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Understanding P3s in Transportation: Definitions, Benefits, Challenges, and Examples, Study notes of Project Management

An overview of Public-Private Partnerships (P3s) in transportation, including definitions, benefits, challenges, types, and examples. P3s are contractual agreements between a public agency and a private entity for the delivery and financing of projects. the role of the Office of Innovative Program Delivery (OIPD) in transportation P3s, the differences between conventional and P3 projects, and the benefits and challenges of P3s for both public and private sectors. It also includes definitions of key terminology and examples of greenfield, brownfield, and hybrid P3 projects.

Typology: Study notes

2021/2022

Uploaded on 09/27/2022

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Introduction to
Public-Private Partnerships
(P3s)
Today’s Instructor
Patrick DeCorla-Souza
P3 Program Manager
Office of Innovative Program Delivery
Program Development Team
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Download Understanding P3s in Transportation: Definitions, Benefits, Challenges, and Examples and more Study notes Project Management in PDF only on Docsity!

Introduction to

Public-Private Partnerships

(P3s)

Today’s Instructor

Patrick DeCorla-Souza

P3 Program Manager Office of Innovative Program Delivery Program Development Team

Course Outline

Lesson 1 Definitions

Lesson 2 Benefits and Challenges

Lesson 3 Types of P3s & Examples

Lesson 4 Financing Tools

Course Summary

OIPD – Role in Transportation P3s

 Technical Assistance

 Educate

 Facilitate P3s

Innovative Delivery

Revenue

Procurement Finance

Lesson 1

Definitions

What is a P3?

 Public-Private Partnerships

  • P3s are contractual agreements between a public agency and a private entity that allow for greater private participation in the delivery of financing of projects
  • More than Design-Bid-Build

Project Procurement and Delivery

Conventional Projects (design-bid-build)

P3 Projects (design-build-finance-operate- maintain)  Public sector burden with all risks  Risk sharing

 Succession of separate (and multiple) contracts

 Integration of two or more project phases  Public Financing  Private Financing

 Lowest bidder  Best suited

 Public sector project stewardship (incl. with contract management firm)

 Private sector project stewardship

Definitions – Terminology

 A Concession is a long term lease of public facilities to a private party (concessionaire)

  • Greenfield and Brownfield Facilities

 A Special Purpose Vehicle (SPV) is a legal entity created to fulfill narrow, specified tasks

  • Isolates the financial risks from the parent company or companies

Leveraging is the degree to which an investor or business is utilizing borrowed money (debt)

  • If a project is leveraged at 70/30, 70% debt and 30% equity

Debt is a bond or loan, with an obligation to pay interest and principal at a later date

  • Obligation has payment priority over equity
  • Includes Private Activity Bonds (PABs) and Transportation Infrastructure and Finance Act (TIFIA) loans

Equity defines ownership interest in a corporation

  • Requires a higher internal rate of return than debt holders as equity interest is riskier
  • Can be lost in certain instances

 The Internal Rate of Return is the percentage return on investment.

  • Weighted average cost of capital (WACC) of project vs. return on equity

Definitions – Terminology

Why P3s Now?

 Growing congestion

  • Need for new highway capacity

 Increasing costs to maintain system

  • Aging infrastructure
  • Increasing construction costs
  • Increasing operations and maintenance costs

 Mounting budget pressures

  • Revenue growth slowing
  • Voter resistance to tax increases

 Poor long-term system performance

  • Deferred maintenance

Why Undertake a Project as a P3?

Answer: When the public sector can get more

value using P3 approach

 “Value” can be:

  • Lower construction and/or operation costs
  • Time savings in construction and/or delivery
  • Innovation -- cutting edge technologies or expertise

 Public Sector must assess “value”:

  • Value for Money Analysis
    • Public Sector Comparator
    • Value of risks transferred to private partner
    • Potential for efficiencies
    • Qualitative factors

Slide 16Slide 16

True or False:

P3s may be only be done on greenfield facilities.

Multiple Choice:

Among the considerations for entering into a P3 are…

  • Budget pressures
  • Upgraded long-term performance
  • Improved risk allocation
  • All of the above

Test Your Knowledge

Slide 17Slide 17

Questions

Submit a question using the chat box

Or

*1 to ask a question by phone

P3 Benefits to Public Sector

 Expedited project delivery

 Protection against some risks

 Construction and operational efficiencies

 Increased investment in transportation assets where unmet needs are the greatest

 Opportunities for “new” money (i.e. from equity investors)

 Brings together multiple financing sources required for large-scale projects

 Enhanced cost control

 More certainty regarding cost and schedule

 Brings innovation

 Introduces life-cycle perspective – better quality up front and improved maintenance

 Improved customer focus

 Leverages each partner’s strengths

 Conserves public sector debt capacity

P3 Benefits to Public Sector