Public-Private Partnerships Require a Sophisticated Approach

Public-Private Partnerships Require a Sophisticated Approach

By GovExec State & Local Staff March 30, 2015

Former Miami-Dade County Manager George Burgess, the vice chairman of Becker & Poliakoff’s Public-Private Partnerships Practice team, writes about P3 projects.

Public-private partnerships, or P3s, are relatively new to the United States but in other parts of the world are the preferred approach for delivering complex and costly public infrastructure projects. If done right, this development method is extremely sophisticated and can be very effective in controlling project costs, reducing government sector risk exposure, and ensuring adherence to projected schedules.

Are public sector administrators in our country prepared to utilize this approach to design, build and finance, as well as potentially operate and maintain public infrastructure projects? Are public officials ready to confidently sit across the table from seasoned private sector experts and negotiate long-term arrangements that will serve the public’s best interests? What should government officials do to attract P3 equity and development firms to public projects? Outside of the transportation projects where P3 financing has been utilized for many years, government administrators should strengthen their skills and expertise before pursuing a project through this approach. To get started, a few very basic steps are required in order to attract private sector interest and to have a better chance of achieving successful project outcomes.

The first step for any government entity is to recognize what it does not  know.  P3s are very different from traditional government design, construction, and financing approaches. You must build a lean in-house team to guide your efforts and hire experienced consultants to assist you with legal, financial, and technical aspects of the project. Begin the process of evaluating projects to determine the best development approach, P3 or otherwise, long before you begin any formal solicitation process.

Encourage interested private sector companies to meet with you and reach out to experts in the field. Listen, learn and tell your story. You will be amazed at the excellent advice you will receive. Remember, any entity that is considering bidding on your project wants to work with well-prepared, capable and qualified public sector counterparts. Conduct several industry workshops and pre-bid conferences. Give the industry every chance to share suggestions and concerns.

When pursuing a project through the P3 delivery method, be sure your solicitation and ultimate contract documents are focusing on value, outcomes, and performance rather than on rigid technical specifications. Let the private sector know what you expect in terms of project scope, service standards, and quality requirements throughout the useful life of the project, not only during the construction phase. Let the selected team’s creative juices flow and hold the team members accountable for delivering on performance requirements. Do not micromanage. That is a recipe for disaster.

Aside from the highly complex technical and financial aspects of P3 projects, which the experts you have retained can guide you through, the most critical element for success is to make sure you have the right development team in place.

You must invest substantial time in the early phases to get to know whom you might be partnering with for decades. You must have absolute confidence and trust in each other and you must share a genuine enthusiasm for a successful project outcome. You must see each other as trusted business partners. The best way to be a good partner is to try to see things through the eyes of your counterparts. A true P3 relationship is akin to a marriage. Divorce or separation are not options to ever want to consider, so you must get know each other well before you tie the knot.

As complex as a project’s financial arrangements and technical requirements might be, the most challenging aspect of a project is often the political element. Do not underestimate the potential impacts of these types of issues. Education and outreach are vital. It is very likely that your project is large, complex, costly, and controversial for some group or groups of people. You must do your homework and you must build community and stakeholder buy- in for your project. More than anything, you must have a project champion— someone who is passionately committed to the project and is willing to advocate for it regardless of the consequences. You must have someone who will support the project through the inevitable political skirmishes and is willing to put his or her name on the project because he or she truly believes in its value to the community.

While these recommendations seem obvious and logical, they are nonetheless critical to the success of any complex development project. Given the added complexity of the P3 delivery method, the necessity for such steps is amplified exponentially.