Background on Public Private Partnerships (P3’s):
Many institutions of higher education are facing mounting pressure on their mission to deliver high-quality, affordable education to students and perform world-class research. Reductions in public funding support and concerns about overall affordability present substantial near-term and longer-term budget challenges for many institutions.
Public institutions are predominantly affected, having been constrained by suspensions or reductions in state funding. State appropriations across the US grew by just 0.5% annually between 2005 and 2015. State funding has still not recovered to 2008 levels, the last year in which state funding decisions would not have been affected by the Great Recession.
(Source: Integrated Postsecondary Education Data System (IPEDS) — state appropriations revenue divided by total fall enrollment, 2005–15)
Public-private partnership models are continuing to proliferate as cash-strapped colleges and universities seek to replace or update aging and outdated infrastructure amid tight finances.
(Source: Proliferating Partnerships)
What is the P3 Delivery Model?
A public-private partnership, or P3, is long-term agreement between a public entity and a private industry team that is tasked with designing, building, financing, operating and maintaining a public facility. The past decade has seen a steady increase in the use of P3 structures, both inside and outside higher education. In 2016, something of a watershed year for P3, multiple high-profile projects came online in response to a variety of public needs, including a $1-billion-plus water infrastructure project servicing San Antonio, and a $300-million-plus renovation of the Denver International Airport’s Great Hall.
“Public” is a non-profit institutional or governmental entity that engages a “private” for-profit entity to pay for a particular project.
The “private” partner provides funding (and often expertise) to deliver (and often operate) the project used by the “public” entity to meet its purposes.
In return for its capital, the “private” entity gets a revenue flow from the asset it has paid for.
The emergence of the P3 option is happening where it matters most: projects that would be otherwise unattainable under the traditional public-improvement delivery models. For instance, 10 years ago, only a handful of higher education P3 projects were up and running; today, we are approaching three dozen such projects.
The biggest challenge is, of course, the financing component, but P3 teams bring much more to the table than money — they give public entities access to expertise and innovation that can add significant value to projects at each phase of development.
Motivations for P3 transactions vary widely, but include:
- Supplementing traditional debt instruments. These include private capital, using off balance sheet or alternative mechanisms.
- Transfer of risk. Historically, universities have born all or most of the risk of facilities-related projects themselves. A P3 is a way to either transfer or at least share the risk.
- Speed and efficiency. A P3 allows for a faster development process, and time to completion is generally shorter and on schedule. The sole focus of the private entity is to complete the project on budget and on time. University infrastructure tends to have competing priorities across all-campus facility needs.
- Outsourcing provision of non-core assets. Outsourcing allows institutions to focus investment of internal resources and capabilities on those functions that are closer to the academic needs of its students.
- Experience. Private partners often have much more experience and skills in a particular development area (e.g., facility architecture and infrastructure, student housing needs) and are able to better accommodate the needs of students, faculty, administrators, etc.
- Planning and budgeting. Private partners offer experience and know-how in long-term maintenance planning and whole life cycle budgeting.
The four types of P3s:
- Operating contract/management agreement. Short- to medium-term contract with private firm for operating services
- Ground lease/facility lease. Long-term lease with private developer who commits to construct, operate and maintain the project
- Availability payment concession. Long-term concession with private developer to construct, operate, maintain and finance the project in exchange for annual payments subject to abatement for nonperformance
- Demand-risk concession. Long-term concession with private developer to construct, operate, maintain and finance the project in exchange for rights to collect revenues related to the project
Pro’s and Con’s of P3’s:
Since their emergence in student housing several years ago, P3s have become important strategies for higher education institutions because of the many benefits they offer, including:
- Lower developer costs
- Developer expertise
- Operational expertise
- Access to capital
- Preservation of debt capacity
- More favorable balance sheets and credit statements
- Risk mitigation
- Faster procurement and project delivery (It can typically take a university about 5 years to get a project built. With a P3, that process can be reduced to just 2 years. Additionally, P3s can save approximately 25% in costs compared to typical projects.)
