Serving as Owner Representative to numerous municipalities, we are participating in PPP discussions like never before. So much in fact, that I recently attended the National Public Private Partnership conference in Boston to learn the ABCs of PPPs and discover the benefits this innovative business model as to offer.
While Public Private Partnerships (PPP) have been around for over 20 years, they have been less prevalent in the United States, compared to the trendsetters of Canada and Australia. That said, there is a surging interest in the PPP model, particularly with infrastructure projects such as water, roads and bridges (think US 36 tollway). Institutions looking for stable financial investments are attracted to water facilities, toll roads and parking garages. They offer a safe bet for a return on investment as they are necessary for a successful communities. Social infrastructure projects, such as schools and libraries, have similar potential, but are commonly paid back through an intergovernmental agreement.
So, why establish a PPP? It was clearly the opinion of the conference presenters that PPP projects are not a want, but a need. PPPs can bring creative resolutions to the ever-mounting problems of failing bridges, congested highways, or lack of water infrastructure. Projects that fall under social infrastructure may appear like a want upon first glance, but after close examination, they may actually be a need; one only needs to look at charter schools for an example of the private sector assisting in devising solutions. Another project type ripe for a PPP is student housing on college campuses, they can also produce revenue. An educational institution has the students, and sometimes the real estate, but not the capital to make the project happen – enter a private partner and a mutually beneficial relationship is born.
“Risk is not knowing what you’re doing,” Warren Buffet. Public entities benefit from the private sectors’ specialized industry knowledge and lack-of-red-tape flexibility —a recipe for efficiency. Many PPPs are not required to follow every established protocol relating to selection processes, design review and board approvals, but this should always be vetted by project. While a work-around can be helpful, a PPP should not be used to avoid public input; public is in the name after all.
Establishing a PPP to back a capital improvement project allows municipalities to free up capital, increase innovation and sometimes, speed up the delivery process. When evaluating whether to establish a PPP, take a look at the value of doing so, besides money savings. There are beneficial synergies of bringing together the right partners, such as enabling a better performing facility, reinvigorating a region, or resolving a public safety concern. A Public Private Partnership has a broader vision than simply building a building or constructing a road.
If you would like to learn more, please don’t hesitate to contact us.
~ Paul Wember, Owner’s Representative