• A P3 model should be used if both qualitative and quantitative specifications throughout the term of the project, from the Design & Construction through the Operations & Maintenance phases, ensure value for money when compared to traditional methods.
• The private sector ensures Value for Money (VfM) over the concession term for the taxpayer. As the O&M service provider has the longest and most unpredictable risk at stake, the O&M firm requires that the consortium teams take a Whole Life Perspective on design and construction issues for the project. Ultimately, these decisions translate into known, quantifiable delivery results, in which the O&M provider takes on the financial risk of delivery services over the project term. Without this type of risk transfer, the public sector will likely obtain an asset without key performance engines to drive operational results and ultimately be saddled with the cost of operations. Design-Build projects can have loose terms and conditions, sometimes allowing bidders to deliver questionable quality standards, resulting in increasing maintenance costs, shorter life span, and higher energy results. All these risks are left with the public sector to operate.

Conversely, output specifications under the DBFM model are very qualitative, from the design and construction phase to the operating requirements of the facility. Any penalty regimes for non-performance can be deducted from the monthly service payment and may escalate in value should corrections not be completed in a timely manner. A performance issue can force termination of the O&M service provider but not remove the service obligation to the project company, which would then be required to hire a replacement firm. This type of financially-geared penalty reinforces awareness that quality standards must be achieved, and should problems occur, leverage can be applied to guarantee corrective action. This is far more impactful than the public sector’s leverage in other contractual models.

Furthermore, governments continuously balance budgets to address the most important priority at any given time, putting regular funding of the required lifecycle at risk. Budget freezes, or worse, budget cuts, require public sector facilities managers to decrease maintenance schedules and defer long-term refreshment projects. These lifecycle items sometimes require temporary fixes or band-aid solutions to keep them operational and often operate at higher energy consumption levels. Buildings are rendered inefficient when funding is choked, which quickly creates deferred maintenance issues, increasing the likelihood of system failure and – over the long run – cost more money to implement. The DBFM model provides a more manageable, sustainable guaranteed result which financially should be in the best interest of government and the taxpayer.

The P3 approach provides a holistic approach to project development. This whole of life approach allows the project team to consider life cycle maintenance early on in the design phase, creating synergies and allowing for the opportunity for cost savings over the project term. 

The O&M service provider plays a pivotal role in the design process, providing input to maximize efficiency and performance of the asset. Whole of life costs throughout the concession period play an integral part of P3 projects. A fully integrated design approach connects the future use of the asset with the team guaranteeing its performance through the project agreement. This exposure to the details of the project allows the O&M service provider to be more effective when forecasting not only future energy consumption, but the overall cost of O&M and rehabilitation throughout the concession period. In a competitive bid, the O&M provider is incentivized to incorporate innovative technology or design to drive down the cost of service. 

• Many P3s have an O&M period of 25 to 50 years, the goal of handback provisions is to ensure that the public owner receives the project back in good working order and that the major elements (e.g., pavement, structures, drainage, signs, etc.) do not require capital investment in the short term. The handback provisions and prescribed performance requirements guide the developer in programming major maintenance throughout the term to meet the above-mentioned goal. Handback provisions generally require assets to meet performance requirements and residual life minimums at expiry. For example, a new concrete girder bridge with a design life of 75 years would typically have a residual life of 25 years (50-year term) and require a prescribed minimum NBIS score.  
  • Handback Period: The public owner should set a period of 60 to 18 months from the expiry date. During this time, the developer will coordinate with the owner to develop and execute the Handback Work Plan. The length of this period should be determined in consideration of both the complexity and characteristics of the project to ensure the means for proper oversight. 
  • Handback Work Plan: The Developer’s written plan outlining the approach, schedule, and methodology should be updated annually. 
  • Residual Life Table: The technical provisions should include a comprehensive table that dictates the public owner’s minimum residual life requirements of each asset at expiry. This table may also include the minimum design life. 
  • Independence: The developer should be required to use an independent firm with expertise and experience to determine the residual life of elements and support the handback process. 
  • Handback Account/Reserve: The developer should be required to establish and fund a Handback Account as a form of security for the public owner. Some agreements include provisions for a letter of credit in lieu of an account. The amount is the estimated cost of the necessary major maintenance to improve, repair, renew, or replace each element listed in the residual life table. 
  • Handback Condition Report: An annual report should be drafted by the developer during the handback period and should typically include the calculations of residual life for each element, an overview of renewal/major maintenance work required, and an estimate of the handback amount to fund the handback account. 
  • Residual Life Inspections/Testing: Specific handback inspections and testing of elements based on the standards at the time of the inspections occur throughout the handback process. 
  • Residual Life Methodology: The developer and its independent firm should be required to develop methodologies for calculating residual life based on standards at the time or prescribed methodologies set by the owner in the contract. For example, pavement residual life would be calculated based on structural capacity and traffic volumes. 
  • Handback Warranty: In recent procurements, some owners have included required warranties on handback work