Beyond the above, the indirect advantages of P3s in student housing are numerous, such as they:
- Provide better housing for students
- Expand campus capacity
- Create high-quality facilities
- Expand the tax base for both a city and county
- Provide an economic boost to surrounding areas, which likely lead to private growth and other improvements
It is important to note that, while there are many benefits of P3s for higher education institutions, these agreements also have disadvantages that need to be considered, including:
- High cost of capital
- Reduced control for the university
- Complexity of deals
- Multi-party roles and responsibilities
- Limitation on future university development
A LOOK AHEAD
Where Are We Heading?
- More political involvement and pressure to consider P3
- Pre-development Risks – Many projects failing to close
- Issues with Construction Pricing & Labor Shortages
- An increasing number of developers are getting in the on-campus business; however, developers are being more strategic on which projects/procurements to respond to
- Exploration of other sources of funds like tax credits, USDA, and opportunity zones
- Shared governance continues to grow
- Larger, more complex P3 projects including long term concessions, availability payment models, Key Performance Indicators (KPIs)
- Bundling of Procurements (food, housing (including faculty), academic buildings, hotel, energy, facility maintenance, etc.)
- State of the P3 Higher Education Industry by Brailsford & Dunlavey http://programmanagers.com/wp-content/uploads/2018/09/P3-State-of-the-Industry-Final_Small.pdf
- Should your University enter into a Public/Private Partnership – the Pro’s and Con’s https://edualliancegroup.blog/2017/06/26/should-your-university-enter-into-a-publicprivate-partnership-the-pros-and-cons
- No Free Lunch: The Pros and Cons of Public-Private Partnerships for Infrastructure Financing https://www.brookings.edu/blog/up-front/2017/02/09/no-free-lunch-the-pros-and-cons-of-public-private-partnerships-for-infrastructure-financing
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Architects need to continue to consider healthy living when designing private and public spaces. According to the sources cited below, the Well Living Lab aims to answer critical questions to make homes, offices and independent living environments healthier places. That means indoor environments could be altered to reduce stress and increase comfort, performance and sleep.
By understanding the interplay of elements such as sound, lighting, temperature and air quality, indoor spaces may be altered to address people’s specific and overall health needs. And by understanding how people’s behavior is shaped by their physical environment, facilities can be designed to maximize positive health habits and reduce negative influences. This ambitious three-year research plan is the start toward transforming human health and well-being in indoor environments.
What is a WELL Community?
WELL community functions to protect health and well-being across all aspects of community life. The vision for a WELL community is inclusive, integrated, and resilient, fostering high levels of social engagement.
Facilitates ambient air quality with strategies to reduce traffic pollution and reduce exposure to pollution.
Encourages drinking water quality, public sanitation, and facilities provisions with strategies managing contaminated water on a systems scale and strategies to promote drinking water access.
Facilitates fruit and vegetable access, availability and affordability with policies to reduce the availability of processed foods and providing nutritional information and nutrition education. Also includes strategies for food advertising and promotion, food security, food safety and breastfeeding support.
Supports maintained illuminance levels for roads and walkways and strategies for limiting light pollution, light trespass, glare and discomfort avoidance.
Integrates environmental design and operational strategies to reduce the risk of transportation-related injuries, mixed land use and connectivity, walkability, cyclist infrastructure, infrastructure to encourage active transportation and strategies to promote daily physical activity and exercise.
Facilitates strategies to reduce heat island effect with policies to deal with extreme temperatures and manage sun exposure and ultraviolet risk.
Facilitates noise exposure assessment with planning for acoustics, techniques to reduce sound propagation and hearing health education.
Supports strategies to reduce exposure to hazardous chemical substances in cases of uncontrolled/accidental release and contaminated sites and to limit use of hazardous chemicals in landscaping and outdoor structures.
Provides access to mental health care, substance abuse and addiction services and access to green spaces.
Supports health impact assessments, policies that address the social determinants of health, health promotion programming, policies that foster social cohesion, community identity and empowerment, crime prevention through environmental design, policies and planning for community disaster and emergency preparedness.
Further Reading: You Know LEED, But Do You Know WELL?
