Type of Organization

d. Other State Agency

Top benefits of PPP

Transfer of risk (construction, toll revenue, etc.);

Longer horizon on debt repayment;

Less political "response";

Deeper talent pool to manage project.

PPP Concern 1

May ignore important public concerns (social equity, etc.)

PPP Concern Mitigation 1

Agreement might provide for public subsidy to meet public policy objectives

PPP Concern 2

Default by "private entity"

PPP Concern Mitigation 2

Could be complex if it involves critical public facility. Financially surety or insurance could be costly but might deal with this possibility. Suggest stiff qualifications for "private partner."

PPP Concern 3

Long-term higher cost is major political issue

PPP Concern Mitigation 3

Hard to deal with-even if some good technical arguments. Explaining risk transfer and net present value of $$ is a nonstarter with most of the public.

PPP Concern 4

PPP Concern Mitigation 4

PPP Concern 5

PPP Concern Mitigation 5

Factors to consider by decision-makers

What are the risks:

Is the private partner qualified?

Is there value in removing the project from direct political control?

What is the political cost of the partnership?

Does the deal pencil out-reasonably?

Contract structures/techniques to protect public interests

Probably some form of franchise or easement. You would want to avoid too many areas of continuing negotiation with conditions and cancellation provisions (at a reasonable cost).

Other perspectives

No-except without some political acceptance it is DOA