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Challenges and Opportunities Series: Public Private Partnerships in Transportation Delivery

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5. Organizational Capacity


  • Developing, negotiating and managing P3 agreements is resource intensive and requires specialized skills not traditionally retained in public agencies. Public agencies face challenges acquiring or developing the political, legal, technical, financial, and managerial skills needed to reach P3 agreements that protect the public interest.
  • Leadership at all levels is required to facilitate overcome organizational challenges to efficient P3 project delivery. Potential challenges include a public sector culture uncomfortable with transferring a greater degree of control of projects to the private sector and project development processes that are not conducive to the multidisciplinary approach required to identify, evaluate, procure and manage P3 agreements.
  • Strategies public agencies have used to address organizational capacity needs include hiring private advisors, developing capacity internally, and creating specialized offices or agencies to address P3 opportunities and challenges programmatically.


This chapter examines the organizational capacity challenges that State and local governments face in considering and implementing public-private partnerships (P3s). The first part of this chapter describes the capabilities that a public agency needs to implement P3s at each stage of project delivery, followed by a discussion of the organizational challenges of P3s. The last section explores strategies for developing organizational capacity.

Building the organizational capacity needed to develop P3s while protecting the public interest presents a major challenge to transportation agencies. To identify, develop, negotiate, and manage agreements with private partners, transportation agencies will need capabilities they have not traditionally possessed. Agencies will need to acquire or develop new policy, legal, technical, financial and managerial skills and establish processes and structures, such as specialized P3 units, that allow them to apply those skills in a multidisciplinary way.

Changing the way some projects are delivered will require public actors to approach project delivery from a different perspective. To design partnerships that are both in the public interest and attractive to private investors, public agencies will need to gain a better understanding of private sector interests as well as public demands. In many agencies, this will require a cultural shift as responsibilities and risks that are traditionally retained by the public sector are transferred to the private sector. Managing the organizational changes needed to develop, implement, and monitor P3s will require agencies to involve and educate agency staff and external project stakeholders to build committed leadership at multiple levels.

What Are P3 Organizational Capacity Needs?

To deliver P3 projects, a public agency will need to acquire or develop new knowledge, skills, and abilities that vary by phase of project development:

Phase 1: Establish a Statutory and Policy Framework;
Phase 2: Identify and Evaluate Potential P3 Projects;
Phase 3: Prepare and Conduct Procurement; and
Phase 4: Monitor Outcomes.

For each phase, agencies need a mix of five capability types:

  • policy,
  • legal,
  • technical,
  • financial, and
  • managerial (see Figure 5-1).
  • Figure 5-1 Agency Organizational Capacity Needs

    Figure of Organization Capacity

These are explored below by phase.

Establish a Statutory and Policy Framework

A state's statutory framework, as described in Chapter 3, typically determines the types of P3 arrangements that are allowed and may define project selection, funding, management and other policies. Beyond the enabling legislation, agencies may establish specific policies that guide P3 project development. The skills required to establish and implement a statutory and policy framework are summarized in Table 5-1.

Table 5-1: Skills to Establish and Implement Statutory and Policy Framework
Skill Type Description
  • Develop and seek authorization for legislation.
  • Serve as program champion and serve as liaison with the public.
  • Establish goals, policy and legal framework for the overall P3 program.
  • Align P3 program goals with overall agency goals and mission.
  • Align P3 program with Federal requirements.
  • Provide policy guidance.
  • Develop regulations and rules.
  • Draft legislation.
  • Draft legal framework for the P3 program.
  • Provide financial guidance to policy makers in developing the overall framework.
  • Develop financial requirements for the evaluation of proposals.
  • Determine financial capacity for P3 program and overall transportation program.
  • Identify financial tools available to public agency.
  • Aid in developing technical requirements for the program framework.
  • Develop matrix of technical risks.
  • Develop project identification and screening guidelines.
  • Determine transportation needs within context of transportation planning process.
  • Integrate P3 concept into planning, programming, and design.
  • Determine performance management goals and objectives for program and projects.
  • Serve as liaison to other agencies (both permitting and advisory).
Identify and Evaluate Potential P3 Projects

Identifying projects that have the potential to be delivered as P3s early on in the planning process allows agencies to more carefully consider how P3s fit into their long term performance objectives and fiscal constraints. Early identification can help to position P3 projects for success by ensuring that the P3 delivery model is considered in the scoping, preliminary design, and environmental review of the project. To effectively identify projects with the potential for P3 delivery, agencies need to build the capacity of transportation planners and project engineers to evaluate proposed projects for their potential to be delivered as a P3 and compare P3 delivery to other delivery methods.

