Types of P3s

The types of P3s vary according to the scope of responsibility and degree of risk assumed by the private partner related to the project's design, construction, operation or maintenance.3 They can also be divided among pure greenfield P3s and pure brown-field P3s.The terms "greenfield" and "brownfield" are used in various disciplines to refer to projects that are built either on greenfield land where there is no need to remodel or demolish an existing structure, or on brownfield land that is in someway polluted, contaminated or previously used and where pre-existing facilities must be modified or upgraded. In the case of P3s, pure greenfields involve the creation of an entirely new road or other transportation asset, while pure brownfields seek to monetize an existing asset.

The U.S. Department of Transportation categorizes P3s according to six basic types, listed from least to greatest private responsibility:

• Private Contract Fee Services - These involve turning over to the private sector responsibility for providing operations, maintenance, program or financial management services.

•  Design-Build-These P3s combine two services traditionally bid separately into one fixed-fee contract. The public sector retains ownership of the facility as well as responsibility for planning, preliminary engineering, financing, operations and maintenance.

•  Design-Build-Operate-Maintain-These add private sector responsibility for operations and maintenance.

•  Long-Term Lease Agreement-These involve leasing an existing facility to a private company for a specified amount of time. The private company usually pays an initial concession fee and must operate and maintain the facility to certain standards. They often collect tolls and keep the revenue to pay bondholders and generate a return on their investment.

•  Design-Build-Finance-Operate-These add private sector responsibility for most of the financing, usually through tolls, sometimes supplemented with public sector grants and/or in-kind contributions such as right-of-way.

•  Build-Own-Operate-The private sector is granted the right to design, build, operate, maintain and own a facility in perpetuity4

There are a number of other different configurations and combinations involving elements of these six types as well.

While some of these types-especially long-term lease agreements-have lost favor recently, others appear to be taking their place in the U.S. A model popular in Europe called "availability payments" is being used in the expansion of Florida's I-595 Expressway. Under this model the private sector designs, constructs and manages the transportation asset, which the government continues to own. The government compensates the private partner for the risks and responsibilities it undertakes. Payments are based on specific performance standards and ensure investors make money only if they keep their part of the agreement. This model is often used for toll facilities that aren't expected to generate adequate revenues to pay for themselves. In the case of the Florida expressway, the availability contract, which took effect in 2008, is to redevelop I-595 with new toll lanes, bus lanes and improved interchanges in a deal that will cost $1.8 billion. The private consortium chosen to take on the project will design, build, finance, operate and maintain the facility for 35 years. Tolling will remain a revenue stream for the Florida Department of Transportation.5