Are P3 building projects too big to fail? Yes, because….
I have been privileged to consult on 10 large P3 projects in 4 different countries and I have seen two recurring issues that are common to many of them:
- Failure to manage the design process and team
- Failure of project management, particularly during the last 12 months prior to handover
Before we dive into this, lets define what makes a P3 building project “unicorn” in nature. P3 or PPP (Public, Private Partnership) are unique because they are generally;
- huge capital, once in a generation project;
- complex due to size and nature e.g. hospitals, data centres, airports;
- finance, design, build and maintenance i.e. vertically integrated design & delivery;
- risks passed onto the private sector (in theory).
What this means in reality, is that the traditional bid, build firms form vertically integrated partnerships, the project company, then manage them like a traditional bid, build project. They present a vertically integrated model to the client but manage internal risks and relationships horizontally. In my experience the rewards, risks and pain are not socialized and shared proportionally within the project company and this leads to silo’s, internal conflicts and sometimes legal action.
The deep experience and skill sets required to deliver a large P3 project are not common within the the design and build community. P3 projects require extremely capable and experienced people to design and deliver them. Given the current and worsening skills shortage within engineering and construction, the people who can meet the P3 challenge are starting to take on unicorn status themselves.
To make things even more challenging, P3 projects are really about the cost of capital. The cost of design and build is an immediate concern but over 30 years it is the cost of capital that separates the winners and losers in this game. Hence the need for socialized risk and rewards. So we have established P3 is a difficult game to play and requires “big beasts” only. What about the two issues I have frequently witnessed?
Failure to manage the design team and process
This is key. 80% of every problem you will have on a project is “baked in the cake” that is the design drawings and specs. Typically the design team is employed by the project company, put in a silo and not managed. The design team take on large risk in the bidding process, they risk litigation over design errors & omissions but do not share in the rewards. They have to play this game as it is the only way they can carry on working on hospitals. Sometimes the project company, normally headed by a construction firm, bully the design team and do not manage them at all.
IMHO, the answer to this issue is to manage the design team and design risks very closely. This requires a dedicated design team manager, not from any of the design firms and defiantly not the architect. Preferably a development manager with decision making power and experience in cradle to grave property development management. Fix this and 80% of of construction issues go away.
Failure of project management during the last 12 months prior to handover
In my experience large capital projects are managed by a civil engineering or construction professional. This is all good in the early stages and many times leads to a vertical zoning and phasing of the construction process. However this approach ignores the complexity of the embedded building technology i.e. the building services installation. Building services tend to traverse the project both vertically and horizontally making vertically phased construction a problem in the later project stages. During the last 12 months and Commissioning period, a lack of attention to detail and understanding of building services issues can be a fatal flaw in the project management process. In hospitals and data centres the MEP is a significant portion of the construction cost and should be managed by a professional who understands its complexity.
IMHO, the answer to this issue is two fold. One; hire a dedicated Commissioning manager and two; swap out the project manager in the last 12 months to a professional with a building services back ground.
This post is getting too long but a third issue is handover documentation. This is always spelled out in detail in the project agreement and frequently becomes one of the most chaotic items at the end of the project. The project company must begin P3 projects with the end firmly in mind and be managing the delivery of final documentation from day one.
Like it or not, P3 projects are hear to stay. IMHO, going forwards most large projects will move towards design, build and maintenance which will require the above issues to be addressed and large construction companies to truly, vertically integrate.