Evaluating the feasibility of a P3 project requires estimating the potential life cycle costs of the project, the value of long term revenue streams, and the value of transferring specific risks to the private sector. Similarly, tax expertise is needed to assess tax benefits and obligations that may accrue to the private partner in a long term agreement. Public agencies can evaluate the potential feasibility and value of a P3 agreement through technical planning and engineering studies, including:

  • Traffic and revenue studies - estimate future traffic levels and revenues based on various scenarios. The traffic and revenue study is essential for estimating the value of potential user-based fees as well as the overall public benefit of a project.
  • Preliminary engineering studies - help to establish cost estimates for construction as well as for long term maintenance and operations of a facility.
  • Financial models - used to understand project cash flow requirements and rates of returns under different conditions.
  • Value for money analyses - compare the life cycle costs and benefits of different procurement approaches.

The primary skills required to identify and evaluate potential P3 projects are summarized in Table 5-2.

Table 5-2: Skills to Identify and Evaluate Potential P3 Projects
Skill Type Description
  • Determine the extent to which a potential project may address public agency goals or achieve public benefits
  • Make decision on whether or not to proceed with P3 procurement.
  • Interpret implications of laws on project liabilities, cash flows, and revenues.
  • Develop a finance plan, including identification of Federal aid, joint development and other innovative finance techniques.
  • Assess potential project cash flows.
  • Identify potential financial risks.
  • Conduct a value for money analysis.
  • Identify potential permitting requirements for program projects.
  • Conduct preliminary technical studies (traffic/revenue, engineering, environmental).
  • Prepare project cost estimates.
  • Identify potential project risks.
  • Recommend which technical components should be contained within the P3 and which should be retained in-house (design, environmental, maintenance, etc.).
  • Recommend whether to proceed with P3 procurement.
  • Recommend structure of preferred P3 procurement (Design-Build, Design-Build-Operate-Maintain, etc.).
  • Serve as project lead and coordinate overall effort.
  • Solicit proposals and receive non-solicited proposals.
  • Review and evaluate work of technical experts.
Conduct Procurement

P3 procurement requires greater flexibility than traditional procurement to allow for innovation on the part of bidders and for more room to negotiate with multiple stakeholders. Flexibility is needed in negotiating a final agreement to ensure that it is deemed creditworthy by commercial lenders and provides an adequate return on investment to attract private equity investors. A public agency may want to have experienced legal and technical advisors to help negotiate with the private partner.

During procurement, agencies need financial expertise to assess the financial quality of the bids and technical expertise to assess the qualifications of the bidder. The decision to go ahead with a P3 project often rests on a value for money analysis of a potential agreement. Conducting a value for money analysis requires the public agency to have the capability to evaluate the value of a project and compare the costs and benefits of the potential P3 arrangement to those of a traditionally delivered project.

The key skills required to conduct a P3 procurement are summarized in Table 5-3.

Table 5-3: Skills to Conduct Procurement
Skill Type Description
  • Review allocation of risk between public agency and private sector.
  • Make decision on whether to proceed with P3 procurement.
  • Negotiate P3 procurement.
  • Sign and justify final agreement.
  • Identify legal risks and liabilities.
  • Draft agreement.
  • Prepare requests for qualifications (RFQ) and proposals (RFP).
  • Negotiate P3 procurement and prepare final agreement.
  • Assist in managing and overseeing outside legal advisers and coordination and consultation with control agencies
  • Develop plans for sharing of financial risk.
  • Identify revenue sources.
  • Develop a finance plan.
  • Conduct a value for money analysis.
  • Assist in managing and overseeing outside financial advisers. And coordination and consultation with control agencies
  • Define technical specifications, performance standards and evaluation criteria.
  • Develop plans for sharing of technical risks.
  • Conduct preliminary technical studies.
  • Prepare project cost estimates.
  • Propose allocation of technical risks.
  • Recommend whether to proceed with P3 procurement for specific proposals.
  • Serve as project lead and coordinate overall effort.
  • Review and evaluate work of internal and outside experts.
Monitor and Oversee a P3

After the agreement is signed, the public agency must manage the contract to ensure that it achieves the performance standards established in the agreement. Contract management responsibilities include:

  • Monitoring of technical and financial performance;
  • Authorization of payments;
  • Review and preparation of required records and reports;
  • Change management; and
  • Dispute resolution.

