Project Development

Project Development Services: Definitions, Objectives & Methods

Introduction

The purpose of the present paper is to describe an approach to the project planning process focusing on particular opportunities and segments of the potential marketplace for such services which are somewhat different from the traditional work which most planners and planning firms undertake. This approach is based on an understanding of the potentially powerful relationship between the traditional services of Urban and Regional Planning, Master Planning, etc. and the implementation of projects. To put it another way, most planning is focused on some type of future development activity. However, as opposed to focusing only on the planning process and delivering a high quality “plan”, if, where appropriate, the planning work embraces a spirit of implementation, then we can use planning as a tool for Project Development. That is, by gaining an early appreciation of the fundamental features of an implementation approach for a given planning exercise, the strengths of a larger multidisciplinary organization – which are primarily focused on the provision of project delivery services – can be engaged. This approach can provide greater value to clients and serve as a key “differentiator” in the changing, highly competitive marketplace for planning services.

The Project Development Process

To elaborate on this approach, the diagram below illustrates the Project Development process focusing on the early “front end” stage. In the beginning, a project usually starts with a light bulb turning on. An individual or a governmental body, or a company with a particular asset that they perceive is underutilized can turn on the light bulb; these assets can range from an empty lot adjacent to a freeway to a large beachfront property. Other types of light bulbs go on when a community, or an owner, has a problem or a set of problems that require some action; examples include a downtown which is faced with competition from suburban shopping centers or a military installation which is being closed down.

Once the light bulb has been turned on and, depending upon the intensity of the light (i.e. how badly the protagonists want change in the status quo), the opportunity to initiate the first stage of the Project Development Process is presented. As shown in the diagram, there are a variety of services that can be part of this first stage of planning work ranging from site analysis and conceptualization through financing. Taking the more traditional (i.e. planning-only) view of this menu of services, a crucial dimension of the opportunity may not be addressed. That is, from the point of view of the owner, what steps are being taken in this early exercise to focus on making the plan a vehicle for action?

Many proponents of projects, particularly those who are inexperienced with the process of developing a project, may be content, at this early stage of problem solving, with a nicely bound Master Plan. They may even go so far as to commission different kinds of planning studies. Sometimes they call an architect; sometimes an economist and sometimes they get a “blue ribbon” panel of out of town experts to do a charette. In many cases, this fragmented approach places emphasis on parts of the picture, but not all of it. It will only be when the owners or protagonists attempt to move forward past the point of deciding whether or not to proceed (i.e. the “Go/No Go Decision” point) that the more critical issues will come to the fore. These issues can include financing, property ownership/control, zoning/entitlements, community opposition, etc.

The opportunity, during the planning stage, for some, but obviously not all, planning exercises is to broaden the scope of the first phase effort to encompass those elements which can be critical to moving a project from “just a good idea” to a real world project. Sometimes this broadening of the scope is done through bringing other outside consultants to the team such as market/economics firms with specialized knowledge of the particular type of project under study; likewise, an operator or operating consultant can be useful in this early stage of the process with his or her knowledge of a particular industry, such as hotel owners/operators.

It’s important to recognize that the broadening of scope under discussion does not necessarily mean increasing budgets, desirable as this may be. Unfortunately, most owners, even those with the biggest of light bulbs (i.e. problems) usually find it difficult to sign off on an expensive planning study. On the other hand, if a reasonably comprehensive Project Development Plan can be put together during the first stage of planning, the chances of the project moving forward are greatly enhanced, when compared to just a “standard” planning study. It bears mentioning that even with significant resources (i.e. multi-million dollar planning study budgets), a failure to address the fundamental questions of how to get beyond the planning stage can be just as fatal as for a project with a smaller budget and thus, result in a project being shelved just the same.

It is also relevant to point out that in pursuing this more pro-active Project Development approach to planning, as opposed to the more traditional approach which is sometimes conceived of being primarily a facilitator, the lead planner assumes the role as the project team integrator. Because of the breadth of services that a large, multidisciplinary organization can provide over the life of a given project, it is not only possible but also quite logical for the planning funciton to act as the “center of gravity” for an owner and be the professional/technical leader which many project owners need. In this capacity, it is also the planner’s responsibility and in the project’s best interest to reach out and access needed expertise at appropriate times. This concept of seeing the planning stage as a vehicle for developing an integrated team is also key to its success.

