News & Insights

United States Federal facilities cover approximately 500 million square feet in the built environment making the Federal Government the largest custodian of real property assets in the US.  This opens a great possibility for public-private collaboration to reach sustainability goals with the largest built-environment partner in the US. This article explores the untapped potential of P3s in federal facilities, highlighting the numerous opportunities they present for driving sustainable transformations.

Key sustainability challenges for federal facilities

Federal facilities face many sustainability challenges from their significant energy consumption and the imperative to manage public assets responsibly.

These hurdles demand strategic solutions that transcend traditional approaches. Pressing issues include the need to:

• Optimize asset utilization: By introducing smarter scheduling, maintenance, and resource-sharing practices, existing assets and resources can be maximized. This approach not only fosters cost savings but also minimizes waste.
• Revitalize aging infrastructure: Addressing the maintenance and replacement needs of aging infrastructure ensures facilities remain functional, reliable, and up to current standards.
• Drive energy efficiency: Implementing energy-efficient technologies and practices reduces energy consumption and operational costs while also contributing to environmental sustainability.
• Harness new technology: Leveraging the latest advancements in technology can enhance operational efficiency, data collection, and analysis. This can lead to better decision-making and streamlined processes.
• Enhance safety measures: Prioritizing the well-being of both staff and visitors through refined safety protocols, training, and cutting-edge technologies creates secure environments that not only bolster productivity but also mitigate potential risks.
• Respond to extreme weather events: Developing strategies and infrastructure to effectively manage and recover from extreme weather events ensures minimal disruption and safeguards operational continuity.

While meeting these challenges can empower federal facilities to modernize their operational landscape and elevate performance, execution and funding for these projects can be difficult.

Public-private partnerships as an answer to sustainability challenges

Public-private partnerships (P3s) present a dynamic solution to address these challenges by capitalizing on the strengths of both sectors and alignment of efficiencies not otherwise found individually for the programs. The partnership model merges the public sector’s objectives for sustainability with the private sector’s agility and innovation, forming a robust synergy.

While all the advantages of P3s hold significant value, financial fitness tends to be a paramount concern for federal clients. Budgets and funding availability often constrain government agencies. Sustainability initiatives, although critical, can be resource intensive. Federal clients can access external funding sources by partnering with private sector organizations through P3s. This infusion of private capital can alleviate budgetary pressures and allow agencies to undertake more ambitious and impactful sustainability projects.

Unconventional solutions often arise from collaboration as private companies bring fresh ideas and technologies to the mix. The resulting innovations hold the potential to reshape industries, enhancing sustainability in unprecedented ways.

Opportunities for public-private partnerships in creating sustainability and resilience

The advantage of being the largest facilities owner is the US government is ripe with opportunity to partner with the private sector to initiate large land transfers and development of phasing for the next steps.

Our baseline: Measure so you can manage (or plan and unlock potential).

ASHRAE audits serve as a critical component in enhancing the operational efficiency of federal facilities, thereby ensuring compliance with energy regulations and optimizing the utilization of taxpayer funds. Encroachment planning for federal facilities is a multifaceted process that incorporates various considerations including the Air Installation Compatible Use Zones (AICUZ) program, environmental assessments, and the management of Per- and Polyfluoroalkyl Substances (PFAS) and Perfluorooctanoic Acid (PFOA).

AICUZ guidelines help mitigate the impact of air operations on nearby communities, ensuring compatible land use with military airfield requirements. Environmental assessments provide a comprehensive framework for evaluating not just ecological impact, but also the potential risk posed by contaminants like PFAS and PFOA. This integrative approach ensures informed decision-making that complies with regulatory mandates while promoting sustainable and safe operations.

Planning for federal facilities is a comprehensive endeavor involving various stakeholders and employing methodologies such as facilitating charrettes and envisioning future base design. Charrettes serve as collaborative workshops that bring together experts, planners, and community members to brainstorm and articulate solutions for complex facility-related challenges. These participatory sessions are often instrumental in shaping future base design, ensuring that the resulting plans are innovative, feasible, and aligned with strategic objectives and regulatory frameworks. Leveraging private sector investment through existing authorities

Several sectors of the DOD, DOE, and GSA have unique provisions to modernize, enhance, or leverage existing assets.  Our team has been successful through the development of photovoltaic solar, office buildings and other strategic assets for the Federal Government and their supporting communities by leveraging unique and distinct acquisition programming and portfolios.