Contract management is inherently an in-house responsibility for the public agency. While private advisors are typically retained through financial close, the need for additional technical, legal, and financial capabilities often continues throughout the agreement. In addition, when conflicts arise or, in the extreme case, when an agreement must be terminated, legal expertise is needed to mediate and resolve disputes.

The performance monitoring and oversight phase will require building a strong set of skills within the public agency due to the need to maintain these oversight responsibilities in-house. This includes the need for contract management skills to monitor the established performance standards and manage accordingly. In addition, the capacity to monitor technical performance during construction and operations can be critical to ensuring efficient service delivery.

Throughout the agreement, the public agency may be overseeing different private parties. In addition to the initial project concessionaire, the public agency will likely have a role in monitoring the activities of separate subcontractors responsible for construction and operations and maintenance. Also, concessions may change hands once the initial ramp up risks have diminished, in which case the public agency may perform oversight of different parties.

Specific skills needed for performance monitoring and oversight are shown in Table 5-4.

Table 5-4: Performing Monitoring and Oversight
Skill Type Description
  • Provide policy guidance and dissemination of public information.
  • Evaluate project within context of overall P3 program.
  • Oversee contract interpretation, dispute resolution and related legal issues.
  • Review and approve updated finance plans.
  • Monitor financial risks.
  • Monitor cash flow and debt streams.
  • Collect and analyze data.
  • Monitor construction and operations.
  • Provide technical advice on performance standards.
  • Serve as project lead and coordinate overall effort.
  • Monitor whether performance standards are achieved.
  • Review and evaluate work of outside experts.

Overview of Organizational Challenges

Transportation agencies seeking to explore and develop P3s face a number of organizational capacity challenges. Table 5-5 summarizes the primary challenges, some of which are discussed further in this section.

Table 5-5: Organizational Capacity Challenges
Challenge Description
Acquiring/Developing New Skills Specialized technical, legal, financial and managerial capabilities will need to be developed in-house.
Managing Organizational and Cultural Changes Public employees will need to become accustomed to transferring certain responsibilities and risks to private partners as part of the project development process.
Coordinating With and Educating Others Agencies will need to communicate effectively with more project stakeholders than in traditional procurements. In addition, agencies will need to communicate about P3 models and other topics for which they may never have developed information or outreach materials.
Conserving Institutional Knowledge Agencies will need to develop capabilities to monitor projects over the long-term - terms that may extend well beyond the career tenure of current employees and leadership.
Acquiring/Developing New Skills

Public agency project managers will need to consider numerous factors they may never have had to consider previously to ensure that P3 projects uphold safety, design, environmental and fiscal standards and meet public agency goals. In many P3 arrangements, the agency's responsibility for design and construction engineering is reduced, since these are done by the private partner. Instead, the agencies become responsible for contract management and oversight of the private partner.

Agencies will need to learn how to establish performance standards rather than construction specifications. This may involve a culture change for public agency engineers, who are used to, for example, specifying standards based on use of certain materials rather than performance. While this role can be outsourced, the development of the goals themselves - whether safety, congestion management, aesthetics, or other project characteristics - should probably remain with the agency. This change in roles may lead to a shift in the types of technical skills within an agency as there may be less need for hands-on design, and more need for broader performance setting and project management and oversight.

Managing Organizational and Cultural Changes

Transportation agencies may need to examine current structures in order to be able to successfully identify, develop and implement P3s. Most transportation agencies do not have a dedicated "owner" of the P3 development process. Only a few State DOTs currently have an established P3 Program with a dedicated P3 staff. States with existing design-build programs or toll facilities may be more likely to have at least some of the skills and structures in place to facilitate P3 project development than states without design-build programs or toll facilities, who may be effectively starting from scratch.

