Preserving capital for financed DBOM projects
A design-build-operate-maintain (DBOM) project delivery method financed by a third party can help clients achieve their infrastructure upgrade needs if they're short on capital.
It is not unusual for clients to have less capital than needed to accomplish all their infrastructure upgrade needs. As more clients look for ways to accomplish more with less, a design-build-operate-maintain (DBOM) project delivery method that is financed by a third party can provide the answer to the challenges they are facing. By combining the benefits of a DBOM project with a financing solution, the client can decrease risk, preserve capital dollars, and reduce the lifecycle costs of the project.
As an integrated procurement model that combines the design and construction responsibilities of design-build procurements with operations and maintenance, the DBOM model provides significant advantages through its project delivery:
- Smoother coordination among phases, reduced risk to the owner, and decreased finger pointing among contractors since responsibility for often disparate functions — design, construction, maintenance — is held by one entity.
- Quicker process that tends to stay on budget better than design-bid-build projects.
- A greater degree of cost certainty is provided with the owner receiving the fixed cost for design, construction, and maintenance early on.
- A more meaningful, tailored maintenance plan based on anticipating and addressing needs as they occur that stem from the team’s detailed knowledge of the project design and construction.
DBOM projects can be financed in a number of ways and can generate savings that open up a number of additional financing mechanisms of value to the client. Therefore, it is important to look at what scopes of work for DBOM projects lend themselves to benefit most from third party energy and operational savings financing mechanisms.
Public-private partnerships (P3) has become a popular discussion point among public entities as a way for them to leverage private capital to meet their capital needs. With 2019 recorded as a banner year for the P3s in the United States according to the National Law Review, DBOM can be leveraged by these clients to reduce capital dollars needed for infrastructure upgrades and to capture savings from the project to offset the capital cost.
Which types of projects are best suited for the P3 structure, though? For example, although there are a variety of projects that can be structured using P3s, transit projects often use P3s since they rely on revenue from the transit system. These projects can be financed not just from projected revenues, but alternatively from projected energy and operational savings. Commercial entities can similarly use monetized savings to offset the capital costs of projects such as central plants.
The integrated procurement model of the financed DBOM method offers a solution to both public and private clients to accomplish their infrastructure needs with less of their own capital dollars by leveraging savings. With a multitude of funding sources and options, various challenges can be tackled from one standpoint, providing best value and specifically allowing for government and commercial entities to monetize their utility assets while ensuring costs and operating standards.
Original content can be found at inthebigroom.com.