P3s: Managing Risks And Rewards

Overview

Successful P3s—Public-Private Partnerships—can be blessings for state and local governments searching for new ways to finance many types of critical "infrastructure"—roads, schools, prisons, and more—and control operating costs. In typical government contracting arrangements, the governmental entity designs and bids an infrastructure project and the successful private bidder only builds it for governmental operation. In contrast, a typical P3 involves a "design-build" or "design-build-operate" arrangement where the government cedes control of an initiative's design, construction and/or operation to a private contractor—albeit with specified performance parameters—in exchange for reduction in construction cost, operating cost, or financing risk.