What are the risks associated with P3s for sustainability, and how can federal facilities and private partners work together to mitigate these risks?

While P3s offer tremendous potential for driving sustainability in federal facilities, they are not without risks. These risks stem from the complex nature of collaboration between two distinct sectors with differing objectives, priorities, and methods of operation.

Here are some common risks and strategies for effective risk mitigation:

Misalignment of Objectives

One of the primary risks in P3s is the potential misalignment of objectives between public and private partners. The public sector often prioritizes social and environmental goals while the private sector focuses on profitability. This misalignment can lead to conflicts and hinder the progress of sustainability initiatives.

Mitigation Strategy: Clearly define and communicate the shared goals and objectives of the partnership from the outset. Establish a comprehensive agreement that outlines each partner’s responsibilities, commitments, and expected outcomes. Regular communication and collaboration between partners can help maintain alignment throughout the project’s lifecycle.

Financial Uncertainty

P3s involve financial investments from both public and private entities. Economic fluctuations, unexpected project costs, and budget constraints can introduce financial uncertainty that affects the project’s feasibility and progress. One significant risk in P3s arises when private ventures are not authorized to access public funds. In such cases, the financial burden may disproportionately fall on the private entity, leading to potential misalignment of objectives and priorities between the public and private stakeholders. This limitation can adversely impact the project’s feasibility, execution timelines, and, ultimately, the delivery of public services or infrastructure enhancements that the partnership aims to provide.

Mitigation Strategy: To mitigate the risk of public funds being unavailable for private access in P3s, a robust financial model should be established at the outset of the agreement. This model would include contingency plans and alternative funding sources, such as third-party investors, grants, or revenue-sharing mechanisms.

Additionally, contractual safeguards can be put in place to specify conditions under which additional financial commitments may be required from each party. Regular financial audits and governance reviews could further ensure the partnership remains fiscally responsible and aligned in its objectives. By proactively addressing these financial constraints, both public and private entities can better manage their respective risks and responsibilities, thereby enhancing the overall sustainability and success of the project.

Regulatory and legal challenges

A notable challenge in P3s is the alignment of authorities between public and private entities within a legal framework. Each party typically operates under distinct regulations, governance structures, and approval processes, which can create complexities in harmonizing responsibilities and authorities in a legally binding agreement. These disparities can result in delays, increased transaction costs, and even contractual disputes that compromise the partnership’s objectives. Ensuring that both parties are fully aligned in their goals and legal and regulatory obligations is essential for the development and successful execution of the partnership agreement.

Mitigation Strategy: To mitigate the challenge of aligning authorities within a legal framework in P3s, it is advisable to involve legal experts and governance specialists early in the negotiation process. These professionals can comprehensively review existing regulations, governance structures, and approval mechanisms that apply to each party.

A well-defined Memorandum of Understanding (MOU) or pre-contractual agreement could be developed to outline the roles, responsibilities, and decision-making protocols for each entity involved. Additionally, periodic joint governance meetings can be instituted to identify and address any divergences in regulatory or operational alignment in real-time. By taking these proactive measures, both public and private parties can significantly reduce the risk of contractual disputes and ensure smoother execution and compliance throughout the project’s lifecycle.

Technological and innovation risks

Sustainability initiatives often rely on innovative technologies with a certain level of uncertainty or complexity associated with their implementation. Technical challenges, inadequate technological readiness, or unexpected technical limitations can impact project outcomes. Federal agencies are often at the early phases of technological adoption due to emerging threats, climate change, and geopolitical events that change our exposure to National Security.  With existing tools providing late-to-need solutions, the federal government needs to adopt and invest in innovation through P3 Partnership programming, whereas capital markets will not take the risk to adopt early-stage technologies.

Mitigation Strategy: Prioritize thorough research and due diligence when selecting technologies for the project. Collaborate closely with private partners to assess the feasibility and potential risks of adopting specific technologies. Develop contingency plans to address any technical hurdles that may arise during implementation.

Reputation and public perception

The success of P3s relies on public support and trust. Negative public perception, stakeholder opposition, or concerns about transparency can undermine the credibility of the partnership and impede progress.

Mitigation Strategy: Maintain open lines of communication with the public, stakeholders, and local communities throughout the project lifecycle. Establish mechanisms for transparent reporting and regular updates on project milestones and achievements. Proactively address concerns and engage in community outreach to build public understanding and support.

