Public – Private Partnership: The DBO Approach
The Design/Build/Operate (DBO) approach had many advantages. For the Tampa Bay Regional Water Treatment Plant, the original DBO approach saved approximately 21 percent on lifecycle costs, compared with a traditional approach. This amounts to approximately $85 million in savings to our member governments.
DBO is a relatively new form of public/private partnership in the water industry, one that is gaining much support in the U.S. because of its focus on risk management and project performance. Water agencies like the approach because of its potential for extensive savings and because it gives them access to the expertise of firms with international experience.
How is the DBO process different from traditional approaches? Think of a spectrum, with traditional municipal operation and facilities ownership at one end and full, private investor-operated facilities at the other.
The traditional architectural/engineering project delivery approach is sequential. It starts when a government agency decides that a facility is needed and commits funds to the project. A project management group, such as the agency’s engineering staff, solicits a contract with an architectural or engineering design firm to undertake the design. This firm then prepares bid documents and the agency ultimately awards a contract to the construction company with the lowest bid.
Often, the utility owner retains a construction manager to see that the construction company fulfills its contract. After construction, the facility is turned over to the utility’s operating agency. In this case, that would be Tampa Bay Water. The agency staff is then responsible to start up and test the facilities. From design to completion, the entire project typically involves at least seven principal parties and three separate contracts.
In this traditional approach, the water agency retains virtually all project risks, and the process is neither interactive nor integrated. Relationships are based primarily on the delivery of a hard asset – the plant – as opposed to the plant’s lifecycle performance. As you can see, the interests of several of the parties can differ greatly.
The DBO process has gained interest in recent years because of the potential for saving 10 to 20 percent of construction costs and 20 to 40 percent of operating costs. Additionally, it shifts commercial and performance risks from the utility owner to the private sector, often with penalties for non-performance.
The DBO procurement process differs from the traditional approach by focusing on risk management and project performance. The owner contracts with a single, unified design, construction and operations team. Although a number of parties are involved on behalf of the water agency, only a single entity is contractually responsible for the design, construction, start-up and operation of the project. Responsibility and accountability are both clear.
Typically, overall risks are shared between the agency and the private company. Commercial and performance risks tend to be shifted to the private sector, while the risks associated with future regulatory revision and/or uncontrollable circumstances remain with the municipality. Further, DBO teams can be required to guarantee certain aspects of the cost and project performance because they are in control of most aspects of the project.
After extensive evaluation, Tampa Bay Water determined in October 1998 that the benefits of the DBO project delivery approach for the regional water treatment plant were so significant that it should be employed for the surface water component. At that time, Tampa Bay Water was relatively inexperienced in operating surface water treatment plants and the project had an aggressive schedule for completion. The DBO approach was believed to be the most suitable method to deliver the project on line, on schedule and under budget.
Tampa Bay Water achieved many advantages for the region from the DBO approach to building its regional water treatment plant. Here are just a few:
- The close working relationship of the designer and constructor led to more economical design and cost saving construction techniques;
- Using a “fast-track” process, the acquisition of critical components began before final design completion;
- Supplies and materials are purchased in bulk to achieve cost savings;
- Veolia recently completed, at its cost, the additional filtration to bring the plant to a rated capacity of 72 million gallons per day (average annual yield is 60 million gallons per day based on available supply).
