A significant portion of the capital spending on a P3 infrastructure project is privately financed and at risk, since service payments begin only after construction. (The publicly financed portion of P3 infrastructure projects takes the form of government contributions paid to the private partner at key milestones in the delivery of the project.) Based on our observations of both conventional and P3 procurements, private financing in P3 projects brings:
◆ discipline to the procurement process, forcing both parties to stipulate the project requirements and consider the full cost and risk allocation implications before the start of the project;
◆ additional commercial and technical due diligence before financial close, followed by monitoring of progress during the construction and operating term of the project agreement; and
◆ private sector stewardship of the project during the delivery stage, including strong incentives to build the facility as efficiently as possible within the specified delivery time frames while meeting the contractual requirements.