Public-private partnerships (P3s) are becoming increasingly popular. The U.S. government is using these types of relationships more and more for infrastructure projects. Studies show adopting a P3 structure for a project can result in a very positive outcome as opposed to using standard contracting methods.
Regardless, government agencies are still reluctant in many instances to award major projects to private companies. Some of this reluctance is due to misconcepations about the process. With a little education and keeping these tips in mind, a P3 project can have a great result and benefit all concerned parties.
A public-private partnership is a business alliance between a private company and a governmental entity. By using this type of arrangement, each side is able to contribute their respective assets and skills to a project that is usually for public use.
If your company is considering a P3 project, here are a few tips to keep in mind:
Build a Strong Team
It is important to remember that a quality team is essential. This might include a few high-level contractors, engineering companies and developers. The key here is that each participant takes on a role that speaks to their strengths.
Pick an Appropriate Model
There are many ways to structure a P3. In some instances, the private side of the P3 assumes the revenue risk. This can be a rough road. It is important that the parties perform their due diligence before entering into a contract. Parties using this type of structure can face higher borrowing costs, because investors may not feel comfortable with the projected returns.
In another scenario, a private developer can propose an idea to a public agency only to lose his idea to another company. A private company may suggest a project and the government entity agrees. Then, the government opens the project up to other bidders.
When in doubt, it is never a bad idea to speak with legal counsel to determine if your plan makes sense.
The bottom line here is that P3 projects are expensive to bid. There must be transparency in the bidding process so all the players know what the rules are.
Whether a project will get off the ground or not has a lot to do with public support, either in terms of public meetings or at the ballot box. A great selling point for a P3 project is that they can move relatively quickly. Often when the public hears about their efficiency, they are eager to support it.
Pick a Leader
Often a successful P3 has a high-level person promoting the project. They may be a public official for instance, who can take the project under their wing and guide it through the political process. Often a P3 project can slow to a halt during the planning stages, and it takes a leader to keep it moving forward to completion.
Should you need any assistance approaching a P3 partnership, please don’t hesitate to contact our office for guidance.