Global Best Practice - Public-Private Partnership (P3): Facilities and Infrastructure
- Public and Private Partnerships
A public-private partnership (P3 or PPP) describes public facility and infrastructure contracts that include minimal components of design and build, such as construction, renovation, or rehabilitation in one single contract. It is also possible to include elements of financing, operations, maintenance, or management within the same single contract. The benefit of a P3 contract is that it allocates risks to the party that is best able to manage the risks, whether that is the government or the contractor. It may also assign a higher level of responsibility for means and methods to the private partner. There is a wide spectrum of complexity in P3 contracts, ranging from simple to extremely complex. P3s became popular in government after the 2007 recession, although they have been in modern government practice since the 1990s. They are sometimes viewed as an alternative source of debt or equity funding. To that end, recognizing the cost that the government or private sector will incur under a P3 contract is crucial. Tapping into private sector equity or debt must only be done when the benefits clearly outweigh the costs and when a P3 contract is clearly the best option compared with other funding and budgeting alternatives. This practice outlines all the critical elements that a procurement professional must consider when deciding to sign a P3 contract, along with examples of situations in which a P3 contract may not have been the best solution.