In modern highway, bridge, and tunnel projects, technology plays a pivotal role in enhancing the effectiveness and precision of O&M. With the increasing complexity of infrastructure, advanced tools such as drones, cameras, and digital monitoring systems are revolutionizing traditional O&M practices, making them more efficient, cost-effective, and safer.

Drones, for instance, are now widely used for inspecting complicated and hard-to-reach assets. Whether assessing the integrity of bridge cables, the undersides of elevated structures, or the interior of tunnels, drones offer a safer, faster, and more thorough inspection method compared to traditional manual techniques. Equipped with high-resolution cameras and sensors, drones can capture detailed visual and thermal data, enabling O&M teams to detect early signs of deterioration or damage without requiring costly or time-consuming access solutions such as scaffolding or lane closures.

Cameras with automatic incident detection capabilities are another crucial technology transforming O&M. These cameras monitor real-time traffic conditions on highways, bridges, and in tunnels, using AI to automatically detect accidents, stopped vehicles, or other safety hazards. This instant detection allows operators to respond more swiftly to incidents, reducing traffic congestion and improving safety for both motorists and workers during emergency or maintenance operations.

Data analytics, predictive maintenance, and artificial intelligence (AI) are also proving to be game-changers in O&M. By analyzing historical data alongside real-time information, predictive models can forecast when and where maintenance is required, optimizing resource allocation and extending asset life. These technologies allow operators to proactively address potential failures, thus reducing downtime and emergency repairs, which can be particularly costly and disruptive, especially for heavily trafficked bridges and tunnels.

One of the key advancements is the use of sensors and Internet of Things (IoT) devices to monitor the condition of critical infrastructure components in real time. For highways, sensors embedded in pavements can detect stress, temperature changes, and even potential cracking, alerting maintenance teams before minor issues escalate into major repairs. Similarly, for bridges and tunnels, structural health monitoring (SHM) systems use sensors to measure vibrations, displacements, and material degradation, providing real-time data that helps prioritize maintenance efforts based on actual conditions rather than fixed schedules.

Building Information Modeling (BIM) and digital twins are revolutionizing the way large structures, including rock walls and tunnels, are monitored and managed over time. BIM provides a 3D digital representation of infrastructure, capturing all relevant data related to its design, construction, and maintenance. Digital twins take this a step further by continuously updating the model with real-time data from sensors embedded in the structure. This allows for ongoing monitoring of conditions such as stress, temperature, and material wear, enabling proactive maintenance decisions and extending the service life of assets.

Even routine O&M activities, like winter road maintenance, are benefiting from advanced technology. Devices installed on snow plows now monitor pavement temperatures and automatically adjust salt spread rates based on real-time conditions. This precision helps ensure that roads remain safe during snow and ice events while minimizing salt use, reducing environmental impacts, and lowering maintenance costs.

The integration of these advanced technologies not only enhances the safety, efficiency, and accuracy of O&M activities but also provides long-term value by ensuring infrastructure remains in optimal condition and operational costs are controlled.

Technology – Social Infrastructure

While buildings and vertical infrastructure in general are designed as static structures, the technology incorporated into new facilities is extremely dynamic and covers several different areas, especially during the O&M Period. In addition, technology evolves rapidly and while “educated guesses” could be made about the future of technology within the next five to ten years, it is certainly much more difficult to understand what technology will look like within the context of a long-term P3 contract (often with terms of thirty to fifty years).

