Feds publish framework for evaluating public-private partnerships

No single factor determines whether a project yields stronger benefit as a P3.

June 17, 2016 |
Feds publish framework for evaluating public-private partnerships

A 371,160-sf office building in Frankfort, Ky., is being constructed through a public-private-partnership. Photo: Steve Beshear/Creative Commons.

The U.S. Department of the Treasury recently published an Economic Framework for Comparing Public-Private Partnerships and Conventional Procurement. 

The department concluded that there is no single factor that should determine whether a P3 is likely to yield a stronger benefit than one delivered through conventional means. The paper also outlines important steps for a government to take before procuring a P3 project to ensure optimal benefit to the taxpayer.

One key factor cited in the report was the capacity of a project to bundle several projects into one large contract. The capacity to bundle is by far the most important factor in a P3 creating cost savings, the report concluded.

Other important considerations were:

  • Private-sector expertise: A strong indicator of whether the project will provide a net-benefit over the full life cycle of a P3 is the technical expertise available.
  • Clearly defined terms that are quantifiable: How precisely does the contract lay out the service level required? 
  • High capital costs and long lived assets: Assets procured using a P3 need to be large enough to generate cost savings that offset the transaction costs of privately raised capital.
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