Frequently Asked Questions About Public-Private Partnerships

If you’re short on budget, staff, time — or all three — a public-private partnership (P3) may be the tool you need to build your next facility. Here are answers to six common questions about P3s.

What is a P3?

A P3 is a commonly used project delivery method involving the use of a private company to deliver a public facility. A P3 enables the public sector to harness the expertise and efficiencies of the private sector. A P3 is structured to provide the public sector client with more flexible terms and less risk than more traditional project delivery methods. In most cases the private sector partner provides the project design, construction and funding, with ownership ultimately transferred to the public sector at the end of the contract term.

What types of projects can be developed under a P3?

P3s are used to deliver a wide range of public facilities, public buildings and public infrastructure projects. Common examples include municipal facilities (fire stations, police, city hall, libraries, convention centers, and more), education, transportation, recreation, public utilities, wastewater treatment, redevelopment of neighborhoods and riverfront, public housing, energy savings programs, defense, telecommunications, and public healthcare projects.

Are P3s legal?

Yes. In fact, 36 states have enacted laws enabling and supporting public-private partnerships. A P3 must be established properly and is generally considered a real estate transaction. Thus, it is not subject to the same selection requirements often used for design services or construction procurement.

Am I eligible for a P3?

P3 project delivery is a valuable development tool that may be considered by state and local municipalities, public works, non-profits, economic development boards, alumni boards, transportation boards, port authorities, school districts, public housing, military branches and federal agencies.

How is a P3 different from design-build or construction management services?

Design-build and construction management services are creative project delivery methods used primarily for the design and construction of capital improvements. A P3 is not a construction delivery process, it is a contractual arrangement between a public agency and a private sector entity that often includes the design, construction and financing of a public facility. Many times the maintenance and operation of the public facility are also included in the contract.

Why should I consider a P3?

There are many benefits to partnering with the private sector on a project. Here are a few.

• No bond issuance costs
• Capital costs do not go against a municipality's bond debt capacity
• Initial capital costs transferred to the private sector partner
• Facility maintenance and operating costs may be included in the contract terms
• Cost savings due to efficiencies of the new facility
• Project risk is transferred to the private partner for schedule, design, construction, O&M and economic performance
• Accelerated delivery, with payments deferred until the improvements are delivered
• Monetizes underperforming publicly owned assets for needed capital
• Can drive economic development
• Provides access to private funding sources Single point of contact and accountability

About the Expert

Steve Peterson is president of SEH Design|Build, Inc., a company dedicated to connecting clients to alternative project delivery solutions that work.