PPP exemplar: LaGuardia Airport

07 March 2017

The $4 billion LaGuardia Airport Terminal B project in New York reached financial close last summer. It’s the largest public private partnerships (PPP) in the USA to date, and a rare example of a major private investment in America’s creaking infrastructure.

“LaGuardia shows that the US PPP market has crossed the Rubicon when it comes to procuring large transportation projects,” says Pat Foye, Executive Director at The Port Authority of New York & New Jersey, the client organisation.

Mitigating risk

A key concern of The Port Authority was that the existing airport’s operations would not be impacted by the construction programme. That was chiefly why LaGuardia Gateway Partners (LGP), a consortium including contractors Skanska and Walsh, was awarded the contract.

“LGP won the competitive procurement process because it had an approach that best addressed and mitigated those risks,” says Foye. 

JLT worked with LGP on its risk management approach, explains Naresh Dade, Partner in the Construction Division at JLT Specialty. 

“Given the extent of risk transfer from day one, it was obvious that an innovative solution would be required,” says Dade. “We quickly identified the need for a combined construction and operational programme.”

He adds: “We also had some serious considerations in respect of the terrorism risk, and successfully placed the longest, non-cancellable, standalone terrorism placement in Lloyd’s history.”

On the construction side, risk was minimised by prefabricating as many construction elements as possible, and keeping airside works to a minimum. However, the logistics of the construction programming were complex, to ensure that airport operations could be maintained. 

“In this respect, the client understood what LGP wanted to achieve,” says Dade.

A joint approach

The programme was placed with a common panel of insurers, who were writing both the construction and operational risks.

“Normally, operational insurers don’t like writing construction, and vice versa,” explains Dade. “But it was necessary at LaGuardia, as one component of the construction programme moving would have a massive knock-on effect on operations.”

“Also, we were able to push the insurance market to agree seven years of cover for material damage and operational insurance, compared to the usual one, two or three at a push.”

For further information, please contact Naresh Dade, Partner on +44 20 7528 4776