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The Morris & Gwendolyn Cafritz Foundation Environmental Center
The nickname for the Morris and Gwendolyn Cafritz Foundation Environmental Center is the Grass Building, and it perfectly captures its spirit. It’s a structure so thoughtfully designed it’s almost as energy-efficient and low impact as the greenery that surrounds it.
The Maryland building is part of an educational farm on the Potomac River Watershed that the Alice Ferguson Foundation used to teach people about the natural world. This new building—which became the 13th in the world to receive full Living Building Challenge certification in June 2017—is an educational facility designed to blur the lines between indoors and out, while still providing shelter as needed. “Part of the intent of the building is to be in the landscape and still have a bathroom to use,” says Scott Kelly, principal-in-charge at Re:Vision, a Philadelphia-based architecture and design studio.
Brock Environmental Center
Drawing thousands of students, the Brock Environmental Center is a regional hub for the Chesapeake Bay Foundation, in Virginia Beach, Virginia, supporting its education and wetlands restoration initiatives. A connection to nature defines the building’s siting, which provides sweeping views of the marsh and also anticipates sea-level rise and storm surges with its raised design. Parts were sourced from salvage: Its maple floors once belonged to a local gymnasium while school bleachers, complete with graffiti, were used for interior wood trim. The center was recognized for its positive footprint: It has composting toilets, captures and treats rainfall for use as drinking water, and produces 80 percent more energy than it uses, selling the excess to the grid.
Discovery Elementary School
Students have three distinct, age-appropriate playgrounds—with natural elements such as rocks and fallen trees—at Arlington, Virginia’s Discovery Elementary School. The name honors astronaut John Glenn, who returned to space on the Discovery shuttle and once lived in the neighborhood. Exploration is a theme at the school, whose interior focuses on forests, oceans, atmosphere, and the solar system. The largest zero-energy school in the country, it offers “hands-on learning around energy efficiency and generation,” jurors noted. The school maximizes natural light and provides views to the outside in all classrooms.
Bristol Community College
A laboratory is an energy-intensive enterprise, with specialized lighting and ventilation needs. That’s why jurors praised the airy health and science building at Bristol Community College, in Fall River, Massachusetts, for its net-zero energy achievement, “a difficult feat,” they noted, “in a cold climate like New England’s.” The move saves $103,000 in annual operating costs and allows the college, which offers a suite of courses in sustainability and energy, to practice what it teaches. Part of a holistic campus redesign, the new building’s location increases the density—and thus walkability—of campus for students.
Central Energy Facility
Orange and red pipes flaunt their role in “heat recovery” at Stanford University’s Central Energy Facility. The center for powering the California campus—more than a thousand buildings—the facility was transformed from an aging gas-fired plant to one fueled mostly by an off-site solar farm, fulfilling a goal of carbon neutrality and reducing energy use by a third. With large health care and research buildings, the campus needs as much heating as cooling; now a unique recovery system taps heat created in cooling processes to supply 93 percent of the heating and hot water required for campus buildings. The plant reduces Stanford emissions by 68 percent and potable water usage by 18 percent, potentially saving millions of dollars and one of the state’s scarce resources.
Ng Teng Fong General Hospital
Like other buildings in Singapore, Ng Teng Fong General Hospital incorporates parks, green roofs, and vertical plantings throughout its campus. But the city-state’s hospitals haven’t traditionally offered direct access to fresh air, light, and outdoor views. This hospital marks a dramatic change, optimizing each for patients. About 70 percent of the facility is naturally ventilated and cooled by fans, cross-ventilation, and exterior shading, saving on precious water resources. The building uses 38 percent less energy than a typical hospital in the area.
Eden Hall Farm, Chatham University
After receiving the donation of 388-acre Eden Hall Farm, 20 miles north, Pittsburgh’s Chatham University created a satellite campus centered around a sustainable living experiment. The university views the landscape—an agricultural area adjacent to an urban center—as critical to supporting cities of the future. The original buildings are complemented by new facilities for 250 residential students (and eventually 1,200), including a dormitory, greenhouse, dining commons, and classrooms. Students get hands-on experience in renewable energy systems—the campus generates more than it uses—sustainable agriculture and aquaculture, waste treatment, and water management. Now home to the Falk School of Sustainability, the farm is producing the next generation of environmental stewards, who follow in the footsteps of alum Rachel Carson.
