Type of Organization

m. Financial Advisor

Top benefits of PPP

- More favorable risk allocation;

- New business model for infrastructure development;

- New entrants to the marketplace increasing competition;

- New technologies and improved attention to life cycle cost

PPP Concern 1

Excessive focus on revenue maximization

PPP Concern Mitigation 1

Greater public policy focus on underlying goals for each P3 project

PPP Concern 2

Deal terms that are perceived to be contrary to the public interest

PPP Concern Mitigation 2

Provide meaningful caps on toll rate escalation, limit concession tenors, focus competition on lowest toll rates, etc.

PPP Concern 3

Inadequate criteria for selecting candidate projects for P3 implementation

PPP Concern Mitigation 3

Better public sector understanding of the trade-offs inherent in P3- private sector money is not "free" and P3 is not necessarily the answer when everything else has failed

PPP Concern 4

Attempting to apply existing finance, contracting and O&M tools to P3

PPP Concern Mitigation 4

Study commercially-acceptable practice so that the public owner understands the P3 framework and doesn't either give away the store or offer a deal that can't be financed. Seek industry input on project concepts.

PPP Concern 5

Separate P3 activity from the agency's core production and contracting functions

PPP Concern Mitigation 5

Make the investment in time and energy to involve District-level staff in the procurement process. They know the project best and will maintain a balance between technical and financial considerations. Lessons learned will migrate to the overall work program, magnifying benefits from new approaches to risk allocation.

Factors to consider by decision-makers

- Project readiness-don't put projects out for tender before they are ready;

- Clear goals-risk transfer and revenue risk;

- Use a competitive process-avoid losing control through unsolicited proposals;

- There is no free lunch-private equity

Contract structures/techniques to protect public interests

Our experience with availability payments has been extremely positive in [project] and [project] in [state]. Emphasis must be given to institutionalizing the P3 process and providing the necessary training to make P3 part of the everyday toolkit for project implementation.

Other perspectives