Public Private Partnership

Public Private Partnership FHWA Definition

A public-private partnership is a contractual agreement

formed between public and private sector partners, which

allows more private sector participation than is traditional.

Another Definition
A public-private partnership exists

when public sector agencies (federal,

state, or local) join with private sector entities (companies, foundations,

academic institutions or citizens) and

enter into a business relationship to attain a commonly shared goal that also achieves objectives of the individual partners.
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Dimensions of P3
Although each is unique, all P3s include following basic characteristics:

Shared goals
Shared resources (time, money, expertise, people) Shared risks Shared benefits Shared authority of decision-making

Why PPP?

Traditional funding sources are not keeping pace with infrastructure investment needs and the growing public demand for services.

In short, P3 is a tool that can help governments meet demands for the development of modern and efficient facilities, infrastructure and services while providing value for taxpayers.
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Who are the Private Partners?

Private, for-profit firms Consortia of private, for-profit firms Private, not-for-profit firms

Typical Uses
Contracting with a private company to:

Renovate

Construct
Operate Maintain And/or Manage

A facility or system

PPP Models

BOO- Build, Own, Operate- ownership of the project remains usually with the Project Company.

BOOT- Build, Own, Operate, transfer- private organization conducts a

large development project under contract to a public-sector partner, such as a government agency.

BLT- Build, Lease, Transfer- private entity builds a complete project and leases it to the government. After the expiry of the leasing the ownership of the asset and the operational responsibility are transferred to the government.

BLOT- Build, Lease, Operate, Transfer- a private organization designs,

finances and builds a facility on leased public land. The private organization operates the facility for the duration of the lease and then transfers ownership to the public organization.
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Two Major Steps

Crafting the Partnership Implementing the Partnership

CRAFT

IMPLEMENTATION

P3 Project Management

CRAFT
GENESIS FEASIBILITY PLAN & TEST

IMPLEMENTATION
PROCURE IMPLEMENT OPERATE

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Six Distinct Phases

1. Genesis

2. Feasibility
3. Plan & Test 4. Procure

5. Implement
6. Operations
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1. Genesis

2. Feasibility
3. Plan & Test 4. Procure

5. Implement
6. Operations
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Genesis

Whats the need

Whats driving the need, rationale

Facility non-compliance, natural disaster, budget deficit

Is there a need for a Public/Private Partnership? Preliminary Project Definition

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1. Genesis
2. Feasibility 3. Plan & Test 4. Procure

5. Implement
6. Operations
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Feasibility

Is a Public/Private

Partnership

feasible,

not only

financially, but practically? Can it be done?

Market Research Economic/Financial Analysis Program, Budget and Schedule Risk Analysis

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1. Genesis
2. Feasibility 3. Plan & Test 4. Procure

5. Implement
6. Operations
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Plan and Test

Final project definition

What is the best way to complete the project?

Has the plan been thoroughly tested to assess market demand, public and stakeholder feedback and

economics?

Master Schedule/Budget

Political Climate
Any potential fatal flaws that could derail the project?
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1. Genesis
2. Feasibility 3. Plan & Test 4. Procure

5. Implement
6. Operations
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Procurement and Contracting

How do you choose and contract with the best-value private partner? Whats the best delivery method?

Design-Bid-Build Design-Build

Finance-Design-Build

What do current statutes allow? Risk Allocation between Public and private Partners Structuring of Contract/Risks and Rewards
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1. Genesis

2. Feasibility
3. Plan & Test 4. Procure

5. Implement
6. Operations
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Implement

Environmental Design Permitting

Construction
Commissioning and Administration

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1. Genesis

2. Feasibility
3. Plan & Test 4. Procure

5. Implement
6. Operations
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Operate

Startup

Monitoring
Assessment

Enhancement
Contract Modifications

Contract Renegotiations

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Benefits

Expedited project completion Project cost savings

Improved quality
Use of private resources Access to new sources of private capital

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Drawbacks

Contracts are drafted poorly Contract managers are given inadequate resources Lack of experience A failure to sustain partnership Personality clashes between project team personnel Lack of understanding of complexity, context and dependencies of contract Lack of measurement of performance Corruption and emphasis on personal gains Less monitoring and management of statutory, political situations
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