What are the attractions of the I-4 Ultimate project in Florida [which a team including Skanska has bid for]?
KR: Florida is a key home market for Skanska and has been a leading public-private partnership (P3) advocate. With 11 P3 projects either under construction or under procurement in the state, it is highly experienced in its delivery. The I-4 Ultimate project is well planned and will lead to major regional transportation improvements. Florida Department of Transportation is a current valued client and Skanska’s financial strength, construction capabilities and local presence are well matched with their needs.
As one of the busiest highways in Florida – with about 1.5 million average annual daily trips — I-4 is a critical thoroughfare for commuters and commerce. Domestic travel to Orlando continues to increase, thanks in large part to its world-leading theme parks and conference facilities. The project will relieve congestion by adding managed lanes to more than 20 miles of the corridor. Additionally, there are interchange improvements that will enable safer, more efficient travel.
Our team, I-4 Mobility Partners, is based in Orlando and our team-mates are used to delivering massive roadway projects to FDOT on time and on budget.
What are your priorities as an infrastructure business, and which parts of the world excite you most?
KR: The most exciting and promising market for the P3 business is the US. This past spring, the American Society of Civil Engineers (ASCE) gave the state of infrastructure in the US a D+ grade and predicted a $1.6 trillion infrastructure shortfall by 2020. It’s a forecast that doesn’t have to become reality. Skanska has made P3s a priority because it’s an opportunity to invest capital, achieve financing and build projects that are highly needed — projects that are massive and could not otherwise be traditionally funded.
The transportation sector has the strongest needs and possibilities right now, but we are hopeful that this model will be applied in other sectors such as healthcare, higher education, energy and government buildings in the near future.
What are the main challenges facing developers these days?
KR: In this post-recession economy, there is a recognisable need for improvements to infrastructure and fortunately, there is a good deal of capital available for investing. The challenge is two-fold: developing projects that are well structured with consideration to scope, risk allocation, political will and financing capabilities, among other characteristics. There are increasingly more states that have laws that enable P3 procurement, and this is encouraging. However, there are still several incorrect perceptions about the P3 model that need to be clarified in political circles.
The other challenge is speed to market with the pipeline. There are tremendous possibilities, but thoughtfully shaping projects requires resources and expertise both on the private and public sides. There is room for expediting procurement that will put shovels in the ground and people to work. Considering construction materials and labour costs, doing so sooner could provide clients with more leverage. It’s an ideal time to open up more P3s for competition.
In an infrastructure context, what might surprise us about Skanska’s market position in five years’ time?
KR: In five years, we would hope the surprise would be less about Skanska’s market position and more about the position of P3s in general in the US. We see P3’s being an accepted, widely used procurement method for projects large and small and critical projects across many sectors are being financed, built and operated by responsible companies in partnership with public and private clients. And all of those projects are being done without raising taxes, adding to government costs and through performance-based long term contracts to ensure public trust is upheld.
From a Skanska perspective, Elizabeth River Tunnels (Midtown Tunnel) will be completed and stand as a shining example of how a P3 can work and positively impact a region.
Karl Reichelt is executive vice president, North America at Skanska Infrastructure Development