Friday, August 3, 2012

Public Private Partnerships (P3s) Heat Up In United States

Public private partnerships (PPP or P3) have been popular in Western Countries for decades.  Countries like France, Germany, Australia and Japan have embraced the concept and have constructed (and leased) public infrastructure projects from bridges to airports with PPP. The same seems to finally be taking off in the United States.

While the Federal Government has been involved with the PPP concept for years, States are getting into the picture with projects such as the one in Virginia, where a consortium of Skanska Infrastructure Development, Macquarie Financial Holdings and others have closed a $1.2 billion deal to finance, design and build a new tunnel under the Elizabeth River between Norfolk and Portsmouth. California entered in to a contract for the $490 million Long Beach Courthouse — the first major new courthouse built in California in forty years — which is nearing completion by a team including Meridiam Infrastructure, AECOM Design, Clark Construction and Johnson Controls. In Texas, where they like to keep government small, a new PPP statute is enticing the state and local governments to consider PPP for projects. In Florida — where Balfour Beatty Campus Solutions and Capstone Companies recently completed a 1200-bed dormitory and stadium project for Florida Atlantic University — awareness of PPPs was raised when the Florida House passed a new and broader PPP statute. While the Florida Senate adjourned without acting on the bill, the trend toward increased use of PPPs in Florida shows no signs of abating. Finally, in New York, talk of using PPP for the Tappan-Zee bridge reconstruction is on the rise again, after Federal funding fell through.

 For those who don't know, PPP has generally been defined as a transaction involving a public sector authority and one or more private parties, in which the private parties agree to provide a public service or project and assume substantial financial, technical or operational risks. In a successful PPP, the objectives of the government are aligned with the profit motives of the private parties. This alignment results in a win/win project that provides “value-for-money” and the optimum amount of risk transfer to the private party.

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