2. Jails and Prisons
Private contractors have long designed and built jails and prisons. In a relatively new development, some governments have accelerated completion of projects by delegating more authority to, and reducing regulatory requirements on, private design-build teams. Even more recent is the appearance of prisons wholly financed and built by the private sector, which offer their bed space on a per-diem contract basis to jurisdictions experiencing an overflow of prisoners. This will be increasingly important not only to provide space for new prisoners, but also to replace existing aged facilities as needed. Nearly 300 prisons in the
United States are over 50 years old, and more than 50 are over 100 years old.26
These facilities will need
replacement or thorough renovation as they decay or become obsolete and inefficient to operate.
Outsourcing for Airports
New York City. In an outsourcing touted as the largest in the nation, the Port Authority of New York and New Jersey has contracted with a consortium (including LCOR) for the renovation, expansion, and operation of the International Arrivals Terminal at John F. Kennedy International Airport. The project’s
estimated value is $1.2 billion.27
Several benefits will accrue to the port authority. Outsourcing the massive project has enabled the port authority to refocus on its core mission. The project has also created predictable cost and revenue streams. Also, the new terminal will be on-line sooner—the consortium is on track to complete the project
an estimated 18 months faster than the port authority had projected.28 Dave Sigman, vice president of LCOR, suggests that the budget is much closer to the original estimate than it would have been had the
port authority undertaken the project.29 The project was financed using credit from the port authority, via
special project bonds based on the future cash flow of the project.
Private operation of the new Terminal 4 has led to other advantages. The consortium not only has been able to control operating expenses, but also has been able to boost revenues from the project, primarily through innovative management techniques. For example, the consortium has greater flexibility in
terminal pricing, such as peak and off-peak pricing for terminal use.30
Los Angeles. The most extensive upgrade at Los Angeles International Airport (LAX) since the 1984 Olympics has been launched as a design-build project. A bridging delivery strategy will also be employed on the $112 million project, known as Gateway LAX. LAX decided to depart from traditional contracting procedures to meet a “tight schedule, reduce overall change orders and minimize interpretation problems.” Contractors were given extensive performance specifications, and the contracts were awarded to low bidders. Work has begun on the $75 million Phase One, which will run three separate construction
Alex Singal and Raymond Reed, An Overview of the Private Corrections Industry (New York: Legg Mason Equity Research, 1997), p. 24, citing Bureau of Justice Statistics.
Dave Sigman, vice president, LCOR, interview with author, March 2000.
Design-Build, December 1999, p. 5