The main goal of the O&M Service Provider is to ensure the facility is operated, maintained and/or rehabilitated in an efficient and cost-effective manner and in accordance with the Project Agreement. To that end, technology serves mainly two purposes: (a) the collection and presentation of critical data and information to ensure all systems are working as intended; and (b) the automation of building systems to ensure all key performance indicators (by which the O&M Service Provider is being evaluated) are being met and to achieve operational efficiencies in energy usage. Some examples of technology incorporated into modern facilities include:

• Building Automation Systems (BAS) is a centralized control system designed to monitor, manage and automate various building functions. The installation of a modern BAS helps improve energy efficiency, enhance occupational comfort, reduce operational costs, and increase the overall safety and security of the facility.
• A Computerized Maintenance Management Systems (CMMS) is a software suite developed to centralize and streamline all operations, maintenance, and rehabilitation activities occurring within the facility at any given moment. The CMMS has the ability to track service requests and work orders; scheduled, unscheduled, and demand maintenance activities; and replacement part inventory tracking. Oftentimes, the building information model (BIM) developed during the design phase of the building is integrated into the CMMS to ensure the as-built plans for the building are always up to date.

In conclusion, incorporating the latest technology in buildings is crucial for the following reasons:

• Energy Efficiency and Sustainability: Modern technologies like smart sensors, IoT, and energy management systems optimize energy use, reducing waste and lowering utility costs. This not only saves money but also supports environmental sustainability by reducing the building’s carbon footprint.
• Enhanced Comfort and Productivity: Advanced HVAC systems, smart lighting, and automated controls create a more comfortable indoor environment. This can lead to increased occupant satisfaction and productivity, whether in office buildings, schools, or residential spaces.
• Improved Safety and Security: Technologies such as AI-driven security systems, smart locks, and surveillance cameras enhance the safety and security of buildings. These systems can detect and respond to potential threats more effectively than traditional methods.
• Cost Savings: predictive maintenance and automated systems reduce operational costs by preventing equipment failures and optimizing maintenance schedules. This leads to fewer unexpected repairs and longer equipment lifespans.
• Better Decision-Making: Building Information Modeling (BIM) and digital twins provide detailed insights into building performance and operations. This data-driven approach helps stakeholders make informed decisions about design, construction, and facility management.
• Flexibility and Scalability: Modern technologies allow buildings to adapt to changing needs. For example, IoT devices and smart systems can be easily updated or expanded, ensuring that the building remains functional and efficient as requirements evolve.
• Enhanced Collaboration: Tools like BIM facilitate better collaboration among architects, engineers, contractors, and facility managers. This leads to more efficient project management and reduces the likelihood of errors and rework.
• Future-Proofing: Incorporating the latest technology ensures that buildings are prepared for future advancements. This makes it easier to integrate new innovations and maintain the building’s relevance and functionality over time.

Conduct a project assessment to identify P3 delivery method options:

• Identify repayment mechanism. Can the project generate enough revenue to be a viable P3?
• Perform value for money study to determine if a P3 structure can provide additional value to the project.
• Identify risks and appropriate mitigations during construction and O&M.
• Select appropriate structure based on value for money, funding, and risks (DBB, CM/GC, DB, DBF, DBFM, DBFOM).

Several key contractual concepts are fundamental to ensuring the project’s long-term success during the O&M phase. These concepts define the responsibilities, risk allocations, and performance expectations between the public and private partners. Below are some of the essential contractual concepts related to O&M in a P3 Project Agreement:

1. Performance Standards and Key Performance Indicators (KPIs)

Performance standards set specific criteria that the private operator must meet in maintaining the asset. These may include road surface conditions, lighting availability, or response times for incident management. KPIs are measurable metrics tied to these standards, allowing both parties to track the private partner’s performance. KPIs may include factors such as lane availability, pavement condition index, bridge structural health, and safety incident response times. If the operator fails to meet these KPIs, penalties or other contractual remedies may be triggered.

