Creating and optimizing new forms of public-private partnerships in Seattle

Abstract

Seattle Public Utilities is pioneering a new form of public-private partnership in North America in the development of two new large water treatment plants. The Tolt and Cedar Treatment Plants, which provide drinking water for 1.3 million people, are being implemented using a design-build-operate (DBO) approach. This process has resulted in savings of 40% for the Tolt and 30% for the Cedar, relative to the estimated cost of implementing the projects using a conventional design-bid-build procurement with City operations for 25 years. In using the DBO approach, owners seek to optimize efficiency and the potential for innovation by conducting a competition to supply a bundled set of services including permitting, design, construction,and long-term operations. Benefits from this approach arise through design-build synergies, design-operate synergies, and through more focused competition than exists in the segmented design-bid-build model typically used. This paper will focus not only on the DBO approach and its resulting benefits, but perhaps more importantly on the critical issue of risk allocation. Finally, a discussion of our experience with these two premier projects will highlight the importance of a thoughtful procurement process and adherence to partnering approach to contract management in assuring the integrity of risk management principles.