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Public Private Partnership Pros and Cons

Public Private Partnership (P3) : Their benefits and disadvantages


New Study Cites $100 Billion In Annual Losses For Drivers Due To Traffic Congestion
Justin Sullivan/Getty Images News

P3: Public Private Partnership Benefits

Public private partnerships or P3 can be the long-awaited solution for the construction industry, developing new strategic alliances, improving public services and reducing government costs. Public private partnerships can be negotiated using different contracting methods producing the projected results allowing a faster benefit to all citizens. Depending on the job being executed Public Private Partnerships will results in greater benefits and will allow the business to develop into an exciting emerging market.

Public Private Partnership Benefits

Public Private partnerships (P3) offer several benefits:

  • Public Private partnerships could increase and provide greater infrastructure solutions

  • It will offer faster project completion and reduced delays on infrastructure projects

  • The Public private partnerships return of investment (ROI) is greater when compare to traditional methods, due to innovative design and financing approaches

  • Public private partnerships identify the expected life-cycle cost analysis and schedules the operation and maintenance component of the project, programming their cost and expected devaluation

  • Risks are weighted from initial conceptual stages to determine the feasibility of a certain project

  • The operational and project execution risk is transferred totally to the private sector, leaving the public component on a win-win situation

  • Public private partnership is a concept where early completion is expected under expected budget, reducing the claims and change order process

  • P3 allows government funds to be re-directed to other important socio-economic areas

  • Reduces government budget and budget deficits

  • High quality standards should be obtained and maintain through expected life-cycle of the project

  • Public Private partnership allows a reduce tax payment from users

  • Allows the government to direct the expected function of the project in accordance to their own interests

Public Private Partnership Disadvantages

As with any construction project, not everything is good news and is expected to follow as projected. P3 has also some drawbacks:

  • Every Public private partnership has risks involved, and the government will the pay the price to transfer those risks to the private sector

  • Certain situations can affect the purity of the process due to specialized areas being improved, reducing the number of contractors available to perform the requested projects

  • Profits of the projects can vary depending on the assumed risk, competitive level, complexity and volume of the project being performed

  • There is a slight risk that the proposed contracting alternative being offered is not the best suited option

  • Government representative must be highly specialized personnel and contracting experts.

Public-Private Partnership Case Studies

Across the United States and the world, many public transportation projects have succeeded through private partnerships. Other large Public/Private Partnerships include:

  • JFK AirTrain, New York – $1.9 billion total cost

    AirTrain JFK is an 8.1-mile rail system in New York City that connects John F. Kennedy International Airport (JFK) to the city's subway, commuter trains and airport parking lots.

  • E-470 Toll Road Colorado -$722 million total cost

    The first segment of the Project (approximately 5 miles) opened to traffic in June 1991 and later two additional segments of the project were built totaling 28.5 miles of highway.

  • Taiwan's High Speed Rail

    This project was one of the largest infrastructure projects in the world and one of the largest infrastructure projects ever built, using a "public-private partnership" (PPP)

  • Construction of Travelling Centre Ljubljana – EUR 220 million

    Emonika City Center complex will be built in the centre of Ljubljana and will connect two parts of the city that have been separated by a railway for several decades. A new bus and railway station and a new passenger hall will substantially improve the quality of passenger services for the visitors of Ljubljana.

  • DC Streets – Washington, Total Cost $69.6 million five-year contract

O&M concession to VMS, Inc., a private highway asset management firm responsible for the maintenance of city streets, tunnels, pavements, bridges, roadside features (curbs, gutters, and retaining walls), pedestrian bridges, roadside vegetation, guard rails, barriers, impact attenuators and signs in Washington, D.C.

  • The Chicago Skyway - Chicago $1.83 billion

    This PPP project was a 7.8-mile elevated toll road connecting I-94 (Dan Ryan Expressway) in Chicago to I-90 (Indiana Toll Road) at the Indiana border. The facility includes a 3.5-mile elevated mainline structure crossing the Calumet River.

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