Mike Schneider Speaks to P3 Bulletin About the Future of the P3 Industry
InfraStrategies’ Mike Schneider has seen the P3 market mature over the past four decades. He spoke to Paul Jarvis about the lessons learned and the future for the industry. Moving to the Mainstream was published on April 12, 2022 in the P3 Bulletin.
The recent P3 Awards in New York saw industry stalwart Mike Schneider receive a Lifetime Achievement Award, getting a standing ovation in the process.
A few weeks later, the InfraStrategies co-founder and managing partner is back at home on the other side of the country, reflecting not only on the Award, but also the career that he has enjoyed. “It’s hard to believe that I’ve spent almost 40 years conceiving, planning, advising, and implementing P3 projects,” he says, but while he may be planning to wind down his work schedule over the next few years, he is not thinking about imminent retirement.
“It’s a good thing I’m not particularly fond of fishing,” he says with a smile.
Schneider’s career has seen him work on a wide variety of projects around the world, but he began his working life at his local Department of Transportation in the City of Los Angeles, as a research engineer on traffic signal systems and travel forecasting. While working for the public sector provided a good grounding, he concluded that the private sector was where he wanted to ply his trade.
“After a couple of years in the public realm, I determined that the private sector was the place for me, and in the early 1079s I had the opportunity to join a small company in Irvine, California, called VTN,” he says.
Soon, Schneider was on the move again, arriving at Parsons Brinckerhoff (now WSP) in 1975. It was here that he really began to dig into the P3 world, starting up the firm’s southern California office and helping the firm grow significantly over a 30-year stint at the company. Schneider saw PB grow from virtually no presence west of the Hudson River to more than 30 offices and over 5,000 staff.
It was during this period that Schneider engaged in many of the highlights of his project work. He was part of the team that conceived and implemented the E470 Toll road around Denver, Colorado, and he co-developed the concept for the Orange County, California, toll road program and directed this program for almost a decade. When California began experimenting with privately financed roads and unsolicited proposals in the early 1990s,
Schneider led a team with French company Transroute on the development of one of the first: the SR125 project in San Diego.
“It was the first private toll road in the Western US where the private sector held responsibility for all aspects of the program, including accepting all environmental and political risk, cost and revenue revenue risk, and the full funding and financing risk,” he says. “The industry learned a lot about how some of these risks need to be ameliorated
before the private sector enters a P3 project.”
Schneider also points out that the project offered a direct example of why the P3 model can be such a powerful tool. The SR125 opened in 2008, just before the financial world was turned upside down with the demise of Lehman Brothers and the onset of the financial crisis. Some argued that the P3 model didn’t work, as ridership dropped below expected levels owing to the collapse of the housing and employment markets. “However, I would point out that in fact the P3 approach succeeded, because the private sector took all risk and today the project is a major success, now owned and operated by the regional MPO agency,” he says.
Another of Schneider’s exploits in the 1990s is also among his proudest achievements, but this time not in California. Instead, he became deeply engaged in Israel where he worked on major public transit projects in Jerusalem and Tel Aviv. “In Jerusalem, we supported the development of a P3 model with partial revenue risk, to allow the government to set the fares and subsidies, but still have the private sector take defined risks on ridership and revenue,” he explains. “It is now one of the most successful street-running LRTs in the world and has transformed Jerusalem in the process.”
In 2006, Schneider was executive vice president and director of corporate development at Parsons Brinckerhoff, and after 30 years it was time for the next chapter. Schneider decided to set up his own company, InfraConsult, which worked on a number of major program management and P3 initiatives, including supporting LA Metro to establish its industry-leading P3 program and developing the foundations for the multi-billion-dollar Honolulu Rail
Transit Program. After six years, Schneider and his partners sold InfraConsult to HDR, and he moved with the business to establish and lead HDR’s foray into the advisory services market.
In 2018, Schneider moved back into the boutique strategic advisory world, co-founding InfraStrategies, the company he runs today with partners Carolyn Flowers, Jeff Morales, and Sharon Greene. Schneider believes InfraStrategies is uniquely positioned in the infrastructure sector, having the flexibility and professional insight to address the market
today and in the future. According to Schneider, “one of our key objectives, in addition to providing strategic advisory services to clients in the public and private sectors, is to bring young and highly motivated professionals into InfraStrategies. My partners and I - including our newest member, Joshua Schank - are all focused on recruiting and mentoring young
professionals to address the acute issues of workforce development and reinforcing skills in the STEM disciplines.”
As anyone working in the P3 space knows, being able to react to changing priorities and new political realities is critical. Schneider reflects on the array of changes that have taken place over the course of his career.
“In the 1980s and ‘90s there was a loud chorus demanding new infrastructure, and not much public money, so there was a huge appetite for ‘privatization’ and what became known as public-private partnerships.” he says. “It took agencies some time to understand that P3s were not a panacea for funding new infrastructure, but rather a mechanism for finding more efficient financing and utilizing the vast storehouse of private capital for accelerating public projects, while transferring varying degrees of risk from the public to the private sector.”
Schneider notes that the conversation has matured since then. There is a better understanding of the rationale for using private finance and partnering between sectors. In particular, he suggests that over the last 20 years there has been a gradual acceptance of utilizing user fees as an equitable approach to providing and maintaining infrastructure.
However, Schneider also observes that in the last couple of years, a growing backlash seems to have emerged among certain elements of local and state government, resistant to tolls and other such revenue generation methods. “The industry has a responsibility to help educate the public that infrastructure is the backbone of a strong economy and requires significant investment at all levels of government, supported by private investment and risk sharing,” according to Schneider.
Another evolution over the decades is the growing use of the P3 model in social infrastructure. “P3s have become more prevalent in social infrastructure because government agencies often do not possess the in-house skills to deliver projects quickly and efficiently and often do not wish to be responsible for the maintenance of those projects once they are built,” he says.
“In summary, P3 has gone from being a fringe idea to a more mainstream option to accelerate the delivery and rehabilitation of needed infrastructure.”
Here to Stay
So, what does the future hold, both for the P3 market and Schneider himself?
“P3s will occupy an important niche that government agencies may embrace because they see it as a smart way to deliver infrastructure,” he suggests. “Others won’t, because of populist concerns about ‘privatizing’ infrastructure and increased focus on issues ‘transparency’ which seem unduly focused on P3 delivery.”
He also points to the way the discourse around infrastructure generally is shifting, with significant focus now on environmental and social goals. “ESG has become a major topic for both the public and private sectors,” he says.
Schneider expects this attention on ESG matters to continue, particularly under the Biden administration, which he notes is “very concerned with dealing with inequality through developing new infrastructure with fairness and equity”.
He continues: “ESG has become the triple-bottom-line for government, focused on environmental justice, social equity, and good government, to promote and enable a better and more sustainable future. The ESG concept has become embedded across the industry.”
P3 can and will play an important role in that, but as Schneider explains, it is unlikely to become the dominant procurement approach. “It will remain an important piece of the infrastructure delivery puzzle, and will remain firmly rooted as a supplement to other methods.”
For Schneider and his InfraStrategies team, that will still provide plenty of opportunities, especially as the federal government looks to roll out the promises contained in the Infrastructure Investment & Jobs Act (IIJA).
Schneider may choose to spend a bit more time fishing (or hiking and skiing) over the next few years, but with the US increasingly opening up to novel ways of procuring projects and making the IIJA’s funds stretch further, there will clearly be plenty of interesting opportunities to drag his attention back to infrastructure and away from the lake.