Are Public-Private Partnerships Development's New Normal?

The Lewis and Clark expedition… the Transcontinental Railroad… the invention of the Internet… these are some of our country’s proudest projects, and they have one critical factor in common- they were each the result of a public-private partnership (P3).

LEFT TO RIGHT: Meriwether Lewis and William Clark were private explorers commissioned by President Thomas Jefferson to figure out what exactly the U.S. had acquired with the Louisiana Purchase; A public-private partnership made it possible for the Transcontinental Railroad- nearly 2,000 miles long- to be completed in six years, spurring incredible development and growth; The Internet was invented in a government lab but developed and commercialized in the private sector (No, it was not just Al Gore).
A P3 agreement between a public entity and a private company transfers the design, construction, operation and maintenance of a public facility to the private sector, either for a new project or for improvements to existing facilities. These agreements have been used to finance, construct and operate a variety of building and infrastructure projects, including highways, ports, sewer systems, water treatment facilities, hospitals, schools, and even hotels and residential developments.

With this history of successful innovation, P3 agreements are arguably the most effective mechanism for accomplishing key projects, especially in our current economic and political climate. Government funds are perpetually low, politicians are well-aware that raising taxes could mean electoral suicide, bond referendums are not passing, and because of this, many beneficial public projects are not getting off the ground. Additionally, trust in government, according to recent polls, has reached all-time lows, and taxpayers are increasingly scrutinizing government spending and demanding results as the economy slowly clambers out of recession.

The P3 structure can overcome these obstacles by providing an influx of private sector dollars to jumpstart projects, and by instituting a system of checks and balances that combines the private sector's focus on the bottom line with the public sector's focus on voters’ needs and wants. The payoff for the public at large is considerable, as projects complete with fewer delays and fewer tax hikes, and public and private entities alike are held more accountable. 

For public and private organizations, P3 agreements offer mutual benefits. Government organizations can receive project funding while also transferring risks to the private sector. Private contractors benefit from the increased work and also from the goodwill and open communication fostered between the two groups. Such collaboration can be particularly helpful in dealing with the intricacies of zoning and code compliance, which often stall or even halt private sector projects. It can also be helpful for achieving the increasingly multi-faceted, complex development projects that are becoming the norm. In urban downtowns, for example, P3 agreements can help to revitalize areas of blight and decay, foster more sustainable development and fulfill a growing need for community redevelopment.

Within the P3 structure, the private sector benefits from increased work and access to public departments while the public sector benefits from increased funding and risk transference.
The Lentz Public Health Center in Nashville, Tenn. is the result of a P3 agreement between the Hospital Corporation of America (HCA) and the Metro Public Health Department (MPHD).Here in Nashville, P3 agreements have enabled projects like the Lentz Public Health Center, which was designed by GS&P after a partnership between the Hospital Corporation of America (HCA) and the Metro Public Health Department (MPHD). The new center replaces an aging facility that had become a limitation to MPHD's mission of providing high-quality, accessible medical care and information. In another example, public-private partnerships are at the center of discussions about what to do with the Nashville Convention Center, a prime piece of downtown real estate in need of redevelopment after the city's new Music City Center opened this summer .   

The factors currently complicating public projects- a lack of funding and resistance to tax increases- are unlikely to change anytime soon. As development needs become more complex, I believe public-private partnerships will become much more common in the corporate and urban design industry, as well as in transportation, water, and other infrastructure industries. Few other structures have the same potential to generate benefits for both the public and the private sector, and to promote the kind of collaborative, innovative development that can truly transform a city. After all, today's P3 projects are the heirs of an impressive legacy, including everything from Lewis and Clark's expedition to the World Wide Web. Today's public and private companies have the obligation and the privilege of answering an exciting question- what comes next?

*Note: If you are interested in best practices for drawing up P3 agreements, the Urban Land Institute has an excellent resource: Ten Principles for Successful Public/Private Partnerships.

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  • December 10, 2013 @ 11:59 AM

    David Thayer

    Nice. I like the article. An old concept, modern tools of finance, sharing the load by focusing specific strengths on tasks equals successful endeavors.

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