Establishing a Public-Private Partnership (P3) program within a public agency involves issues from enabling legislation through identification, evaluation, negotiation and management of P3 projects. Public agencies have to make important and complicated decisions to develop effective P3 programs and projects - often under intense public scrutiny. P3s tend to be large and complex projects that present unique challenges to decisionmakers.
The public agency is responsible for protecting the public's interest, setting policy goals and objectives, administering the procurement process, and overseeing the agreement. Some required capabilities can be outsourced, depending on the anticipated volume of work to be done.
Policymakers must consider whether to set up a P3 program or develop P3 projects on a project-by-project basis; develop a process for the selection of projects as potential P3s; structure commercially viable P3 agreements that achieve policy goals, optimally allocate project risks, and bring value to the investment; and conduct a fair and competitive procurement to select the best partner and negotiate a final agreement that is transparent and protects the public interest while addressing the private partner's concerns.
In a P3 agreement, the public agency's role shifts from that of facility operator and overseer to that of performance-based contract manager. Public agencies must be deliberative and judicious in managing this new role. The establishment of a well-defined performance management regime, a strong contract management team, and an open and engaged relationship with the concessionaire can be key to the long-term success of a P3 project. This can help to ensure contract performance while avoiding the potentially costly consequences of contract renegotiation or default.