Guest Column | January 24, 2018

Delivering Assets And Strengthening Communities: A CBP3 Primer

By Andrew Smith, Greg Cannito, Bruce Allender, and David Washington

Delivering Assets And Strengthening Communities: A CBP3 Primer

Local government can harness the power of community-based, public-private partnerships (CBP3s) to efficiently implement programs that encompass delivery of many unique assets — such as stormwater management programs that include green infrastructure. Can your community benefit from this delivery approach?

Community-based public-private partnerships (CBP3s) have become a hot topic of conversation in the offices of stormwater managers, civic leaders, and regulators. But much is still misunderstood about this growing trend in the broader marketplace. Some basic information about these frameworks can quickly address this gap and illustrate the potential benefits of CBP3s for communities across the U.S.

What It Is And What It Does
In the most general terms, a CBP3 is a partnership between a local government and a private partner that agrees to perform delegated management services to build infrastructure and deliver on broad policy goals and objectives — such as established community-centered metrics. CBP3s span the full lifecycle of assets, including a maintenance period for the assets that lasts 20 to 30 years, to ensure asset sustainability and increased economic and social impact for a community.

Examples of social/economic community benefits include special (e.g., minority-, woman-, or veteran-owned) business-entity participation, education, faith-based initiatives, and local business participation that provide job creation and positive economic impact for the community. Local governments and private partners both benefit when the agreed key performance indicators (KPIs) that are associated with social/ economic and delivery performance outcomes of the contract are met. In this way, the partnership aligns goals and metrics to create a true alliance and accountability between the two entities.

Region 3 of the U.S. EPA and select partners developed the CBP3 framework to assist communities seeking a way to implement large infrastructure programs to leverage the efficiency of programmatic delivery and achieve performance outcomes over the lifecycle of the assets. This delivery approach has been beneficial to communities that are implementing green infrastructure and other stormwater management practices to achieve water quality improvements. Recognizing that some communities were struggling to meet Clean Water Act requirements using traditional approaches, the EPA in 2015 published “Community Based Public-Private Partnerships (CBP3s) and Alternative Market-Based Tools for Integrated Green Stormwater Infrastructure.” This document is suggested reading for public leaders interested in more detail on CBP3s.

For illustrative purposes, consider a community that has significant local stormwater challenges with both flooding and regulatory requirements to reduce local pollution from stormwater. The community identifies opportunities to retrofit approximately 3,000 acres of existing infrastructure using a combination of green infrastructure and flood mitigation best management practices. Such infrastructure retrofits are typically small, require technical expertise to design, and are widely dispersed across the community and thus require flexibility for permitting and access on both public and private land, and also require ongoing maintenance to function reliably.

The community would likely struggle to meet implementation requirements and timelines using the traditional design-bid-build (DBB) approach, with each individual installation requiring a lengthy process. This would cost the community significantly more money in the form of higher rates without any real impact or return on investment than by implementing improvements though a CBP3 approach. With a CBP3, the community would be able to greatly increase efficiency; expedite the delivery of needed infrastructure improvements across the community at scale; deliver quantifiable community and economic impact metrics, greater inclusion and outreach with the local community; meet regulatory requirements; and create a measured return on investment for stormwater ratepayers in the community.

Funding Versus Delivery
One way to better understand CBP3s is to contrast them with their better-known cousins, traditional public-private partnerships (P3s). The fundamental difference between the two is the market need each seeks to address. Financing is a primary driver for a traditional P3, with the private partner providing the financing solution to either own or facilitate delivery of the infrastructure. In contrast, CBP3s address a delivery need that transfers greater risk and accountability to the private sector and are “financing agnostic.” A CBP3 is a collaborative effort driven by project goals and deliverables rather than a specific financing approach.

Employing a CBP3 approach enables local governments to bring a greater volume of shovel-ready projects to the marketplace to access a greater array of tax-exempt and/or taxable capital sources; however, the CBP3 in and of itself does not represent a new source of funding. It better leverages existing available funding to maximize the amount of infrastructure and community impact delivered. It does so through a turnkey delivery model whereby the partnership can efficiently deliver projects, inspection services, maintenance services, or other infrastructure installations in a timely manner. It delivers community benefits through agreed performance outcomes, with greater risk transfer than traditional DBB approaches.

