The advantages P3s offer stem from the bundling of tasks together, the appropriate transfer of risk and the creation of incentives that do not naturally occur within the public sector. These benefits can include the following (depending on the nature of the project, and the form of the P3 model):
Potential Benefit | Description |
Bring Construction Forward | P3s enable the public sector to spread cost of infrastructure investment over the lifetime of the asset. The Private sector has strong incentive to complete the project ASAP because they need the stream of revenues to repay the capital costs. |
On-Time & On-Budget Delivery | Payments are aligned to the delivery of project objectives thus P3s have a solid track record of on-time or early construction completion. Changes to scope, a key factor driving cost overruns and delays, are more difficult and costly and therefore less frequent. |
Ensure Assets are Properly Maintained | Well-structured P3s help maintain infrastructure by transferring maintenance requirements for a facility to the private partner, making maintenance a contractual obligation of both The City (payment) and the private partner (execution of maintenance). A more complete lifecycle perspective is therefore taken from the outset. |
Cost Savings | Shifting long-term operation and maintenance responsibilities to the private partner creates an incentive to ensure long term construction quality, as the partner is responsible for those costs many years down the road. Experience from several countries has also demonstrated savings from P3s during the construction phase of the contract. |
Strong Customer Service Orientation | Private sector infrastructure providers may be made responsible for the customer interface and/or rely on user fees from customers for revenue, and if so have a strong incentive to provide superior customer service. |
Enables Public Sector to Focus on Outcomes & Core Business | Properly structured P3s enable governments to focus on outcomes, instead of inputs. Governments can focus leadership attention on the outcome-based public value they are trying to create. |
The ability to capture these benefits within a P3 relies on the ability to establish performance benchmarks and appropriate incentives within the arrangement. These benefits are not necessarily exclusive to P3 delivery; however, the incentives to achieve them tend to be stronger within P3 delivery.