As use of Public Private Partnerships (P3s or PPPs) grows, establishing a single office can help manage multiple stakeholders involved in large, complex projects across sectors. Cites have traditionally used P3s to finance infrastructure projects, parking, and large redevelopment projects. There is growing interest in partnership models for communications (5G and broadband), cybersecurity, district energy, education, and smart city technology.
Benefits & Problems Addressed
New sources of financing for building and operating large projects: P3s leverage private capital as an alternative to traditional public procurement processes dependent on bond revenue or available municipal funding
Clarity on goals and vetted risks: A single office communicates a united message on overall goals, project analysis/criteria, funding/financing structures, data sharing, risks borne by all parties, and performance expectations over the life of the project. Having one office screen and vet projects and project sponsors lowers agency risk.
Equitable project distribution: A single office oversees project delivery across the entire city or region.
Coordinated partnerships: Internally, a single office can coordinate project design and procurement across Departments. Externally, the office can identify non-traditional partners to set and monitor non-financial performance goals. With one office, a city does not have to replicate staff within individual offices.
Pilot program support: Most innovative projects begin as small pilot projects that are designed to iteratively scale. This is a new project delivery process which may be better hosted in a partnership office.
Tips & Techniques
Background: For physical projects, P3s are different from traditional public procurement in that the building and operating stages are bundled, typically to optimize how the design, build and long term operating structure supplies an expected return on investment. In the demand-risk model, a public entity grants the private developer the right to collect fees from the public for the use of an asset such as a road or subway. While an operator may see more of the profits, they also have a larger negative exposure if financial projections don't materialize. In an availability-payment (or performance based) model, the public entity pays the private party a set amount (availability payment), subject to the private firm meeting performance expectations. Both models come with benefits and risks to the public.
City Structure: Partners can include multiple municipal departments, the private sector, nonprofits, and the philanthropic sector.
Establishing an Office; Limited and quantifiable risks Mayor's Fund to Advance New York City. While intended to add flexibility, an Office will need to establish rules (via rulemaking process), and align with existing procurement procedures. Some offices use innovative procurement such as Requests for Innovation and special funding pools specifically to support P3 offices.
Projects & Criteria: For both hard and soft projects, cities will want to establish criteria for solicited and unsolicited projects. With larger project proposal volumes, an office can set up initial consultations and multi-step screening application.
Criteria can include Policy Priorities, Risk Transfer and Allocation of Risk, Funding Considerations, Life Cycle Costs, Social Equity Considerations, Strength of Partnership, Market Readiness, Legal Risk and Standing, Innovation Opportunity, Accelerated Project Delivery
Some more complex projects, consider criteria on full financial and technical feasibility analysis, detailed risk analysis, performance metrics and monitoring plans, and insurance
Operations: Cities will need to create or augment an office to handle partnerships (which may also handle non-financial partnerships as well). Elected officials may want to retain some oversight of the program, project selection and contract details. Staff will need expertise in contracts, infrastructure finance, and program management. As noted, some cities also establish or allocate funds for P3s.
Hot Buttons: P3s can be viewed as corporate handouts or sweetheart deals where a private entity either gains more of the upside gains or is shielded from risk from unprofitable ventures. There have been several high profile P3 failures such as Chicago's parking meter P3. Private entities can limit data sharing. P3s are often long term arrangements, which increases risks in times of rapid innovation and disruption. As traditional funding shifts to new models (Vehicle Miles Driven charges, curb pricing), the public may balk at new payment systems for use of public infrastructure). Elected officials may object to transferring their vote on individual projects to staff.
Office of Public Private Partnerships: Virginia Department of Transportation
Office of P3s, District of Columbia
Office of Strategic Partnerships and Mayor's Fund to Advance New York City: New York City
4 Qualities Of A Successful Public-Private Partnership: Strong Towns
P3 Infrastructure Delivery: Principles for State Legislatures: National Conference for State Legislatures