Milken Institute School of Public Health, George Washington University
At George Washington University’s Milken Institute School of Public Health, located in the nation’s capital, design embodies well-being. Built around an atrium that admits light and air, the structure encourages physical activity with a staircase that spans its eight levels. A green roof reduces storm runoff; rainwater is collected and stored for plumbing, resulting in a 41 percent reduction in toilet fixtures’ water use. Limestone panels (left) were salvaged from the previous building on the site. Materials used throughout the building contain recycled content.
National Oceanic and Atmospheric Administration’s Inouye Regional Center
Located at the heart of Pearl Harbor, on Oahu’s Ford Island, the National Oceanic and Atmospheric Administration’s Inouye Regional Center repurposed two airplane hangars—which narrowly escaped destruction in the 1941 attack—linking them with a new steel and glass building (right). The research and office facility for 800 employees was raised to guard it from rising sea levels. Given the size of the hangars, daylight illuminated only a small fraction of the space, so specially crafted lanterns reflect sunlight further into their interiors. Necessity required invention: Due to anti-terrorism regulations, no operable windows were allowed in the space. Through a passive downdraft system that taps prevailing sea breezes, the building is completely naturally ventilated. The adjacent waterfront was returned to a more natural state with native vegetation.
R.W. Kern Center
Serving as the gateway to Hampshire College, in Amherst, Massachusetts, the multipurpose R.W. Kern Center holds classrooms, offices, a café, and gallery space—and is the place where prospective students are introduced to campus. The school converted what was once an oval driveway into a wildflower meadow, now encouraging a pedestrian approach (seen above). The center is self-sustaining, generating its own energy through a rooftop solar array, harvesting its water from rainfall, and processing its own waste. Its gray water treatment system is in a pilot program for the state, and may pave the way for others.
Manhattan 1/2/5 Garage & Salt Shed
Two buildings belonging to New York City’s sanitation department redefine municipal architecture. Resembling a grain of salt, the cubist form of the Spring Street Salt Shed holds 5,000 tons for clearing icy streets. The Manhattan 1/2/5 Garage (background), whose floors are color-coded for each of the three districts, is home to 150 vehicles, wash and repair facilities, and space for 250 workers. The garage is wrapped in 2,600 aluminum “fins,” shading devices that pivot with the sun’s rays, reducing heat gain and glare through the glazed walls while still allowing views to the outside. Municipal steam heats and cools the building, so no fuels are burned. A 1.5-acre green roof reduces heat-island effect and filters rainwater. A condensate by-product of the steam is also captured, and, along with the rainwater, used for toilets and the truck wash. Combined with low-flow fixtures, the process reduced water consumption by 77 percent.
Starbucks Hillsboro, Oregon
Starbucks has been a leader in the development and implementation of a scalable green building program for over a decade .Starbucks joined the U.S. Green Building Council® (USGBC) in 2001 and collaborated with them to develop the LEED® for Retail program, an effort to adapt LEED (Leadership in Energy and Environmental Design) to new construction and commercial interior strategies for retail businesses. In 2008,Starbucks challenged themselves to use LEED certification not just for flagship stores and larger buildings, but for all new, company-operated stores. Many people, even internally, were skeptical, especially with Starbucks growth across the globe. But by collaborating with USGBC and other like-minded organizations, we have been able to integrate green building design not only into new stores but also into our existing store portfolio. Starbucks has also succeeded in providing a practical certification option for retailers of all sizes.
The Edge, Deloitte
The Edge, located in Amsterdam, is a model of sustainability.is billed as the world’s most sustainable office building and has the certification to prove it. But, it’s more than that. The place is, well, fun. And interesting. And inviting. So much so that professionals are actually applying for employment with Deloitte Netherlands because they want to work in the building. That it has become a recruiting tool is a satisfying side effect of a project designed to both redefine efficiency and change the way people work. “We wanted to ensure that our building not only had the right sustainability credentials, but was also a real innovative and inspiring place for our employees,” says Deloitte Netherlands CEO Peter Bommel.