Although CBP3s might not address top-line funding needs, they absolutely address bottom-line efficiency. They exist to provide greater output, value, and risk transfer than the traditional DBB delivery approach. The DBB approach requires a great deal of involvement and risk on the part of local governments to contract design services, procure and inspect construction, and maintain assets.

For individual one-time projects, the higher level of involvement inherent in DBB projects can make sense. But DBB falls short for the delivery of hundreds or thousands of individual and unique installations, where program outcomes and best management practices are more important than the sum of the parts. And DBB delivery doesn’t address the long-term O&M outcomes required to ensure lifecycle management of these assets.

The private partner provides services and risk transfer that varies from one CBP3 to another, but typical services include planning, design, procurement, construction management, capital structuring, financing, regulatory submittals, public involvement, and long-term maintenance. With a CBP3, these services are wrapped into a single contract that provides commercial guarantees to the public entity for agreed performance outcomes.

Community Benefits
Another CBP3 driver is community and economic impact. CBP3s drive community and economic impact through the inclusion of KPIs that center on broad policy goals and objectives for the community. The private partner adopts accountability for these goals and objectives as part of the delivery plan. For example, stormwater infrastructure is pervasive throughout a community, and investing in stormwater infrastructure can create opportunities for other strategic infrastructure investments while delivering stormwater projects such as sidewalks, recreation parks, community areas, bus stops, and street improvements. Investment in stormwater infrastructure through a CBP3 framework can also be a catalyst for other development through strategic land reclamation.

In addition, stormwater development has a lot of low barrier-toentry activities and responsibilities across design, construction, and maintenance operations that create tremendous opportunities for coordinated local-subcontractor development, workforce training, and employment. A community can achieve almost triple its local return on investment of every dollar spent on a stormwater program delivered through a CBP3. Based on Esri economic-development models, communities that have employed a CBP3 have almost tripled the amount of each dollar invested to reflect over $2.5 dollars returned in economic stimulus in the community.

Leveraging Other Trends
The CBP3 model is evolving in parallel with other trends in the stormwater field that complement the use of CBP3s. One is the application of asset management techniques and principles for stormwater systems. The water and wastewater sectors have used asset management for many years. Some stormwater utilities and/or system managers are beginning to seek ways to capture the benefits of asset management frameworks that link assets to business planning and budgeting for the lifecycle of the assets.

The application of asset management to stormwater-management programs helps program providers move from reactive to predictive management practices, efficiently apply limited resources, and quickly and confidently communicate the value of the system and future improvement plans. Incorporating a CBP3 approach to improve stormwater assets encourages managers to look at their stormwater systems as managed infrastructure, which naturally dovetails well with asset management techniques and practices. And asset management programs can be capital-intensive, so incorporating a CBP3 approach can help lower costs and provide an overall economic benefit to the community.

Delivering Efficiency
A holistic framework can provide local governments access to capital markets and private-sector efficiencies to meet clean water goals more quickly and cost effectively than traditional procurement and funding mechanisms.

With the ever-increasing need for efficient delivery and local economic stimulus with limited resources, the CBP3 approach offers an appealing option for communities across the U.S. This approach ensures accountability for a positive social and economic impact on the communities where it has been implemented. It’s a way for public entities to efficiently implement and manage infrastructure and to transfer risk through agreed-upon performance-based outcomes at a lower cost to the community.

About The Authors

Andrew Smith, PE, ENV SP, is the Practice Lead for Stormwater, Watersheds, and Flood Management for the water business of Black & Veatch. He has 17 years of experience in stormwater, including concentrations in program development, strategic planning, and green infrastructure.

 

Greg Cannito is a Partnership Innovator for Corvias, where he oversees the application of innovative public-private partnerships to challenges faced by public sector institutions nationwide. His expertise in development, structured financing, and managing the implementation of P3s has brought value to partners where he has developed progressive delivery solutions that utilize both private and public funding sources.

Bruce Allender is the Chief Operating Officer of infraManagement Group, a wholly owned Black & Veatch subsidiary that works with the U.S. water sector to deliver infrastructure solutions through public-private partnerships. He has focused on partnership development in the water industry in the U.S. and other countries for more than 25 years.

 

David Washington, PMP, is the Program Executive for the Clean Water Partnership. He brings more than 15 years of experience in financial planning and analysis, corporate real estate, project finance and investment analysis, and capital program and project management at top-tier research universities to the Prince George’s County Clean Water Partnership.