The operations and maintenance incentive for future builds and renovations of U.S. airports
By Frank Rapoport
The water main break that flooded a baggage claim area at JFK International Airport in New York earlier this year and the power outage at Atlanta’s Hartsfield–Jackson Airport in December 2017 that lasted eleven hours and was said to lead to 1,180 flight cancellations, creating considerable traveler disruption and displeasure – likely gave owners and operators of airports across the country a jolt, as more than a few recognize these events as a harbinger of things to come.
As with most U.S. infrastructure, airport systems are aging. The American Society of Civil Engineers (ASCE) 2017 Infrastructure Report Card report gives America’s airports a D, largely because airport infrastructure is not keeping up with passenger demand. The reality is that constraints on AIP funds and PFC limits, combined with increased costs from security and nextGen requirements, makes it difficult for airports to adequately fund maintenance and development programs. Further, a 2018 report by FMI, an infrastructure consulting group, reported that US airports anticipate over $100 billion in infrastructure needs over the next five years.
Does your local airport authority’s project delivery method or capital improvement plan include funding operations and maintenance to prevent failures such as water main breaks or power outages? Is there a robust asset management plan to correct problems before they impact operations?
Rather than only extending user fees to fund the Airport and Airway Trust Fund, the ASCE 2017 Infrastructure Report Card report recommends that airport owners and operators explore innovative private sector financing such as public-private partnerships (P3) and with good reason. Both in the US and abroad, P3s have proven to ensure long-term operations and maintenance (O&M), with agreed upon performance requirements at a pre-negotiated, fixed price, with minimal exposure to the public sector. The same P3 entity that designs, finances and constructs the airport is on the hook for long-term maintenance and therefore designs with a life-cycle approach to optimize O&M costs.
With a P3 approach, the private partner is bound by requirements and standards defined in a contractual agreement to maintain the asset for the life of the contract, which is typically 20-40 years—and must handback the airport asset in the tip-top shape. Since public agencies retain safety and regulatory oversight under a P3, which include provisions to maintain the public’s assets, there’s little or no chance of deferred or unresolved maintenance.
The P3 framework is ideally suited to transfer the risk of a capital expenditure and long-term operations and maintenance. The public agency will realize better value for money, increased confidence in performance outcomes, and guaranteed service life. In addition, P3s incentivize outstanding customer experience – happy passengers are proven to spend more money on concessions.
The San Juan Airport is just one example. Despite the devastation wrought by Hurricane Maria on the island of Puerto Rico, the Luis Munoz Marin International Airport was among the first transportation facilities to return to service, due in no small measure to private operations, performance standards and expectations.
Partnering with the private sector creates a recipe for success for airports as the plans to modernize these assets with P3s result in projects that finish not only on time, but often ahead of schedule and with lower lifecycle costs. With these programs, assets last the entire design life and fit the developer’s (fixed) budget because the developer is contractually obligated to optimize preventative maintenance and renewal techniques – and there are heavy penalties for mismanagement.
Before your airport infrastructure deteriorates – or in the worst case, fails – look into P3s with a lifecycle view and an O&M component for your next new build or renovation.
Frank Rapoport is the chief strategy advisor for the Association for the Improvement of American Infrastructure (AIAI).