2. Handback Requirements

P3 agreements often include detailed handback provisions (see link to Handback white paper), which stipulate the condition the asset must be in at the end of the concession period. These requirements ensure that the asset is handed back to the public authority in a condition that will not require immediate or major repairs. This drives the operator to maintain the asset throughout the term of the contract, preventing deferred maintenance issues. Handback inspections typically occur several years before the end of the concession to allow time for any necessary remediation.

3. Maintenance and Rehabilitation Requirements

Maintenance and rehabilitation obligations define the scope of routine maintenance, major repairs, and asset rehabilitation that the private operator must carry out during the concession period. These obligations are typically outlined in the technical provisions of the agreement and may be prescriptive (with fixed timelines and specific maintenance activities) or performance-based (focused on meeting certain asset conditions). These clauses ensure that the asset is kept in operational condition and that significant repairs are planned and budgeted for well in advance.

4. Availability Payments

In some P3 agreements, the public authority makes availability payments to the private operator based on the infrastructure’s performance and availability for use. Availability payments are directly tied to the condition of the asset and its availability for public use, incentivizing the private partner to conduct proper maintenance. If the asset does not meet the required availability thresholds (e.g., due to lane closures or excessive deterioration), deductions may be applied to the payments.

5. Lifecycle Cost Considerations

Lifecycle cost provisions are critical in a P3 agreement as they require the private partner to plan for both routine maintenance and long-term capital expenditures over the duration of the contract. The private partner is responsible for optimizing the asset’s lifecycle, balancing short-term maintenance needs with the timing of major rehabilitation activities. This incentivizes the private partner to manage the asset cost-effectively over the entire lifecycle of the project, rather than focusing solely on upfront construction or short-term maintenance.

6. Risk Transfer and Allocation

Risk allocation is a fundamental component of P3 agreements, and it defines who is responsible for various risks related to O&M, such as traffic demand, extreme weather, material defects, or unexpected asset deterioration. The private partner typically assumes the risk for routine maintenance and asset performance, while risks beyond their control (e.g., natural disasters) may remain with the public authority. Proper risk allocation ensures that risks are managed by the party best equipped to mitigate them, aligning incentives and protecting both parties’ interests.

7. Prescriptive vs. Performance-Based Maintenance

As noted earlier, P3 agreements can mandate prescriptive or performance-based maintenance approaches. Prescriptive maintenance sets specific activities and schedules for the private partner to follow, whereas performance-based maintenance focuses on meeting performance outcomes, giving the operator flexibility in how those outcomes are achieved. Performance-based approaches are becoming more common in P3 contracts due to their focus on long-term asset performance and cost optimization.

8. Penalty and Incentive Regimes

Most P3 agreements incorporate penalty and incentive mechanisms to drive performance. Penalties, such as deductions from payments, are applied when the private operator fails to meet performance standards, such as response times for repairing defects or ensuring asset availability.

9. Force Majeure and Relief Events

These clauses protect both parties in the event of unforeseen circumstances beyond their control, such as natural disasters or significant political or economic disruptions. If such an event occurs, the private operator may be granted relief from certain O&M obligations without facing penalties. Relief events are often carefully defined to prevent misuse and ensure that the risk is equitably shared.

10. Inspection and Auditing Rights

P3 agreements often grant the public authority the right to inspect and audit the condition of the assets and the maintenance practices of the private operator. Regular inspections help ensure that the operator complies with its contractual obligations and that any defects are identified and addressed promptly. Auditing mechanisms can also verify that the operator is using appropriate materials and methods, as well as tracking lifecycle costs and expenditures.

11. Hazardous Materials Management

Managing hazardous materials is a crucial aspect of O&M in P3 agreements, especially for highway, bridge, and tunnel projects that may involve the handling or discovery of materials such as asbestos, lead-based paints, contaminated soils, or hazardous chemicals. The P3 agreement typically includes provisions that define the private operator’s responsibility for identifying, managing, and properly disposing of hazardous materials encountered during maintenance and rehabilitation activities. These provisions ensure compliance with environmental laws and regulations, including specific protocols for handling, reporting, and mitigating hazardous materials to protect the public, workers, and the environment.

