A&M assisted the District of Columbia’s Office of Public Private Partnerships (DC OP3) in comparing the costs and benefits of leasing privately developed and operated transitional housing facilities versus an alternative scenario in which the government would fund construction and operations of the same program.

Client Mandate
In 2016, A&M was engaged by DC OP3 to perform a Public Sector Comparator (PSC) for the administration’s proposal to shut down the city’s central transitional family housing shelter and move families to smaller, newer facilities in all eight of the city’s wards. The independent PSC was designed to provide the administration information on the economic veracity of proposals it had received from private development companies to construct and operate the bulk of the new facilities. Further, it determined if the private options were cheaper on a long-term basis than the government appropriating capital and operating funds to execute the projects itself.

A&M Approach
To approximate the cost to the government of constructing and operating similar facilities as those proposed by the private sector, A&M conducted extensive market research on acquisition, construction and operating costs. Since family transitional housing is a highly specialized product type in terms of layout and finishes, appropriate adjustments were made to accommodate for deviations from standard multifamily construction. In addition, specialized operational features, such as security hardware and full-time, on-site management, were added to make the pro forma more accurate.

After developing capital and operating assumptions, as well as purchase prices for sites in five of the city’s eight wards, A&M conducted lifecycle cost analyses on each private proposal and government alternative. Cash outlays were then discounted back at the city’s borrowing rate over a 30-year period.

Results
In the majority of cases, A&M showed that the private proposals were not cost-effective against the public sector options. This enabled the administration to make an informed decision about how to proceed with the closure of the existing facility. The administration, working with the city council, devised a hybrid program that combined public and private options and saved the city approximately $165 million over the life of the projects.