Public-Private Partnerships (P3): A Mechanism for Enhanced Project Delivery
Continuing our series on Alternative Project Delivery (APD) methods, we examine Public-Private Partnerships (P3).
P3s are contractual frameworks for procuring public infrastructure projects where the private sector assumes a significant share of the risks in terms of financing and construction, from design and planning to long-term maintenance of a traditionally public facility (e.g., highways, educational facilities, water treatment facilities, etc.).
P3s include the public sector entity, such as a government agency, and a private sector entity or consortium. The public sector provides regulatory approvals and land rights, while the private sector — often comprising a financial sponsor, construction contractor, and operator — offers capital, technical expertise, and operational efficiencies.
P3 helps public agencies meet the challenges of growing populations and aging infrastructure by harnessing private sector efficiencies, innovation, and capital. This helps to alleviate some financial and operational burdens traditionally shouldered by the public sector alone.
Over recent decades, the U.S. has seen an increase in the adoption of P3 for project delivery in infrastructure with projects including the PennDOT Rapid Bridge Replacement Project and FDOT I-4 Ultimate Project. The Infrastructure Investment and Jobs Act (IIJA) is also expected to propel P3 growth in the coming years.
Types of Public-Private Partnerships
P3 structures can vary and adapt to the needs of the project. Three common P3 structures typically used for highways and other large infrastructure projects in the United States include:
Design-Build-Operate-Maintain (DBOM): In this model, a single entity is contracted to design, construct, operate, and maintain the project for a specified period. This holistic approach ensures consistency and long-term functionality. Once the period concludes, operational responsibilities revert to the owner.
Design-Build-Finance-Operate-Transfer (DBFOT): A model where the contractor is responsible for designing, building, financing, and operating a project for a set period, after which ownership and operational responsibilities are transferred back to the public entity. The financial involvement encourages efficiency and timely completion.
Build-Own-Operate-Transfer (BOOT): Under this framework, a private entity builds, owns, and operates the project, ensuring its upkeep for a specified period. This model facilitates quicker commencement and construction of the project. The asset is transferred back to the public sector after a defined period.
It's important to note that the Federal Highway Administration (FHWA) views Design-Build (DB) as a crucial element of Public-Private Partnerships, yet not enough on its own to form a complete P3.
The Design-Build delivery method is a fixed-price contract that facilitates collaboration between a private entity and a public agency on a roadway facility's design and construction. Financing is publicly sourced by the Agency, with the public partner retaining ownership and control over the facility. In a true public-private partnership, as defined here, the contract between the public owner and private developer also includes financing, long-term operations, and/or maintenance responsibilities.
Benefits of Public-Private Partnerships
P3s offer significant benefits for public agencies and the private sector alike:
Accelerated Project Delivery: Private sector involvement can expedite the project timeline from conception to completion.
Enhanced Innovation: Private sector expertise can introduce innovative solutions, delivering value throughout the project's lifecycle.
Efficient Risk Allocation: Project risks are distributed based on each party's ability to manage them, reducing project costs and time overruns.
Sustainable Financing Models: P3s can provide a steady financial stream, ensuring project continuity amidst economic fluctuations.
Public-Private Partnerships (P3) have emerged as a vital model in advancing infrastructure projects across the U.S., promoting efficient delivery and financial viability.
Mission Critical's expertise is invaluable for multi-disciplinary teams building their P3 offering. We assist in formulating initial offerings (unsolicited and structured) and creating Statements of Qualifications (SOQs). Our team translates technical depth into compelling proposals demonstrating capacity and resonating with the owner's vision.
Contact RoAnn Thorne to explore how Mission Critical can help build your P3 initiative from conceptual stages to a competitive and successful offering.
Want to learn more?
Build America Bureau: This bureau encourages the use of P3s in the development and delivery of transportation improvements, aiming to bring innovation, efficiency, and capital to address complex transportation challenges. Website: Build America Bureau
Design-Build Institute of America (DBIA): DBIA's P3 Committee has developed a P3 Primer to help both public and private sectors better understand and utilize P3s for infrastructure projects in their communities. Website: DBIA
Associated General Contractors of America (AGC): The AGC provides resources and information on Public-Private Partnerships, including key characteristics and basics of P3s. Website: AGC
Office of Global Partnerships at the U.S. Department of State: Along with Concordia and the University of Virginia Darden School's Institute for Business in Society, they host the P3 Impact Award to recognize exemplary public-private partnerships. Website: P3 Impact Awards