A major institutional barrier to effective P3 project development is the traditional division of project development responsibilities and authorities into multiple offices and, sometimes, agencies. Financial, procurement, and engineering expertise and authority generally are housed in different offices. For example, the authority and expertise to issue debt and understand and manage complex financial agreements may often be in a different agency from the one that identifies, develops and delivers transportation projects. This organizational structure may make sense for traditional project development processes steps that are often sequential, so that environmental, planning, engineering and financial experts may not have to coordinate closely in order to deliver a project. However, in developing a P3, many of these steps need to happen on an iterative basis, requiring more frequent interactions and internal coordination. For example, a public agency may need to consider how the alignment selected for the project affects both the financial and environmental aspects prior to the RFP, and then reevaluate how any changes proposed to the alignment in the winning proposal may change the outcome of that evaluation. In addition, by considering project funding and procurement issues early in the project development process, rather than at the end of the process, decisionmakers may be in a better position to take advantage of potential P3 opportunities. Developing projects iteratively, rather than sequentially, may require forming and managing multidisciplinary teams that understand the interactions of various technical, financial and legal factors and can facilitate an iterative project development process.

To manage organizational and culture changes, champions at all levels are needed. In some cases, the champion may be the governor; in others it may be a legislator, agency director, or community or business leader. A P3 champion can communicate the business case and public good for P3s (both within public agencies and among stakeholders), gather support for the concept, facilitate the streamlining of processes and organizational change, set and manage expectations, and provide assurance to the private sector of the public sector's commitment to the P3 model. Beyond the champion at the top, champions within the transportation organization need to lead the organizational changes demanded by P3s.

While champions are needed, it is important for the champions to understand the risks and rewards of pursuing a P3 within the context of the overall transportation program. P3s are not the answer to every infrastructure problem, and champions need to be careful about not overstating the benefits of P3s or understating the costs.

Coordinating With and Educating Others

P3s are generally large projects with significant impacts on local populations and economies. In many ways, they may generate controversy, much as any other major project will. However, in accelerating project delivery, the P3 approach accelerates and condenses the political negotiation and consensus building process. Furthermore, certain features of P3s may make them more vulnerable to public controversy: they are often toll-financed; they may require allocations of public funds or tolls to private firms over long time periods; and they involve private firms that are typically large and often foreign and that stand to profit from those public funds or tolls. Finally, P3s also have complex structures that involve a large number of diverse stakeholders with a range of responsibilities and interests, as described in Table 5-6. For a P3 approach to be successful, the interests and capabilities of these diverse stakeholders need to be taken into account.

Conserving Institutional Knowledge

To conduct oversight of long-term concessions, agencies need to develop their internal capabilities with the understanding that staff may retire or leave and that the demand for specific capabilities may fluctuate over time. Building robust capabilities and documenting institutional knowledge, processes and guidelines is important for maintaining those capabilities over time. Currently, most states lack a steady flow of P3 projects, making it difficult to predict staffing and resource needs. But, as projects are identified, developed, procured and implemented, capacity needs, particularly for performance monitoring, will need to be identified and filled.

Table 5-6: Potential P3 Stakeholders
Stakeholder   Role/Interest
Public Agencies Project Development Agency Manages project development and procurement; may sign the P3 contract.
Permitting Agencies Issue permits to enable projects to proceed.
Bonding Agency Issues publicly sponsored debt; may be the same as or different from the project development agency.
Private Advisors Provide technical, financial and legal advice; contracted by the project development agency.
Other Funding Agencies May contribute funding to the project.
Elected Officials State Legislators Develop enabling legislation for P3s and may play a role in project identification (through legislation) and approval.
Other local and State Officials May play a role in project identification, selection, approval and funding.
Private Partners Equity Participants Invest money in the project in exchange for long term returns.
Concession Company (individual company or consortium of companies) Contracts with the project development agency to provide services such as design, construction, operations, maintenance, and financing.
Local subcontractors May contract with project development agency to provide services.
Lenders (private & public) May finance the project.
General Public Voters/Taxpayers Help identify transportation needs, fund the project through tax revenues, and/or approve public financing.
Facility Users Benefit from the use of the facility and may contribute funding through tolls or other means.
Abutters Concerned about property values and takings.
Interest groups Interest groups (environmental, business, and other) Provide input on issues that may or may not be directly linked to the P3 procurement method.

Adapted from

Strategies for Addressing Organizational Capacity

Public agencies have acquired new capabilities through outsourcing, training or hiring to develop internal capacity, or establishing new P3 units. While not mutually exclusive, each approach has its strengths and limitations (see Table 5-7).

The public agency is responsible for protecting the public's interest, setting policy goals and objectives, administering the procurement process, and overseeing the agreement. Other capabilities can be outsourced or handled in-house, depending on the anticipated volume of work to be done. It may not be worthwhile for an agency to hire in-house experts or create a P3 unit for a single transaction.

