Public-private partnership (P3) engagements are continually becoming more common because of two basic reasons.
First, significant amounts of funding are required – but rarely available – for large and complex projects that carry multimillion-dollar project costs. Secondly, many projects require specific types of unique expertise that public entities do not have available internally. Collaborative initiatives are the safest, most efficient way to deliver large, complex projects and a P3 engagement can be structured in numerous ways for any type of project.
Because the trend is escalating and likely to become the norm, it is important for contractors and public officials alike to understand every aspect of this type of delivery model. A P3 engagement has some common components but can be structured in different ways.
All P3 engagements include an investment of private sector capital. The revenue may not cover the entire project cost, but that is often the case. Federal funding for large projects often requires a public entity to seek private sector investors willing to invest along with the federal government.
All P3 engagements require a revenue model repayment for the initial investment and usually the project is designed for a contract that stretches more than a decade or two for the repayment to be completed. Large global P3 contractors that have many years of experience tend to seek out only large projects to pursue.
However, other experienced contractors are available for smaller projects. A small P3 project is usually at least $30 million and a large P3 project could carry a cost of $100 million. Some P3 engagements are billion-dollar initiatives.
Examples of upcoming P3 projects to be launched soon follow. The examples demonstrate the various types and sizes of P3 engagement opportunities that are available now.
City officials in Milwaukee, Wis., will renovate a state-owned building and address upgrades to a 1,000-space parking structure.
The project’s overall cost is estimated at $163 million. The desired delivery method is through a P3 engagement.
The original 163,400-square-foot building has deferred maintenance needs and is overdue for upgrades. Since the building is owned by the state, the Department of Administration will oversee the project. This effort is moving quickly, and solicitation documents could be issued late in 2023, but definitely by early 2024. Plans outlined indicate the preferred revenue model for payback of the capital investment will be a lease contract with the private sector partner. A prime contractor will lead the project and local subcontractors are usually sought as well.
The governor of Hawaii recently announced plans for a $400 million project to demolish the Aloha Stadium and construct a new facility. A P3 delivery method will be used.
Later this year, there are plans to release solicitation documents and begin the process of selecting a developer to design, build, operate and maintain the new stadium. The existing facility must be demolished, and the design phase will be initiated at about the same time. The plan is for the private sector partner to also be responsible for developing some mixed-use development near the stadium.
Revenue from that effort will offset some of the cost of construction, operation and maintenance of the stadium. Planning documents indicate the new stadium will be operational by 2028.
The Illinois General Assembly recently approved supporting a request from the state’s department of transportation to use a P3 engagement to construct approximately 20 miles of new tolled roadway at a cost of approximately $812 million.
The plan is for managed lanes to run in both directions between Veterans Memorial Tollway and the Dan Ryan Expressway. Managed lanes will also be constructed on each side of a western section of I-55. Funding is available, an environmental study is completed, and solicitations have been issued for project advisers. No solicitations have been issued, however, for the construction phase of this project.
A $66 million project to construct a hotel and convention center is planned for Seguin, Texas. The feasibility study validated the economic results, recommended the project, and outlined construction options. The plan is to deliver a 200-room hotel with convention space nearby. A private sector partner will be selected and both components of the effort will be included in one overall initiative.
City officials in Ashland, Ken. issued a request for information (RFI) to gauge interest and receive input on a conference center and parking facility to be delivered through a P3 engagement.
A cost of $42 million is projected for the effort. Responses to the RFI are due August 25 of this year. RFIs are not final solicitation documents for the selection process but interested parties are urged to participate. The conference center project will be built on two nearby sites and the goal is to create 30,000 square feet of sellable event space.
P3 development opportunities are currently abundant.
Other types of industry involvement are also required with P3s – private sector firms to provide planning, professional services, engineering, technology, civic outreach, landscaping and more. The selection of private sector partners is highly influenced by companies that are well-positioned before final decisions are made. It is important to get involved and be on the scene as soon as possible.
Mary Scott Nabers is president and CEO of Strategic Partnerships, Inc. Send Industry Perspectives Op-Ed comments and column ideas to email@example.com.