Post Hurricane Maria - Now Is The Time To Embrace Resilient PPP Planning

“Most of us evaluate risk based on our gut feelings. When we rank potential threat, natural hazards tend to be relatively low considering the amount of damage that they pose and their frequency.” Paul Slovic – The Washington Post, October the 16th, 2017

“The power lines fell like dominoes,” said Robert Kadlec of the US Department of Health and Human Services. Like dominoes, the lack of electricity and communication set off a chain reaction that hindered the entire disaster-response effort, complicating everything from delivering food to burying bodies. The federal government’s sluggishness made things worse…….An overall lack of preparedness on the part of the Puerto Rican government, which is deep in debt, has exacerbated logistical issues. “It’s not that there wasn’t a Plan B,” Mr Chárriez says. “There’s wasn’t even a Plan A.” The Economist, October the 7th, 2017

Political Innertia

Over the last few weeks the USA and its neighbors have been hit by hurricanes that have caused billions of dollars of damage and overwhelmed communities.

Unfortunately, the reactions of public authorities to these catastrophic disasters points to a realization that they do not seem to have comprehensive plans in place that will help drive a focused and rapid recovery response that will serve both the short term and long term needs of impacted communities. These overwhelming catastrophic natural events should not result in blame placing, but should serve as a wakeup call to all that we need to place a higher priority on the potential threats posed by catastrophic natural disasters and develop resilient plans, that lead to resilient recovery, resilient communities, and resilient infrastructure that can survive future events.

Damage has not only been inflicted on property and business owners, but also on the political establishment which has rather focused its energy on criticizing recovery coordination efforts (or the lack of them) than focusing on resilient and pragmatic practices (solutions) that can help alleviate the current challenges facing impacted communities that will take years to recover from. We need to encourage responsible leadership actions that are forward looking – not backward looking. We need to become more proactive than reactive. This is what underlies resilience planning and leaders need to commit to it.

Reexamining Our Approach

Following the media - and discussions that I have had with professionals who are deeply involved in the recovery efforts - has led me to the realization that it is clear that local, regional, and national government – especially in the USA and its territories – need to reexamine how they will respond to future events and harmonize their recovery and reconstruction efforts. Rich communities and poor communities deserve the same attention as well. I might even contend that poor communities need more attention as they are less likely to have the resources to recover from current and future catastrophic events.

One cannot reliably predict the magnitude and impact of future catastrophic events and this is a sobering reality. However, the question that should be asked is “how many events of this nature can we weather, and how resilient are we politically, economically, financially, and socially to prepare for them?”. By all accounts its seems that we may not be where we should be.

Government agencies - at all levels -  need to reassess their readiness to respond to future averse natural events and commit the necessary resource. They should also start sharing lessons with their neighbors. This is a practical issue that requires that best practices be adopted as a new approach by all and that lessons learned by leveraged by all.

The Private Sector as a Collaborative Partner

It is key that government considers embracing the private sector as a partner to hasten recovery and reconstruction efforts. The private sector can bring financing to bridge the government funding gap (think Puerto Rico), can mobilize its technical resources, and can introduce innovation that can hasten any recovery and reconstruction effort. Any collaboration between the public and private sectors should mandate that all recovery and reconstruction plans should include best practices that require resilient design, common sense when it comes to building in vulnerable and high impact areas, and comprehensive strategies to recover quickly from an event that draw on the strength of both the public and private sectors. It is also important that unnecessary bureaucratic red tape be eliminated and inertia be minimized.

It is vital to explore ways to fund recovery efforts collaboratively with reputable and well-intentioned financial institutions and investors. Fiscal responsibility needs to prevail and recovery lending should not exacerbate existing public sector debt, but should mitigate it in the long term. It is alarming to read reports in the press that predatory hedge funds have offered loans with exorbitant terms that are contrary to a visionary and pragmatic approach to recovery that is needed. 

Responsible PPPs as a Solution

It is important that well-structured and fiscally responsible Public-Private Partnerships (PPPs) are explored to speed up disaster recovery. The need exists for magnanimous private sector intervention. It is clear that some impacted areas do not have the financial resources, knowhow, nor the funds to recover without massive help, either because of a history of past mismanagement or because of the massive scale of the destruction. 

Puerto Rico is an example of everything that could go wrong. It was in dire economic straits before Hurricane Maria even hit. It was facing island wide bankruptcy due to years of economic mismanagement and inefficiency. We need to ask - Should its recovery efforts be penalized because of its past history or is this a chance to rebuild in a new way that results in sustainable economies emerging? We have to ask ourselves, how will destroyed communities recover from disasters without being impeded by past legacies. We need to adopt strategies that only create blameless new legacies.

