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, public-private partnerships will become much more common.
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.
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 the result of a public-private partnership.
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.
About the author: Steve Kulinski is executive vice president of GS&P’s Corporate and Urban Design and Land Planning markets. Steve has more than 37 years of design experience, specializing in strategic planning, facility assessment, programming and interior master planning. He is active in the corporate real estate industry and was the founding president of the Tennessee chapter of CoreNet Global, as well as the recipient of their Senior Leader of Corporate Real Estate award. More on Kulinski.