Table 5-7: Strengths and Cautions/Constraints of P3 Capacity Building Models
Capacity Building Model Strengths Cautions/Constraints
Hire Consultant Advisors Quick to acquire as needed. Need to select effective advisors. Services may be perceived as expensive. Risk of real or perceived conflicts of interest. Use of consultants is often regulated by statutes/rules outside the P3 statute.
Train Internally and/or Hire New Staff Builds bottom-up capacity to identify P3 projects as well as capacity to manage external advisors. Takes time and resources to train staff. Staff may lack incentives or background to learn new material. Still likely to require outside advisors to start.
Establish State P3 Unit Can address P3 needs programmatically. Enhances private sector confidence that the public sector will be a strong client/partner. P3 opportunities may be sporadic and may not justify a dedicated unit. Even with a specialized unit, additional experts may be needed from other government agencies or consultants. May be politically complicated where public agency ownership or governance is fragmented.
Potential Roles for Consultant Advisors

Especially when a public agency is just beginning a P3 program, the needed skills, knowledge and perspectives will not be easy to cultivate in-house, so the agency will likely bring on consultant advisors for legal, technical, and financial advice. While qualified consultant advisors in the P3 arena may be more costly on a per hour basis than public agency employees, they usually bring specialized skills that it may not be cost-efficient for the agency to maintain in-house on a permanent basis. This is because opportunities to work on a P3 project may be sporadic, making it difficult for public agencies to develop and maintain the specialized skills necessary to develop and negotiate a P3. Consultant advisors can bring expertise from other engagements and do not need to find continuing roles in the agency organization once their work is complete.

Agencies need to understand how to select competent advisors whom they can trust. There is no certification process for P3 consultants. Many private firms do not have expertise in implementing a full range of financial tools and arrangements; as a result, they may recommend only the approach they know best, ignoring potentially better opportunities. Furthermore, while many advisors in the P3 arena may have international experience, not all international experience is relevant. International firms may lack an understanding of the U.S. market and potential financial tools.

When hiring external advisors, it is important to consider which roles are appropriate for the consultants and which are more appropriate for a public agency to keep in-house (see Table 5-8). Some roles are inherently a public sector responsibility. A public agency should drive and manage the process, set the program's direction, identify potential projects, select bidders, and manage contracts. Private sector expertise is more often used for well-defined tasks, such as developing a financial model, advising as to the optimal financial structure and contract provisions, and assisting with the negotiation of the final agreement.

Public agencies also need to be aware of potential conflicts of interest with any outside advisors it hires. In order to ensure independent advice and analysis, public agencies need to ensure that the advisors do not have any conflicts with advising private sector partners either engaged in or bidding on a potential P3 project. As one State DOT official noted, "it is important to worry about both the substance and the optics of whom an agency hires."

Table 5-8: Typical Public and Private Roles
Role Public Agency Consultants
Program Direction
  • Sets overall program direction and program and project goals.
  • Not applicable.
Project Selection
  • Screens and selects projects
  • Technically evaluates potential projects.
Project Evaluation
  • Makes decisions regarding the structure of the agreement based on evaluation.
  • Prepares traffic and revenue studies.
  • Conducts value for money analysis and provides financial advice.
Project Procurement
  • Sets RFQ and RFP goals.
  • Selects partners and bids.
  • Leads final negotiations.
  • Develops language for RFQ and RFP.
  • Advises on contract structure and risks.
  • Assists final negotiation.
Project Monitoring
  • Monitors performance and administers contract.
  • Assists with inspections and performance monitoring.
Training and Peer Exchanges to Build Capacity

Whether or not public agencies use external advisors, they will need to train or hire internal staff to be capable of understanding and managing the project development process and managing the agreement once it is signed. Developing the skills to manage the P3 process can be done through training existing staff as well as hiring new staff. In some cases, external advisors hired for their technical, legal or financial expertise can also be used to conduct training of internal staff.

In 2008, FHWA and AASHTO surveyed State DOTs regarding their experience in P3s and their training needs. State DOTs varied in their experience with P3s and their self-assessed readiness to implement P3s. State DOTs with more experience implementing P3s were more likely to indicate an interest in training. A majority of the State DOT representatives indicated a need for advanced training in topics of contracting, management, finance, and risk management. Specifically, State DOT representatives believed their organizations would benefit the most from training in:

  • Common failures of P3 contracts and how they are addressed;
  • Techniques for monitoring technical and financial performance;
  • How to assess the economic costs and benefits of projects; and
  • Assessing risks to both partners at each phase of a project.

