PPP Contract Delivery System- Contractual Risks and Ethical Issues Regarding Deep Foundation Subcontractors

"1. INTRODUCTION- WHAT IS P3 OR PPP ?The Public Private Partnership (PPP or 3P) is a project delivery scheme based on the government providing land and/or a concession agreement, and on a private entity providing the design, construction, financing, operation and maintenance of the project for an extensive duration of time (up to thirty years). At the end of the operation-maintenance period, the project is turned over to the public entity, which fully owns the project at all times. While there are many PPP delivery schemes used around the world, for the present paper, we are going to analyze the impact of the Design-Build-Finance-Operate-Maintain (DBFOM) scheme on the deep foundation specialty subcontractor. There are couple of reasons that the PPP delivery system started to be used and implemented not only by developed nations (e.g. United Kingdom, USA etc.), but also by the International Development Bank for delivering major infrastructure projects in developing nations. From the point of view of government agencies, some of the reasons to use PPP are the following:??The primary use of private capital in an era where borrowing and/or supplemental taxation represents too much of a political risk. Budget deficits and taxation limits are extremely hot topics in every election (national or local) and the level of education of the electorate in this area is making it more and more difficult for politicians to use borrowed funds and additional taxation finance sources for public projects. At the same time, we see an increase in the social expenditures of the government in parallel with a needed increase in expenditures on infrastructure due to aging and neglect.??Bundling the construction risks with the operational and maintenance risks naturally pushes the private entity to increase the level of innovation and communications in the primary phase ( the construction phase) in order to develop future process based upon the innovation and communications utilized in the operation and maintenance phase of the project. This is true if contractual incentives are properly structured because “all revolves around incentives. In a world of ‘incomplete’ contracts, where it is difficult to foresee and contract about uncertain future events, it is important to get the incentive structure right” (Grimsey and Lewis, 2004).??The transfer of very expensive risks such as differing site conditions, schedule, design, construction, maintenance and operation costs from the public authority to the private entity.??The timespan of development and construction of a PPP project is usually shorter than the traditional procurement process (e.g. “ the I-595 P3 provided capacity improvements fifteen years sooner than a conventional plan would have offered. In Maryland, an innovative expansion of the Seagirt Marine Terminal in the Port of Baltimore was completed two years ahead of schedule due to the P3 model. As a result, the Port of Baltimore is only the second port on the US East Coast to have unrestricted access to both a fully functioning 50-foot channel and 50-foot berth.”)"