With concerns about the questionable future of the Highway Trust Fund (HTF) and America’s crumbling infrastructure, alternative funding solutions have been gaining more traction in the transportation industry. One method garnering media attention is the use of Public-Private Partnerships, or P3s. But, what is a P3?
According to the U.S. Department of Transportation:
“Public-private partnerships (P3s) are contractual agreements formed between a public agency and a private sector entity that allow for greater private sector participation in the delivery and financing of transportation projects.”
P3s are one of the many project delivery methods available to clients. Despite other options, the popularity of P3s has been gaining momentum for U.S. transportation projects. In fact, ODOT is recently kicked off their largest project in history and first P3 project, the Southern Ohio Veterans Memorial Highway.
P3s and Design-Build
So, how do P3s actually work? First, let’s understand another project delivery method, design-build. A design-build project is essentially a marriage between the designer and the contractor that allows overlap between the design and construction phases and provides one point of contact for the client. A P3 is an extension of a design-build project by combining the design and construction, and also including financing, operating, and maintaining as a responsibility of the developer or financer.
P3 funding is similar to a home mortgage. The project is funded through a partnership of the government agency and one or more private sector companies (financier). The government agency then repays the financier for the project with long-term payments or toll collections. This funding and repayment mechanism is just like how a homeowner uses long-term mortgage payments to repay the bank for the purchase of their home. With funding a current issue for transportation projects, a P3 can be a solution to some much needed roadway improvements.
From the beginning of the project, the project team includes the engineer/architecture, contractor, and financier. The process for selecting the team for a P3 is very similar to a design-build project (see slide show for graphic).
Why use a P3?
As with any project delivery method, a P3 has its advantages and disadvantages. Some advantages include:
- Multi-dimensional innovation: by having a singular and comprehensive team from the beginning to the project completion, innovation happens in all steps of the process. Engineers and contractors can collaborate from the beginning, knowing what can and cannot be designed and any associated costs. This collaboration can provide better infrastructure solutions.
- Necessary funding: projects that would otherwise not have funding can be completed using long-term payments.
- Faster completion: due to overlapping design and construction, similar to a design-build project.
- Reallocating funds: government funds can be used elsewhere in the community. This is similar to using a mortgage to finance a home through a long-term payment plan, which allows for part of your annual income to go towards other needs.
Overall, many factors are used in deciding the best project delivery method for a project, including: project type, client needs, project size, complexity of the project, and the schedule.
Are you considering a P3 for your next project? Or are you interested in the many project delivery methods available? As the lead design firm for the largest single project and first P3 in ODOT’s history and multiple alternative delivery experts in-house, we can provide the best solution for your next project. Contact us at firstname.lastname@example.org.
Photo Credit: “VA 07 2012 I495 HOT facility 3649” by Mariordo (Mario Roberto Durán Ortiz) – Own work. Licensed under CC BY-SA 3.0 via Commons