Puerto Rico and many other governments cannot ignore the reality of past mistakes, but neither can we hold citizens hostage to recovery because of past indiscretions and unreasonable financial terms. It is terrible to see messages being displayed that say “Help Us – We are Dying.”  This should never happen in the USA for example (Yes – Puerto Rico is part of the USA).

Practical Recovery Strategies

Any practical recovery strategy needs to ensure that all responsible parties are committed and signal their intent to remain committed to pragmatic and practical policies that will ensure that recovery is possible. We should not only plan with our gut , but with our intellect as well. It is important that all resources be leveraged collaboratively by the public and private sector. This might require the blurring of boundaries between the two sectors for a while so that the best strengths of each can be adopted. Governments need to be proactive in focusing on long term recovery plans that are not built on short term financial bailout packages. The private sector needs to be welcomed as long term committed partners if they are going to be incentivized to invest in the recovery and reconstruction efforts. Handouts or bailouts without rational terms and conditions will only introduce complacent shortsighted recovery plans that will not bode well for future events.

It is key that we have a Plan A and a Plan B for recovery and reconstruction. This only comes through the adoption of planning that adopts a strategic and sustainable resilient approach to recovery and reconstruction needs. A responsible response to catastrophic events should include the following actions:

• Short term recovery actions (first few months): Short term actions should focus on humanitarian disaster relief that is immediate, which helps those who need assistance, and which provides victims with the tools to recover at individual and community level. It is important that lessons learned during this phase should lead to recovery strategies that are duplicable in the future. This is where philanthropic partnerships between the public and private sector have value, but should not be confused as PPPs which are long term structured contractual agreements. It is also important that during this time that accurate statistics be gathered for meaningful and informed longer term reconstruction plans of critical infrastructure.
• Medium term actions (first few months): Efforts should slowly shift to a focus on the rehabilitation and reconstruction of all critically damaged infrastructure that is essential for long-term recovery. This includes transportation infrastructure, power grids, power generation, telecommunications, water and sanitation, etc.. With communities reconnected to the outside world and with resumed access to electricity and water, the misery factor would be diminished immediately and communities would be galvanized. It is also important during the medium-term recovery efforts that community and political leaders manage expectations. During this recover phase an inventory needs to be created of major infrastructure needs that will form the basis on a prioritized list of reconstruction projects (a pipeline) that would incentivize reputable private sector investors. Coordination is important so that reconstruction is not piecemeal. If PPPs are to be considered as an option, it is in this phase that governments identify infrastructure projects that are PPP appropriate, bankable and which will be of an appropriate duration so that the private sector has a chance to recover its investments and pay off project debt.
• Long term actions (next few years): During this phase of recovery it is essential that government and the private sector collaborate and pool their resources to repair and reconstruct critical infrastructure. It is during this phase that innovation and robustness be introduced to all reconstruction project planning. It would be irresponsible to carry out business as usual. Unfortunately, there is no way that these recovery and reconstruction actions will take place without incurring government debt. It is therefore essential that projects that are considered for PPPs have structured financing deals that are fiscally responsible and affordable. Political and financial guarantees from government will help private sector partners negotiate PPP financing on more generous terms as well, therefore making project finance more affordable. PPPs are fundamentally built around the appropriate allocation of risk. Therefore, it is important that project risk be identified and appropriately allocated (especially in the case of force majeure risks) and that mitigations be introduced that include infrastructure reliability, redundancy, robustness, and resilience. PPPs due to their long-term nature might be the best fit for long-term recovery strategies as they require focused risk mitigation (i.e. not building in flood zones) and extensive operational and maintenance monitoring during the project life cycle. 

Conclusion

PPP contracts between the private and public sectors can prevent the degradation of public infrastructure (i.e. think Puerto Rico power grid) over time due to comprehensively defined delivery conditions. PPP projects that embrace a realistic understanding of pure and speculative risk and the possible vulnerability to the reoccurrence of catastrophic events should be pursued. Thus, responsible reconstruction PPPs will require voluntary and active risk management, tied to reality checks of the possible inevitable reoccurrence of an event, rather than willfully ignoring its possibility.

Much has to be done and we are now facing a time of considerable recovery and reconstruction effort. This will take years. Apart from the private sector, there are organizations that can help with resilience strategies. One in particular is the newly created International Public Private Partnership Resilience Center (IPPPRC) – based in Louisiana - which has received a UNECE mandate to promote PPP reliance best practices internationally (see www.ippprc.org).