Project Development Services Opportunities

The process and approach outlined above is generic in nature and, in the way that the same pair of shoes doesn’t fit everyone, should be considered only illustrative of the way Project Development Services can unfold. For example, with public entities, wherein the planning process for any given project opportunity is usually very controlled via specific RFP’s, etc., the ability to set in motion a different approach is usually limited. The key to being able to do things differently with these types of entities is to gain access to decision-makers at the stage when the light bulb goes on.

Often, in the case of public entities who eventually embark on a public planning process, the light bulbs are actually turned on by individuals or groups who have a stake in resolving a problem or promoting an opportunity; sometimes these individuals or groups will commission the type of studies and efforts which have been discussed herein. Ideally, by identifying and engaging opportunities of this type before they enter the more conventional planning process, the planner who offers Project Development Services may be in a position to obtain an assignment on a sole source basis.

Parenthetically, obtaining work on a sole source basis is also easier when the initial budgets are such that an individual or a group can authorize an expenditure without multiple levels of approvals; thus, the chances of getting a $50 to $100,000 assignment are much greater, in this type of situation, than preparing an elaborately detailed proposal with all services carefully identified and budgeted which puts the effort in the $200,000 to $1 million and above range. In the end, if the project makes sense, the follow-on work will add up to and exceed the bigger budget amounts, but getting the first step going increases the likelihood of action.

The types of assignments that are candidates for this type of process are almost unlimited, but there are certain project categories that we can identify as having a higher likelihood of advancing in the manner described than via a process which might be followed for, say, an industrial facility. Generally, a common theme in these categories is that they involve facilities that serve a “people gathering” function. Further, where a project opportunity has the chance of generating revenues, then there is greater propensity for interested parties to “turn on the light bulb”. It also goes without saying that the days when a government entity would fully fund a project development process are on the wane, if not long gone in many jurisdictions both domestically and internationally. Thus, the buzzwords “public/private partnerships” and “asset management” are often part of the types of projects which are most promising candidates for the Project Development approach outlined above.

Following are brief descriptions of potential types of projects where the Project Development Services approach may be applicable.

Aquariums
Children’s Mus eums
Discovery Centers
Libraries
Science Centers
Museums
Sports & Recreation Complexes
Urban Entertainment Centers/Districts
Themed Attractions
Cultural Attractions
Corporate Visitor Centers
Theme Parks
Convention Centers
Major One-Time Events (Expo’s, Olympics, Pan Am Games, etc.)
State and County Fairs

To further refine and filter the list of potential project opportunities it is also relevant to note that for several of the above noted types of projects, there are some major players who, as experienced customers, have a considerably narrower focus on what a planner offering Project Development Services can actually provide, than other inexperienced customers will have. For example, major players in the theme parks and entertainment project industry, such as Disney, are typically in full control of the Project Development process and although there may be selected opportunities to provide certain “front-end” services, they mainly seek out a large multidisciplinary organization when they need to augment their own staff in engineering and construction management. Thus, an announcement that Disney plans to develop a major urban entertainment center in, for example, Singapore, in terms of the opportunities to be involved in Project Development as previously defined, is of considerably less interest than say a Chamber of Commerce in a major city in the U.S. interest in trying to redevelop a sector of their city consisting of rundown warehouses into a cultural visitor attraction; the former opportunity has an experienced owner who knows the process and the desired outcome, while the latter needs the kind of “hand-holding” that leads to the provision of technical assistance.

A few observations are in order concerning these various project types:

Aquariums, Children’s Museums, Discovery Centers, Libraries, etc.: These types of projects are almost always promoted and funded, in the U.S., by local communities although internationally, governments are the primary project sponsors. There is no “Disney” in this field, although there are certain A/E’s who have done several projects and are therefore considered “experts” in the field. Sometimes in the U.S. a major donor is found to fund the capital cost of the project; in the case of the Monterey Bay Aquarium, it was David Packard of HP who put up $50 million. These types of projects are almost always promoted on the basis of enhancing the cultural offering of a given community and are often located in areas that a community is seeking to redevelop.

