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Our nation’s infrastructure is in need of trillions of dollars in investment in order to maintain and upgrade facilities to meet current demand. In fact, the American Society of Civil Engineers grades our roads, bridges, airports and water facilities as a “D”. With financial needs far outpacing governments’ ability to fund repairs and improvements to our infrastructure, more and more states are turning to Public-Private Partnerships (PPPs or P3s) to help fill the funding gap. Learn more about how PPP’s work: |
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What is a Public-Private Partnership?
A “Public Private Partnership” or PPP or P3 allows the private sector to directly or indirectly invest in publicly-owned facilities or services for the purpose of operating, maintaining, expanding or improving those facilities or services for an agreed upon amount of time. The publically-owned facilities or services may be existing or part of a long-term development plan. Thirty-seven states now have legislation allowing PPPs.
How does a PPP project get started? And, what is the appeal?
A PPP can be solicited by a public agency via a Request for Proposal (RFP) or an unsolicited proposal submitted by a private entity directly to the government agency (provided legislation exists to do so). Generally, a successful PPP proposal is centered around implementing a needed infrastructure improvement or expansion when government funding is not available. It will also likely provide cost savings or cost certainty as well as a faster delivery of the project. Other times, a PPP provides a transition of services to the private sector whereby cost savings are realized by the public agency. Obviously the private sector needs to realize a reasonable financial return on the project as well.
Who is using PPP and why?
Government agencies (state and local) are utilizing PPPs as another source of procurement and project delivery as part of their capital programs. In many cases, the private sector will pay for the rights to operate and maintain an existing facility through a concession fee - allowing the public sector to reinvest the concession fee into other needed infrastructure improvements. Generally, there is some level of investment in the PPP by the government agency as well, and by leveraging a limited investment in the project, the government agency can substantially stretch their limited financial capabilities to provide a larger spending program.
For example, TRC’s Infrastructure Sector has been working with an Australian toll road operator – Transurban, during the development of their $1 billion PPP to add High Occupancy Toll lanes to the existing I-95 reversible HOV system in Alexandria, VA. We are serving as Transurban’s engineering consultant and developed a comprehensive asset evaluation of the existing facility, a long-term life-cycle maintenance program for the 72 year concession and design oversight of the design-build process. The project reached financial close in July and is now headed to construction. TRC has also served as designer of record, Geotech engineer, QA manager and Lender’s Technical Advisor on other PPP projects in Virginia and Pennsylvania.
What trends with PPPs do you see happening in the future?
More and more government agencies are interested in pursuing PPPs as a viable alternative to delivering projects and services that are traditionally public in nature. PPPs can deliver a project in a much shorter period of time and private sector efficiencies can often times reduce the overall cost of projects and services. There is a tremendous amount of private sector capital and interest in investing in public sector projects and as the process for implementing PPPs becomes more commonplace, PPPs will begin to fill a much needed void in solving our infrastructure problems.
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