A financial viability assessment helps inform the selection of the most appropriate ‘financial model’ to take new car park scheme(s) forward. There are several different types of model that can be developed to procure and operate car parks and from a ‘private finance’ (or ‘PPP’ aspect), the following models are typical:
- Build Operate Transfer (BOT): a contract with a private sector contractor to design, build and operate a public facility (such as a car park) for a defined period, after which the facility is handed back to the public sector. The facility is financed by the public sector and remains in public ownership throughout the contract. The key drivers under this model are the transfer of operating risk as well the transfer of design and construction risk. This model is particularly suited to projects that have a significant operating element such as a public car park.
- Design Build Finance Operate (DBFO): a contract with a private party to design, build, operate and finance a facility for a defined period (after which the facility reverts to the public sector). The facility is owned by the private sector for the contract period and the key drivers are the use of private finance and the transfer of design, construction and operating risk. Again, this is suited to a project that involves a significant operating element and is particularly suited to transport projects such as roads, car parks, etc.
- Concession: similar to DBFO except the private sector recovers costs from user charges (or parking charges). Again, private finance is used whilst design, construction and operating risks are transferred. This model is suited to projects where user charging is a key feature, such as a public car park.
In addition to the above, alternative delivery models include service contracts where the asset remains in public ownership and the contract is typically short term (around 1 to 3 years in duration). The capital investment comes from the public sector and the contract covers a service fee paid by the public sector to the private sector for specific services, such as the operation of a car park. Operating and maintenance responsibilities are shared by the public and private sectors whilst commercial risk remains with the public sector.
Management contracts can typically last for 3 to 8 years and refer to models where the private sector manages the operation of a public service and received fees paid directly by the public sector. In this model, operating and maintenance are the responsibilities of the private sector.
Another model is that of a lease contract (lasting between 5 and 10 years) whereby the private sector manages, operates, repairs and/or maintains a public service to specified standards. Fees are charges to users and the service provider pays the public sector authority rent for use of the facility. Unlike the two other types of contract described above, this model features the transfer of commercial risk to the private sector.
We can undertake modelling of demand within the context of competing providers or options to identify whether the parking is adequate for the peak days just before and immediately after Christmas and what the annual cost may be to provide this level of capacity across the whole year. It may be that an optimal and more cost-effective solution for the town relies not on providing more permanent capacity but using temporary solutions to expand peak period capacity when required. This type of strategy is highly suitable for seaside destinations that may incorporate use of temporary overspill parking sites during summer months, but also applicable for many situations where there are intermittent peak demands. We have used a number of tools to identify the potential cost of providing for the peak and helped our clients and stakeholders re-scope these peak demand problems in a more cost-effective way.