Theme Parks: Conventional wisdom is that the U.S. is saturated with stand-alone theme parks and that the economics of putting up a new, major park is unrealistic. In spite of this, there are some projects recently implemented which belie the conventional wisdom including New Orleans’ Jazzland and Legoland in Southern California. It is also true that all existing theme parks in the U.S., for example all those now owned by Six Flags, will be under competitive pressures to constantly refresh their product and this will result in development of new attractions and entire new “lands”. That said, the most promising market for theme parks is abroad, although the same economic issues are present abroad as they are in the U.S. (i.e. a park that operates for 6 months of year is not a good use of capital). Since Disney and its competitors can’t and won’t go into every country and city in the world that wants a theme park, there are selected opportunities to put together “one-of-a-kind” projects.

Museums, Themed and Cultural Attractions: As communities seek ways to distinguish themselves and generate tourism, particularly from outside the region, they look to create unique attractions, some of which are based on certain “home grown” features, such as an historic site like the Alamo, while others are pure transplants with little or no relationship to the past, like the highly successful Guggenheim Museum in Bilbao, Spain. The latter project represents an extraordinary example of the use of a cultural attraction to spearhead and stimulate an extensive program of city regeneration; it estimated that the City’s investment of over $160million was recovered within two years via the tourist influx.

Sports and Recreation Facilities: The U.S. is not unique in the level of enthusiasm and interest in sports at all levels. What is unique is the extensive level of investment which taxpayers are supporting to attract and retain professional teams. In spite of a number of in-depth studies on the reality of new stadiums and sports arenas (conclusion: they don’t really create new spending, just a reallocation from older stadiums and other activities), there are many projects on the boards throughout the U.S. Other countries around the world are just beginning to appreciate the more commercial models of sports and related facilities which HOK Sports and HNTB have been experimenting with over the past decade. There will probably be more and more interest in this experience in the near term from abroad. Other types of sports facilities which are being developed in the U.S. in smaller cities include: regional soccer complexes and minor league baseball stadiums, both of which fit the economic development profile.

Major One-Time Events (Expo’s, Olympics, others): There are two main areas of project opportunities in this category: Olympics and others. On the first account, in spite of scandals surrounding the IOC and bid cities, several U.S. cities recently spent considerable effort seeking to be the U.S. candidate for the 2012 Summer Olympics; New York won this bid and now must face competition from several major cities around the world that are lining up and spending millions to become the host for 2012. In addition to the fact that the Games bring prestige and attention to a city in a way that no other activity can, there’s a lot of potential revenue which accrues to an organizing city such that these outlays can be easily justified, by the winners. For the losers, there are lots of “consolation prizes”, like smaller events, such as the Pan American Games, and international media attention. Expo’s are a different animal: there hasn’t been an Expo in the U.S. since 1984 when New Orleans World Expo went bankrupt but there hasn’t been a drop in enthusiasm in this field outside the U.S. In 1998, Lisbon hosted Expo’98 and Hannover, Germany hosted Expo 2000; Switzerland held a national exposition in 2002 and Nagoya, Japan will host Expo 2005. Without the TV revenues and accompanying international media attention, the rewards of hosting an Expo are more localized, but as a vehicle for getting city improvements compressed into a short time frame, Expo’s, after the Olympics, are hard to beat.

Convention Centers: Another project type funded primarily by local communities (in the U.S.) which is designed to attract tourism and tourism spending is the convention center. Communities that want to “stay in the game” are being forced to expand existing facilities or build new ones to attract the big conventions (in excess of 1 million square feet). Abroad, cities like Madrid, Lisbon and Hong Kong have all developed major convention centers in the past few years and more are in the planning stages; the Hannover Expo 2000 was fundamentally an exercise in expanding the convention center in that city.

State and County Fairs: An often overlooked U.S. project type, state and county fairs are currently experiencing substantial pressure to change or go under. As local governments are under increasing pressures to cut costs, the logic of subsidizing and supporting fairs has come under fire. Several responses to the need for change include: development of new facilities that can be utilized year round, consolidation of one or more fairs into one new facility, privatization, etc. In some cases, aging fairgrounds are surrounded by vital, highly valuable real estate and a thorough analysis of the market opportunities may permit relocation to a new, economically appropriate physical plant.