In the case of pre-existing hazardous materials, the P3 agreement may assign responsibility to the public authority or set terms for cost-sharing between the public and private partners. Clear procedures must be in place for addressing any discovery of hazardous materials, including immediate reporting, containment measures, and remediation processes. Failure to properly manage hazardous materials can lead to significant safety risks, legal liabilities, and environmental damage, making this a critical focus in the long-term operation and maintenance of P3 projects.

12. Dispute Resolution

Dispute resolution mechanisms are an essential element of P3 project agreements, ensuring that disagreements between the public authority and the private operator regarding O&M responsibilities or performance are resolved efficiently and fairly. P3 agreements typically outline a multi-tiered dispute resolution process, starting with informal negotiations and escalating to more formal mechanisms, such as mediation, arbitration, or litigation if necessary. These processes are designed to minimize disruptions to project operations and allow for the continued performance of O&M obligations while the dispute is being resolved. By providing clear pathways for resolving disagreements, these provisions help maintain the collaborative nature of the P3 relationship and prevent costly delays or interruptions in asset maintenance.

13. Change Orders

Change orders are a common feature in P3 agreements to manage adjustments in the scope of work during the contract term. A change order may be issued when the public authority requests modifications to the O&M requirements, such as adding new maintenance tasks or altering existing procedures due to updated standards or unforeseen issues. Change orders allow for the formal documentation of these changes, including the necessary adjustments to payment structures, timelines, or performance metrics. The process for handling change orders is typically well-defined in P3 agreements to ensure that both parties agree on the scope, cost implications, and timeline adjustments, preventing misunderstandings or disputes. This is better for contract increases than a traditional method with which a change order would be carried out.

14. Change in Law

P3 contracts often include provisions addressing the impact of changes in law on O&M obligations. These clauses protect the private operator from being unfairly penalized if new laws, regulations, or standards are introduced that significantly alter the scope, cost, or feasibility of the O&M activities originally agreed upon. For example, a new environmental regulation might require additional maintenance procedures or stricter materials handling protocols. In such cases, the private partner may be entitled to compensation, an extension of time, or a renegotiation of the performance standards, depending on how the change affects their obligations.

15. Penalties and Deductions for Noncompliance Points

Typically if the O&M provider accumulates more than a specified number of Noncompliance Points over a specified period (or periods) of time, the owner may, among other things, increase the level of O&M monitoring, inspection, auditing and oversight at the O&M provider’s expense. In extreme cases the owner may have the right to step in and remedy the noncompliance.

In addition, specific instances of noncompliance, and/or the accumulation of Noncompliance Points over a specified amount/period, can result in monetary penalties for the O&M provider, in the form of deductions from payments to the O&M provider or payments by the O&M provider to the owner.

In extreme cases continued and endemic noncompliance by the O&M provider can allow the owner to terminate the P3 agreement.

16. Compensational and Relief Events

Under a typical P3 agreement, the O&M provider is granted relief (which may include performance relief, schedule relief, compensation/payment adjustments or a combination) upon the occurrence of certain specified events:

Compensation Events: events/occurrences that entitle the O&M provider to receive compensation/payment adjustments, which are intended to restore financial equilibrium to the P3 agreement, by partially or fully compensating for the impact caused. Such events may include:

• delays caused by the owner
• changes or suspensions imposed by the owner
• certain unforeseen environmental, geotechnical or other site conditions (including historic/archaeological finds and threatened or endangered species)
• certain delays caused by utility providers

Relief Events: events/occurrences that entitle O&M provider to relief from performance due to the impact of such events/occurrences (by means of performance relief and/or schedule adjustments). Such events may include:

• force majeure event (acts of god, weather events, labor disputes, terrorism etc.) beyond the control of the O&M provider
• certain qualifying changes in law after the execution of the P3 agreement
• an injunction, restraining or other court order (not due to O&M provider) that prohibits/delays the O&M services

Certain events/occurrences may constitute both Compensation Events and Relief Events, entitling O&M provider to performance relief, schedule relief, compensation/payment adjustments.