As the P3 market matures in the United States, agencies can learn from their peers in other organizations. Peer exchanges are one way public agencies can develop internal capacity. Closely reviewing case studies is another way.

Resources for case studies and other educational resources, such as guides and manuals, dealing with P3s:

Specialized P3 Units

In the United States, the authority to develop transportation P3 agreements typically rests with State DOTs, but is sometimes extended to municipalities or regional authorities (such as the City of Chicago, Regional Mobility Authorities in Texas, or Regional Transportation Agencies in California), or with another department within the State with the power to issue debt - typically Administration and Finance or Treasury Departments. A model increasingly used by states and other countries to address P3 organizational capacity is the specialized P3 unit. A P3 unit can be any institution, office, or team set up to support the development, implementation and evaluation of P3s. P3 units are typically staffed with sector-specific experts as well as experts in economics and finance, regulation, procurement, communications and training. Many of the countries that are the most active users of P3s for project delivery have P3 units.

The roles and responsibilities of a P3 unit may include:

  • Providing technical assistance and training on P3 project development and procurement. This centralization of knowledge can save money and allow for a more consistent approach.
  • Helping to identify a pipeline of potential P3 projects and prioritize those opportunities. P3 units can help to promote a standardized programmatic approach to the development of P3s.
  • Providing regulatory oversight and screening of P3 projects. P3 units often act as gatekeepers to ensure that risks are accounted for and value for money is achieved.
  • Promoting the P3 program by soliciting projects, attracting potential partners and investors, and educating the public. P3 units may raise private sector interest and confidence in P3 investments as potential partners may feel they have a more experienced and capable client team with whom to negotiate agreements.

P3 units can be housed within government departments, or run as privately or publicly owned corporations funded by fee-for-service. In the United States, P3 units are State-based and typically have a small dedicated staff of employees with engineering, legal and financial specializations who report to a CEO or Executive Director. The P3 staff is generally supplemented by expert advisors (government employees or consultants) who may be relied on for specific technical, legal and financial tasks. The P3 unit typically reports to a board or committee charged with oversight responsibilities. Authority to sign P3 agreements may rest with the director of the P3 unit, the commissioner of the board, or the director of the agency where the P3 unit is housed.

P3 units can facilitate a programmatic approach to project identification and assessment. Programmatic evaluation has the advantage of allowing P3 projects to be identified earlier in the planning and scoping process, allowing the public sector to better manage its limited resources.

In recent years, several U.S. states and territories (e.g., Georgia, Virginia, and Puerto Rico) have established P3 units, but their experience thus far has been limited. Georgia passed renewed P3 legislation in 2009 that established a P3 program team within Georgia DOT. With the support of external advisors, the team developed a policy framework and guidelines for developing P3s, identified potential P3 projects, and began the procurement process for several projects. Puerto Rico established the Public Private Partnerships Authority (P3A) with the goal of promoting private investment in public infrastructure ranging from schools to airports and highways. In October 2010, P3A began the procurement process for the long term lease of one of its primary toll roads, PR-22, currently operated by the Puerto Rico Highways and Transportation Authority.

International Experience with P3 Units

The experiences of the development of the P3 market in the United Kingdom, Canada and Australia provide several well-established models for P3 units.

National P3 Units - Partnerships UK

Partnerships UK is perhaps the most prominent example of a national P3 entity that provides advice, technical assistance, and guidelines for other units of government. Partnerships UK was established in 1999 as part of an effort to reform and bring order to privatization efforts. Earlier privatization efforts were criticized for not generating enough public value, raising prices, and reducing services. The goal of Partnerships UK is to increase investment in public services and increase the efficiency of public service delivery. Partnerships UK does not focus exclusively on transportation projects but rather supports a broad range of publicly delivered services including utilities, hospitals, prisons and schools.

Establishing Partnerships UK was the recommendation of the Bates Review, a 1997 review of government efforts to privately finance public services. The Bates Review recommended that a national task force be established to support the use of P3s. The task force was made up of staff recruited from the private sector with specialized project management and financial experience. Its role was to evaluate potential P3 projects before procurement commenced and advise on contractual terms and conditions. The task force was widely considered a success and, following a subsequent review in 1999, was made permanent in the form of Partnerships UK.

