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• Allow designers, contractors, and maintenance teams to work together through the delivery of the process to focus on lifecycle costs as opposed to just initial design and construction costs.

It should be noted that project funding and P3s are not synonymous. Policymakers and government leaders frequently mistake the financing that P3s provide for funding. A P3 allows the government to obtain equity from the private sector, but that equity has to be paid back with interest. Like a loan, a P3 can be used to accelerate revenues and provide needed capital to help pay the upfront costs of a project, but also like a loan, the private P3 investors must be paid back for investors to realize a financial return.

Some mistakenly think that using a P3 would allow a road or bridge to be delivered without increases in tolls or taxes. It is important to remember that all funding for governmental infrastructure comes from either taxes or user fees. P3 financing can be used to make those funding sources more efficient, but it cannot replace the need for taxes or user fees to provide the funding for the project.

In addition, a poorly managed P3 procurement process (the process government uses to identify the best private P3 partner) can result in excessive consultant costs and years-long delays in delivery. While P3s can offer efficiencies in delivering the project, the P3 procurement process itself can be significantly longer and more expensive than traditional procurement processes.

Finally, and possibly most important, a P3 gives a private party the ability to collect fees or payments over decades (a period well beyond the length of the careers of the political appointees who sign contracts with private parties). Thus, P3s create an opportunity for current governmental leaders to obtain a higher upfront payment from the private party in exchange for greater user fees paid by future generations who will use the asset. In other words, a governmental CEO (governor, mayor, head of an authority) can use a P3 to impose unnecessarily high costs on users decades in the future in exchange for upfront cash. It is important that contracts be transparent in order to minimize this possibility.

A P3’s greatest public value is realized when the procurement model is used for a project that is unusually risky or a type of project with which the government has limited experience such as a tunnel or light rail line. P3s are an excellent tool for transferring risk from the public sector to the private sector and can create considerable value for the taxpaying public. However, a high degree of expertise is required to ensure that the risk transfer warrants the higher financing and procurement costs that P3s impose.

EMERGING TECHNOLOGIES

As private companies develop a future of new, emerging technologies, one role for DOT is driving clarity in the government’s role and setting standards for safety,