Public-Private Partnership Models
10 Different Types of P3
Due to limited funding and increasing constraints, many government agencies are looking into different models of public-private partnership (P3) as a means of maintaining updated infrastructures without having to make large investments. These type of projects can be very useful, but their costs must be closely controlled to make them cost-effective solutions.
Public-private partnerships are considered by many to be the future of infrastructure projects because they offer solutions to problems of financing, job completion, and investing in large projects without sacrificing government finances. There are many different types of public-private partnerships to fit various construction, operation, ownership, and revenue-generating scenarios.
In a traditional P3 agreement, the public component of the partnership acts as a contracting officer. It looks for funding and has overall control of the project and its assets. Almost any partnership between a private contractor and a government entity can be considered a P3, but some of the most common examples are public road projects, maintenance of parks, and construction of schools and other public buildings.
Operation and Maintenance P3s
With an operation and maintenance P3, the private component of the partnership operates and maintains the project, while the public agency acts as the owner of the project. Examples of these contracts include bridges and tollways. Ongoing maintenance may provide revenue for the private party through tolls or other fees paid through public use.
A design-build P3 is similar to a client-contractor arrangement. The private partner designs and builds the facility, while the public partner provides the funds for the project. The public partner retains ownership of the project and any assets generated through its use.
Design-build-operate P3s are similar to design-build P3s but include ongoing operation and maintenance of the property facility or project by the private party. The public partner acts as the owner of the installation and provides the funds for construction and operation.
If the private partner operates the project only for a limited time before the facility is transferred to the public partner, the arrangement is known as a design-build-operate-transfer agreement.
A variation of the design-build-operate P3 includes the component of general financing supplied by the private contractor. With a design-build-finance-operate arrangement, the private party provides financing and design, then builds, possesses, and operates the facility. The public partner provides funding only while the project is being used or is active.
Under a build-transfer-operate P3, the private partner builds the facility and transfers it to the public partner. The public partner then leases operation of the facility to the private party under a long-term lease agreement.
In some cases, the public partner builds, possesses, and operates the project for a limited time, then the facility is transferred, free of charge and including ownership, to the public agency. This may be known as a build-own-operate, transfer P3.
Under a build-own-operate contract, the private contractor builds, possesses, and operates the facility and also has control over profits and losses generated by the facility. This is similar to a privatization process.
A lease P3 involves the public owner leasing a facility to a private firm. The private company must operate and provide maintenance for the facility per specified terms, including additions or a remodeling process.
With a concession P3, the private agency operates and maintains the facility for a specific period of time. The public partner has power over the ownership, but the private partner possesses owner rights over any addition incurred while the facility is being operated under its domain.