We agree wholeheartedly with the pitch that private expertise reduces cost on a project. We have seen this kind of benefit and savings first hand on all 28 of the projects we have been involved in. The problem lies in financing the project with equity and taxable debt as well as the very expensive operations and maintenance packages that are coupled with the project. Unfortunately we also agree with many of the sentiments presented in this AMI article regarding the George Deukmejian Courthouse in Long Beach, California:
The Deukmejian Courthouse is a prime example of the kinds of inflated costs that can occur from private financing arrangements and long term operations and maintenance packages that are typically presented under the DBFOM model. From our viewpoint, Public-Private Partnerships are a partnership, both parties should bring to the project their most advantageous components, for the public sector, that is the advantage of tax-exempt financing.
Long term operations and maintenance contracts are enticing to public agencies, especially for those that have issues with deferred maintenance, but bear in mind, no private developer would utilize this arrangement on their own building. It is better to introduce a repair and replacement reserve and competitively bid the private operations on a 3-5 year interval to keep pricing competitive and incentivize the private partner.