A second Bates report found that P3s required a range of skills that would be difficult to develop in the civil service. Therefore, Partnerships UK was itself established as a P3 and managed on private sector principles, rather than as part of the civil service, to better enable it to recruit and retain the private sector skill base required to support the public sector.

Partnerships UK has operational independence from Her Majesty's Treasury and 51 percent private equity ownership. It operates primarily on a fee-for-service business model. The chief role of Partnerships UK is to provide technical assistance and financial tools to support the public sector's development of specific P3 projects. Partnerships UK has a staff of over 80 employees and has been involved in over 900 projects worth well over US$100 billion since it was launched. A separate, smaller P3 policy team housed within the Treasury is responsible for approval of projects and the development of nationwide policy guidance.

Partnerships British Columbia (Canada)

Partnerships British Columbia (Partnerships BC) is one of three provincial P3 units in Canada (Infrastructure Ontario and Public-Private Partnerships Quebec are the other two and there is also a Federal P3 unit, Partnerships Canada). Partnerships BC was established in 2002 as a public corporation governed by a Board of Directors and reporting to its sole shareholder: the Minister of Finance. It has a full-time staff of approximately 40 and is based on a fee-for-service business model. To date, Partnerships BC has been involved in over 35 P3 projects with a combined value of over US$12 billion. The role of Partnerships BC is to act as a center of procurement expertise to assist with the evaluation, structure and implementation of P3s for public infrastructure in transportation, health, education, water and sewage, and other sectors. Partnerships BC provides a variety of services including:

  • Research and dissemination of best practices;
  • Evaluation of risks, value for money and procurement options;
  • Development and evaluation of standardized procurement processes; and
  • Project management and construction oversight.
Partnerships Victoria (Australia)

Partnerships Victoria, established in 2000, is the P3 unit within the State Government of Victoria and is also the name of the overall policy framework established for P3 by the state. There are currently 21 Partnerships Victoria projects in place, valued at approximately US$10 billion. Partnerships Victoria is a unit with the Commercial, Infrastructure and Risk Management Group - a part of the Commercial Division of Victoria's Department of Treasury and Finance. Partnerships Victoria has a staff of 12 full-time employees with backgrounds in banking, law, economics, finance and engineering. The role of Partnerships Victoria is to work with the Treasury to facilitate the P3 approval process, develop policy, and to provide expert commercial advice, training and materials to procuring ministries. Partnerships Victoria offers a number of courses and conferences to build public sector capacity to develop and manage P3s, including courses in:

  • P3 basics;
  • P3 business case development;
  • P3 evaluation and approval processes;
  • P3 procurement; and
  • P3 contract management.


To identify, develop, and procure P3 projects requires a multidisciplinary approach that combines policy, financial, technical, legal and managerial skills. Most agencies have traditionally approached these aspects of project development separately. Not only will agencies need to acquire or develop new skills that they have not traditionally utilized; they will need to change their structures, processes and mindsets to be able to apply these skills in combination.

Public agencies have employed a variety of strategies for building organizational capacity including the development of specialized P3 units, the use of external advisors, and the training and hiring of staff. Each approach has strengths and weaknesses and they are not mutually exclusive. Most public agencies rely on external advisors to varying degrees to develop program policies and processes, evaluate projects and agreements, and provide training to agency staff. Internal training of agency staff can provide long term benefits that hiring external advisors may not, such as enhanced project identification and stronger contract management. Developing the capacity to implement a P3 program can help to catalyze private infrastructure investment, but without a pipeline of potential P3 projects, investment in permanent staff positions may not be warranted. Finally, capacity building efforts should not solely focus on the agency responsible for delivering the project. Varying degrees of understanding and capacity are needed across agencies at all levels of government to effectively implement P3s.

Research Needs

Additional research can help determine what skills, structures, and resources can best prepare agencies for evaluation and implementation of P3s, as well as how these needs can be met most effectively. Research questions include:

  • What lessons have been learned about organizational capacity in the implementation of past P3s? What skills/resources/organizational structures have contributed most to success, or have been regarded as impeding success?
  • What are lessons learned from agencies that have attempted to build capacity for P3s? What specific examples exist of how organizational capacity has affected P3 implementation (positively or negatively?). What common organizational capacity elements exist in projects deemed as successful (and ones that are not?).
  • What capacity needs exist in the private sector, and in levels of government other than the implementing agency for a P3s, such as local governments, other State agencies, and State legislatures?


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