A public-private partnership, or PPP, is an entity or organization that links with the public sector to bring a project to fruition. Of course, the nuances of a PPP are much more complex than that sounds. By working to understand these nuances, and how they influence the whys behind a PPP, your organization is one step closer to finding success in a public-private partnership.
The Parties in a PP
A simplified look at a PPP shows that there are privatized and public partners involved. However, the organizations that create a PPP influence how the project works and what it can accomplish.
- State and Local Government Organizations: Whether a city, county, state, or other governmental department, these public entities provide services to the public, other government departments and agencies, or other organizations and businesses like educational facilities. Typical to PPPs are government organizations involved in infrastructure, like highways, schools, and healthcare.
- Education Organizations and Schools: An education organization may be considered public or private, depending on how it is funded. Either way, these parties seek to provide services to students, staff, and other stakeholders, including families, and to provide access to these services.
- Industry, Trade, and Professional Organizations: These parties collaborate with public organizations such as the government, advocating for industry-members and other stakeholders.
- Private Businesses – Putting the ‘private’ in public-private partnerships, these are the parties who might design, build, or operate an asset that has been publicly funded or administrated.
Many PPP models exist. A private company might operate a public asset while leaving ownership within the public sector. Or, the private company might build the asset, financing capital cost during construction but not financing anything else. It could be a combination of the two in which a private entity designs, builds, and maintains or operates the asset for a certain timeframe. It all depends on the goal of the PPP and what each party desires from the project.
The Popularity of PPPs
PPPs are re-emerging in America as infrastructure begins to crumble and the public sector needs the innovation and technology of private entities to meet their needs while working with strained public budgets.
As one example, in 2017, the US Senate Committee on Environment and Public Works Subcommittee on Fisheries, Water, and Wildlife met to talk about innovative financing and funding to address America’s deficient water infrastructure.
There, US Senator John Boozman highlighted the popularity of the public-private partnership, saying, “P3s are a crucial component of the Administration’s proposal and are necessary to get to the $1 trillion investment in infrastructure that the plan promises … A combination of innovative financing, private investment, along with State and federal funding, such as loans and grants, is a good way to address the problem.”
Why Establish a PPP?
PPPs bring many benefits for everyone involved. Primarily, a successful PPP puts design, finance, construction, operations and maintenance of a project into one centralized deal. That means that everyone is involved from the beginning, ensuring that informed practices and efficiencies inform every decision and plan.
When it comes to cost-effectiveness, it is hard to top the combination of public and private sectors. In a public project, the government is responsible for paying the cost of schedule overruns and blown budgets.
However, in a PPP model, the private entity is responsible for the risks and responsibilities that fall under their domain, meaning there is a compelling reason to ensure projects come in on time and within budget. The public sector is responsible for its own risks, such as compliance and regulatory concerns. So, each party has a good reason to meet their own responsibilities, which in turn helps the health of the entire project. Private sector stakeholders do not want to lose their own money.
On the flip side, a successful PPP brings about a big advantage for private entities — the opportunity for long-term profits. Instead of completing a one-off project, a private entity that continues to maintain and/or operate the asset continues to see that investment pay off. And, risks are usually well-known, well in advance, so private companies can determine if a project is a good fit before getting too far.
Stay tuned for our next article in this series, which will show you how real-life CIOs and CTOs got started with public-private partnerships. If you have any questions or want to learn more about what we do and how it can help you with a PPP, get in touch. Reach out to our team using our online form to send a message, calling us at 801-335-0700, or emailing firstname.lastname@example.org.