Puerto Rico did not do their homework

We are frequently asked by current and potential public sector clients to help them understand how they can successfully administer a public-private partnership (P3) program in their state, locality or jurisdiction. The answer is not necessarily an easy one, and “one size rarely fits all”. Even with our extensive database of global P3 best practices, there’s no one “thing” that will absolutely guarantee success.

However, there are some things that will almost certainly guarantee failure! In this competitive environment, there are a few “land mine” mistakes you can blow up your program. These are to be avoided at all costs.

Unfortunately, Puerto Rico’s P3 program (www.p3.gov.pr) found one of those land mines this week. Puerto Rico’s program, which has been heralded as one of the most well constructed in the US, didn’t do their homework…

This week Puerto Rico announced that they were canceling the New Beginnings Juvenile Facility Project, also known as the “Nuevo Comienzo”. The cancellation did not come as a result of a lack of investor interest (as was the case in the also recently canceled Midway Airport P3 effort). In fact, 11 teams submitted expressions of interest and 4 were down selected to proceed.

The project was cancelled because the Puerto Rico Department of Corrections and Rehabilitation conducted a review and analysis of the project and decided they didn’t need the facility because it didn’t fit a recently changed policy on the maximum size of juvenile facilities. This was to be a 500 bed facility, well above the newly minted policy of 120 beds per facility. Oops! We changed our minds.

And with one letter to the 4 remaining bidders, Puerto Rico’s P3 credibility has fallen through the floor. P3 proposals are expensive to produce and require a tremendous effort from the private sector. My guess is that each of the four teams has probably invested somewhere around $500,000 to $800,000 to get to this stage of the process. All of that is for naught now.

Puerto Rico still has a significant list of projects they’d like to complete using the P3 model.

“The Authority reiterates that this administration is committed to the delivery of new infrastructure projects using public-private partnerships,” the P3 Authority said in a statement. “The Authority has recently awarded contracts for financial advisory services for two correctional facilities and for the Caguas commuter rail project and expects to engage other advisory services in the near future.”

How many potential bidders are going to spend the time, effort, and money to chase a project in Puerto Rico when they have already shown a propensity to cancel midway through? I’d say not many.

All is not lost, and Puerto Rico’s program can recover, but it will not be an easy process. I would suggest that they resign themselves to the concept of providing a “stipend” to bidders until they get a more established track record behind them.

So, the lesson here is simple – Do Your Homework! If you – the public sector – are going to come out with a project, do your homework to understand that a new analysis won’t be conducted midway through that will render your project obsolete. Stakeholder management is key, both internally and externally. Address any potential issues before the RFP. You won’t get many second chances with the private sector P3 world…

The four unlucky but down selected consortia are:

The Alianza Renacer consortium includes Brookfield Infrastructure Corp, AECOM Technology Corp., Brookfield Financial, AECOM Capital, Tishman Construction Corp. of Puerto Rico, Yates Construction LLC, AECOM USA Inc., architek Professional Services Corp, Bird Construction Company Inc., and Johnson Controls Inc.

The Balfour Beatty Capital consortium includes Balfour Beatty Capital Inc., Heery International Inc., Aireko Construction Corp., Heery Design, LIONAKIS, JR Technical & Development, DG3A Design Group, ADG Engineering, Newcomb & Boyd, Black Creek Integrated Systems Corp., Balfour Beatty Communities, and Aireko Services & Installation.

The NBC Yauco consortium includes Desarrollos Metropolitanos, V Architecture, InfinityGlobal Solutions, LLC, Municipal Capital Markets Group, Inc., ISI/MCS Detention Services, and TKC Management Services.

The PBR Plenary Properties Puerto Rico consortium includes Plenary Group (Canada) Ltd., Walsh Puerto Rico, Venegas Construction, Dewberry Architects Inc., HOK International Ltd., CSA Architects and Engineers, Honeywell Limited, and RBC Capital Markets.