Last edited 04 Jan 2021

Design Build Finance Operate Maintain DBFOM

DullesGreenway.jpg
The view north along U.S. Route 15 and east along Virginia State Route 7 (Leesburg Bypass) at the exit for Virginia State Route 267 EAST (Dulles Greenway, Dulles Airport, Washington) in Leesburg, Loudoun County, Virginia.

Contents

[edit] Introduction

Design build finance operate maintain (DBFOM) is a project delivery method that allows a private sector contractor to design, build and finance a project and then to handle operations and facilities maintenance under a long-term agreement.

NB Operations refer to actions taken to achieve business objectives. Maintenance refers to actions taken to keep the asset in running order. Maintenance can be considered a subset of operations, since it ensures that assets retain a good appearance and operate at optimum efficiency.

[edit] How DBFOM works

DBFOM is sometimes used by public sector entities for infrastructure projects such as bridges, roads, transportation facilities and so on. Public sector clients tend to use DBFOM for two purposes:

  1. To allocate risk for the project to the private sector contractor.
  2. To allocate responsibility for the project to a private sector contractor with expertise in areas that the client lacks.

By bundling the components of the project, the public sector client relinquishes responsibility without surrendering ownership.

Financial considerations may be the initial rationale behind the decision to use the DBFOM method, since it may open up access to private capital while conserving public resources and reducing debt potential.

This project delivery method delegates all project duties to the private sector party in exchange for fee payments collected over an agreed period of time. Operating control reverts back to the public sector client once the final payment has been made.

Payments may come in the form of availability payments or shadow tolls. Under an availability payment arrangement, the public sector client makes payments once the project is ready to use. Under a shadow toll arrangement, the public sector pays a predetermined amount to the private sector contractor for operating and maintaining the project. In the case of highways, bridges, tunnels and other roadworks that shadow toll fee is usually based on the number of vehicles that use the asset.

[edit] Applicability

The DBFOM method is used for both new construction and renovation of roads, bridges and tunnels which generate tolls from users. It is commonly used in the United States.

In the state of Virginia, the Dulles Greenway is a 14-mile shadow toll highway project that was privately financed and constructed between 1993 and 1995. The initial agreement reverts operational responsibilities back to the state in 2036.

To finance the Greenway, funding was obtained through loans that were to be repaid with toll revenues. However, a lack of traffic failed to generate the projected amount, so tolls - and legal speed limits - were increased on the road to entice drivers to use the highway. Revenue continued to miss targets, prompting the state to renegotiate a 20 year extension to the original agreement.

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