Skanska’s public-private partnership sales pitch at the State House

2016-11-16-skanska-07Representatives from Skanska, the 5th largest construction company in the world, gave their sales pitch to the State House commission tasked with studying the best ways to expand public-private partnerships (P3s) in Rhode Island. The purpose of the commission isn’t to evaluate the utility of P3s, but to “make a comprehensive study and provide recommendations to promote the upgrade of facilities used for public purposes by encouraging private investment in qualifying projects.”

In other words, the commission isn’t about whether or not P3s are a good idea, it’s about how best to attract businesses to come to our state and gain a controlling, profitable share of our public goods and commons. “These are businesses,” said a Skanska rep, “We are creating businesses.”

As Commission Chair Sean O Coffey said as he invited Skanska company reps to speak, “I look forward to hearing what you have to offer.”

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Paul Pedini

Paul Pedini, vice president of operations and Boston regional manager at Skanska and Chris Guthkelch, regional project director of infrastructure development at Skanska, spoke for almost 40 minutes to the commission, taking some time at the end of their presentation to answer questions.

Pedini wasted no time in referring back to the first presentation of the day, conducted by John Smolen, on behalf of the National Council for Public-Private Partnerships (NCPPP). What Smolen referred to as a “spectrum” of P3 possibilities stretching from public ownership to privatization, Smolen called a continuum. “I am that continuum,” said Pedini sounding more like a villain from a sci-fi movie than a vice president of operations. But Pedini was mostly there, it seems, to introduce Guthkelch.

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Chris Guthkelch

Guthkelch said that his job is “entirely focused on public sector clients” and warned that “time is running out to fix infrastructure” in our country. Echoing Smolen’s earlier presentation, Guthkelch recommended a “pipeline of projects.” Under questioning, Guthkelch said, “one thing the private sector loves to do is to come in very early in the process and be able to engage with the agencies and their advisors and actually bounce ideas.”

That is, instead of a municipality deciding on what it needs in terms of infrastructure and P3 arrangements, the “private sector” would prefer to approach a municipality as a buffet, choosing what it it wants to be involved in, taking only the best, juiciest, most profitable bits.

Under such a process, said Guthkelch, “We can save a lot of tears later on.”

The tears that so worry Guthkelch are the problems that can slowdown or even cancel a project, even after a lot of money has been spent in developing it. The two biggest worries seem to be push back from the public, and “regime change.”

When a P3 is undertaken, a company like Skanska depends heavily on a champion, that is a political figure with enormous clout who can stand behind the project, investing their political capital to make the project happen. Every project, said Guthkelch, will “inevitably… get into some awkward situations, particularly during the procurement phase.” A project champion can help smooth over the issues surrounding environmental permits and permit approvals in general.

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Skanska has learned many lessons over its years of creating successful P3s. They have learned the importance of community outreach and stakeholder engagement. (Looking back at the Elizabeth River Tunnels project in Virginia, Guthkelch said he “wishes [Skanska] had managed stakeholders better.”) Transparency is critical, said one slide Guthkelch presented, “working with the feds, public and media can be highly contentious.”

But the number one risk to P3s is regime change, that is, a change in the political winds that elects a governor or elected official with a different vision. The use of the term regime change, which refers to “the replacement of one administration or government by another, especially by means of military force,” [italics mine] is yet another demonstration of corporate distrust of democracy. Democratic elections are not regime change, they are peaceful transfers of power.

But the democratic process seems to be the bane of P3 development, and therefore is seen as violent, problematic and maybe even illegitimate.

Early on, Guthkelch showed a slide that touted the advantages of P3s that included the item that “politics can’t mess with your infrastructure funding (as much).” John Smolen interjected that political risk is mitigatable if projects are announced after they are ready to go and answers for the public prepared for all possible questions.

Commission member Michael McNally,who is a board member at Commerce RI, suggested that regime change can ruin a state’s ability to attract P3 partners for a long time.

Democracy can hurt the development of P3s in small ways as well. “You can get all the way down to a stage where you’ve selected a preferred bidder,” said Guthkelch, “so a lot of money’s been spent to get there and then suddenly, uh, ‘maybe we should actually refer this to the legislators for a sort of final review.’ That makes the private sector very nervous.”

The floor for P3s, money wise, is about $100 million dollars. Skanska would probably not be interested in anything smaller than that. “Schools and things like that can be delivered, clearly, for much less,” said Guthkelch, “But then, to get the full benefits of something like that, some social infrastructure, you’d be trying to bundle the schools together as something a lot bigger as a program.” There is, added Pedini, “some truly innovative thinking into how to bundle risk.”

Guthkelch showed a slide that stated that “More than 50 percent of all P3s are either cancelled or go into indefinite delay.” Guthkelch also mentioned that the 50 percent figure “may be apocryphal.” That didn’t stop anyone in the room from treating that dubious factoid as gospel. Chair Coffey was even inspired to invent his own apocryphal factoid. “My bet is that 50 percent of most public projects are either deferred, indefinitely delayed, canceled, at least. I’ve been in Rhode Island long enough to see that that’s what happened. Or they’ll change form in some way and come back years later.”

Guthkelch’s final words, coming from a representative of a company that promotes P3s and loves dubious statistics, should not calm anyone’s concerns:

“For those who get worried, and I know that’s not the case here [referring to the commission members], for those who worry about if P3s are going to take over the world of government procurement, even at its best, where I come from in the UK, I think no more than 10 percent of that, of all government procurement was actually done as a P3.”


Even as Rhode Island toys with the idea of Public-Private Partnerships, we learn that President elect Donald Trump‘s infrastructure plan is being described, inaccurately, as a P3. As Josh Bivens and Hunter Blair show in the linked article for the Economic Policy Institute, “P3s are a standard model for financing infrastructure that can in theory be used with little downside compared to direct public provision. However, this description of the Trump plan is both not that comforting and incorrect. It’s not comforting because the real-world record of P3s is much spottier than textbook models would suggest.”

Here’s a case study of a failed P3, a toll highway outside San Antonio Texas.


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