P3s are contractual agreements between a public agency and a private entity that involve the private sector taking on additional project risks, such as design, construction, finance, long-term operation, and traffic revenue.
Building the organizational capacity needed to develop P3s while protecting the public interest presents a major challenge to transportation agencies and requires agencies to develop or acquire new policy, legal, technical, financial, and managerial skills.
Three main types of highway P3s have been used for highway projects in the United States: design-build, design-build finance, and design-build-finance-operate-maintain.
Three common payment mechanisms are used to repay private sector partners are repaid for their investment in P3 projects: tolls, availability payments, and shadow toll payments.
To deliver P3 projects, public agencies will need to acquire or develop new knowledge, skills, and abilities that vary by the phase of the project, including: establishing a statutory and policy framework, identifying, evaluating, and developing potential P3 projects, conducting procurements, and monitoring and oversight.
FHWA recently implemented a policy that will allow State Departments of Transportation to apply Federal-aid funds in towards availability payments to P3 partners.