PDS Participants

As shown in the aforementioned diagram, the skills and capabilities which are typically involved in the “front end” of a given Project Development effort include:

Site Analysis
Market/Economics
Project Concept
Cost Estimate
Schedule
Financing Approach
Project Organization

The types of firms and individuals who are contacted to provide assistance in these areas includes (in addition to planners):

Market/Economics Consultants: Because most owners/protagonists – no matter how inexperienced in the development process – realize that the only real project is one that can perform economically, they contact market/economics consultants to perform feasibility studies.

Architects: As much as “the numbers” are important in moving a project from dream to reality, there is also a need to visualize what the project looks like. In some instances, an expensive rendered drawing of the project – something that non-professionals can easily understand – proceeds a serious business plan.

Financial Advisors: Before the feasibility study can be completed, the business plan must address a key question: what is the financial plan? The complexity of financing large-scale projects is such that experienced financial advisors can and do command very high rates for their services, not only in placing financing, but also in the run-up and early planning stages.

Business Consultants: In addition to the complexity of finance, there are also many organizational, tax and legal dimensions to new projects which cause even experienced owners to seek professional advice and assistance. Firms that, through their accountancy operations have intimate knowledge of the workings of various industries like hospitality (hotels), entertainment and commercial real estate, may also be engaged to perform feasibility studies.

Real Estate Firms: Because of their close proximity to and working relationships with owners, tenants and developers, Real Estate firms also can offer to prospective project developers, a variety of services and knowledge which can assist in determining the feasibility of a given project.

Because each project opportunity evolves in a unique way, and because each of these types of firms and individuals has their own perspective on what is needed and when, it is sometimes the case that whoever gets involved first in a project tends to emphasize their particular expertise and sometimes this is done to the detriment of the project, putting the cart before the horse so to speak.

Site Analysis
Market/Economics
Project Concept
Cost Estimate
Schedule
Financing Approach
Project Organization

The types of firms and individuals who are contacted to provide assistance in these areas includes (in addition to planners):

Marketplace Trends Affecting PDS

There are some noteworthy marketplace trends which set the context for future offerings for PDS and are worth mentioning briefly. These include:

Privatization: In the past decade governments throughout the world have embraced the concept of transferring comprehensive responsibilities (i.e. build, finance, own, operate) for developing all kinds of projects to the private sector. The jury remains out on some of the attempts to do this (e.g. railroads in Britain, water supply in Manila, etc.), but this has not stopped the outflow of tenders which are based on this concept. For planners, the opportunities to be involved in these projects will come from developers who do not have as their core business technical services; the downside is that developer teams which are organized to pursue certain projects usually want the team members to “share the pain” of putting together proposals on their own nickel, which can involve substantial effort over many months, with the reward of having a sole source role when the deal is consummated; in certain circumstances, these types of efforts may be worthwhile, but if the deal sounds too good to be true, it usually is…too good to be true.

Tourism: Internationally, domestically and at national, regional and local levels tourism-focused projects are on everyone’s agenda. Tourism travel and spending has dropped over the past few years for many reasons, none the least of which is security concerns, but boosters believe that tourists will continue to seek travel opportunities and although some locations may suffer, overall the trend will be upward. Somewhat ironically, leisure time in the U.S. is under pressure and actually in decline, but this is resulting in more emphasis on local and regional projects. Internationally, Europeans still take their annual month-long vacations to long haul destinations in the south (i.e. Spain, Italy, etc.) and are moving into developing markets which are more cost competitive (e.g. Turkey, Greece, former Eastern Bloc).

Convergence:For a variety of reasons (legal, financial, schedule, etc.), the traditional design-bid-build process of developing projects is giving way to “truncated” project delivery methods. These methods, generally called design/build, are causing convergence in the community of technical service providers from “stand alone” units linked only by a common client, yet functioning very independently, to teams which are offering “bundled” services. For planners, the opportunities of this trend can be twofold: first, selling planning as part of a broader delivery system and second, by being brought into situations where the broader organization can use planning to create downstream work opportunities.

Focus on Financial Accountability: While an occasional “grand scheme” (like the many projects being planned and developed in the United Arab Emirates – Dubai and Qatar, specifically) surfaces from time to time, it is more and more common that projects at all scales are accompanied by business plans. The obligation to base plans in some economic context forces a disciplined approach to programming and design. Because cost estimating is something that most architects and even fewer physical planners offer as a service, planner’s ties to a broader organization which offers PM services (wherein financial management is a crucial component) can be another “differentiator” to distinguish an offering from that of the competition.