Long-term sustainability and maintenance

Sustainability projects require ongoing maintenance and management to ensure lasting impact. Failure to adequately plan for long-term sustainability can result in the deterioration of project benefits over time.

Mitigation Strategy: Include provisions in the partnership agreement that outline responsibilities for ongoing maintenance, monitoring, and evaluation of project outcomes. Establish a clear plan for knowledge transfer and capacity building to ensure that federal facilities are equipped to sustain the initiatives beyond the partnership’s duration.

By identifying these risks and implementing thoughtful mitigation strategies, federal facilities and private partners can navigate the challenges of P3s and harness their full potential for driving sustainable transformations. Through proactive communication, transparent collaboration, and comprehensive planning, P3s can become a powerful tool to achieve the shared goals of sustainability and resilience.

What criteria should federal facilities consider when selecting private partners for P3 sustainability projects?

Selecting the right private partners for sustainability projects is crucial for the success of P3 projects. Here are the key criteria that federal facilities should consider when evaluating potential private partners:

• Expertise and Experience: Look for private partners with a demonstrated track record in executing successful sustainability projects. Evaluate their experience in similar initiatives, their understanding of relevant technologies, and their ability to navigate regulatory and compliance challenges.
• Alignment with Sustainability Goals: Choose partners whose values and mission align closely with the federal facility’s sustainability objectives. A shared commitment to environmental stewardship and social responsibility is essential for a successful partnership.
• Innovation and Creativity: Assess the partner’s capacity for innovative thinking and creative problem-solving. Look for partners who can propose innovative solutions, technologies, and strategies to address sustainability challenges effectively.
• Financial Stability: Ensure that the potential partner has a solid financial foundation. A financially stable partner is more likely to withstand economic fluctuations and commit to the long-term sustainability of the project.
• Proven Collaboration Skills: Evaluate the partner’s ability to work collaboratively with diverse stakeholders both within the private sector and in the public sector. Strong communication and interpersonal skills are key to ensuring effective teamwork and stakeholder engagement.
• Technical Capability: Assess the partner’s technical expertise, including their familiarity with cutting-edge sustainability technologies and their ability to integrate these technologies into the project effectively.
• Commitment to Community Engagement: Choose partners that value community engagement and are experienced in working with local communities. A partner that respects and involves community interests can help build positive public perception and support.
• Risk Management Strategies: Examine the partner’s approach to risk management. Look for partners who have a comprehensive understanding of potential risks associated with sustainability projects and have strategies in place to mitigate them.
• Past References and Case Studies: Request references from previous clients who have worked with the potential partner on sustainability projects. Hearing about their experiences can provide valuable insights into the partner’s strengths and areas of improvement.
• Long-Term Commitment: Seek partners committed to the project beyond its initial implementation. A partner willing to invest time and resources in the project’s ongoing monitoring, maintenance, and improvement is invaluable.

Selecting the right private partner for sustainability projects is a critical decision that can make or break the success of a project. Federal facilities must look for partners who have experience, share their goals, think creatively, and can work well with others. They also need to find financially stable partners who know the latest technologies and are committed to working with the community and managing risks.

Salas O’Brien experience and can help structure the P3 project, connecting clients with strong partners. With our understanding and expertise, we can help ensure that sustainability projects are successful and meet the needs of everyone involved.

How Salas O’Brien helps federal clients engage P3 solutions

Salas O’Brien has the capacity to help federal agencies conceptualize and structure public-private partnership projects. We also provide a host of ancillary services like:

• Capital investment planning and analysis
• Decision modeling and analysis (Digital Twin), Artificial Intelligence, Advanced Meter Reading Systems (AMRS)
• Transactional Support
• Facility condition assessments (ASHRAE Audits)
• FAR and non-FAR based procurement solutions
• Owners’ rep (Market DD, Real Property Exchange RPX, Enhanced Use Lease EUL, Military Housing Privatization Initiative MHPI, UP Utilities Privatization, BRAC Base Realignment and Closure, Intergovernmental Support Agreements (IGSAs)m Other Transaction Agreements)
• Repurposing stranded and distressed assets
• Sustainability consulting

Contact us about the specific challenges you face to determine if a Public-Private Partnership P3 solution may be right for your context.

For media inquiries on this article, reach out to Stacy Lake.