P3s and Rebuilding America’s Infrastructure

In June, the Trump Administration announced its fundamental principles for rebuilding the United States’ aging infrastructure. As detailed by the White House, the new approach will rest on a foundation of long-term reforms, focusing on how infrastructure projects are regulated, funded, delivered and maintained. If all goes according to the Administration’s timeline, these reforms will be included in legislation that will be ready for Congress to consider by the end of the year.

Across all branches of local, state and federal government, there is almost universal agreement that there is a critical need to modernize and expand infrastructure in the United States. Supporters of increased infrastructure spending cite traffic-choked tunnels and outdated, overburdened water systems, as well as highways, bridges, airports, hospitals and courthouses designed in the 20th century and inadequate to meet 21st century requirements.

There is no doubt that an overhaul of our infrastructure represents a major challenge, but we also believe that it presents a compelling opportunity. The Administration has called for the participation of the private sector in rebuilding of our infrastructure, saying that it would like to “unleash private sector capital and expertise to rebuild our cities and states.”

We agree that this approach is essential for maintaining America’s global competitiveness and for delivering faster and better results for the American people, including the creation of good long-term jobs. In our experience, when the private sector is involved as a partner, from the planning phase through design, construction and operations, the end result is more likely to be a better return on investment for the government and for the communities the projects serve.

The private sector can bring its technical expertise and project management experience to an infrastructure project, to increase efficiency and help increase the likelihood of success. In some cases, this means offering improvements to existing infrastructure plans at an early planning stage. In other cases, to apply best practices, innovative ideas and project management efficiency when the work begins.

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The delivery of infrastructure can also effectively incorporate a public private partnership (P3) model, an excellent tool for executing large and complex infrastructure projects. In such a model, the private sector partners substantially assume the responsibility for the design, construction, financing, operation and maintenance of a project and guarantees its execution and long-term performance. P3 contracts typically transfer significant risks from the public sector to the private sector, incorporating a fixed price, specific timelines for delivery, and guaranteed operations and maintenance performance.

P3 projects also generally offer savings for the public sector through a high degree of value engineering and innovation, application of synergies and avoidance of duplications. Some other strong benefits of P3s include enhanced project innovation (construction and operations), better life-cycle costs, condensed schedules, risk transfer, and accountability for the infrastructure to meet required standards throughout the life of the concession and beyond. P3s not only help to deliver complex projects on time but often years before a traditionally procured public project.

Skanska has been an international innovator in developing the P3 model, and has an extensive and growing record of P3 success. Skanska is now wrapping up the Elizabeth River Tunnels (ERT) in Virginia. One of the largest P3 projects in the United States, at $2.1 billion, the ERT encompassed the design-build, financing, operation, and maintenance of a new two-lane tunnel adjacent to the existing Midtown Tunnel (which connects the cities of Portsmouth and Norfolk under the Elizabeth River). The tunnel consists of 11 rectangular segments, 342 ft long, 28.5 ft tall and 54 ft wide, resting nearly 100 ft under water. Each 16,000 ton segment was cast in a graving dock near Baltimore and floated down the Chesapeake Bay to the construction site in Portsmouth.

The contract also includes maintenance and safety improvements to the existing Midtown Tunnel and the existing two Downtown Tunnels as well as the extension of the MLK Freeway in Portsmouth, to provide a direct high-speed connection between US 58, the Midtown Tunnel, I-264 and the Downtown Tunnel. The entire project was completed a year ahead of schedule and is already alleviating congestion issues and saving the average round-trip commuter 30 minutes a day.

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ERT is just one example of the successful and diligent work that has already taken place to address America’s infrastructure issues. We believe that it also represents lessons learned on partnership, innovation, project management and hard work (we are finishing the project one year ahead of schedule). We look forward to applying them in the future when the waiting game ends and the real work begins.

As Executive Vice President of Skanska Infrastructure Development (ID), Magnus Eriksson brings more than 20 years of senior leadership and management experience in project development, project financing and public private partnerships. During his 16 years with Skanska ID, he has been part of delivering public private partnership projects (P3s) to the Skanska group in excess of $14 billion. Magnus is a member of Skanska ID’s executive team and overseas the P3 bid development activities in North America. Under his leadership three of the largest P3 projects to date in the US, the Midtown Tunnel Project, Virginia, the Ultimate I-4, Florida and most recently the LaGuardia Central Terminal Replacement Project in New York have been successfully closed and are now under construction.

Magnus has a vast international experience. For 3 years he served as Principal Investment Officer for the African Development Bank, Abidjan, Ivory Coast, responsible for private sector investments in Africa. He was instrumental in the delivering the first P3 project ever of its kind in Norway, Poland and Russia. In 2010, he successfully lead the development team for the world’s largest P3 hospital, the New Karolinska Hospital in Sweden, a project with a value of about USD 2bn and the first of its kind in Sweden.

Mr. Eriksson, holds a law degree (LLM) from Lund University, Sweden, and has been working in the field of international project finance and PPPs for most of his career. Mr. Eriksson and his wife live in Northern Virginia and enjoy boating on the Chesapeake Bay.