Public officials study best practices, lessons learned when considering public-private partnerships
by Mary Scott Nabers,
CEO of Strategic Partnerships, Inc.
Public-private partnerships (P3s) come in various sizes, shapes and types. Few are exactly alike but many are patterned after similar types that have proven successful. Best practices and lessons learned are hot topics with public officials these days.
Here are some examples that provide an inside look at best practices and P3s that have been declared successful:
Colorado State University (CSU) entered into a design, build, finance, operate contract with a partner to build a 30-acre, 23,000-panel solar power plant on CSU property.
Under the terms of the agreement, CSU agreed to lease the land and purchase electricity produced by the plant at a fixed rate for 20 years. Both sides of this partnership benefit because CSU has protection against future rate increases and there were no upfront costs to the university. The plant also provides CSU lower utility rates over time and will provide more than a third of the Foothills Campus electric needs. The energy firm benefits by owning and operating the solar power plant for 20 years with guaranteed revenue. CSU will have the option to purchase the plant at the end of the contract term.
Under a different type of P3, the wastewater treatment plant in Shelby County, Alaska, was sold to a private sector water company. The revenue from the sale was then used to fund the construction of a new water treatment plant that the private sector company would also operate and maintain. Leveraging one of the county’s underutilized assets created a much-needed revenue stream that was necessary to upgrade its water treatment capabilities. There was benefit to the private sector partner because that company increased its water holdings and locked in long-term revenue.
Another governmental entity, the University of Arkansas, partnered with a private sector company for operation of its wastewater facilities. The P3 engagement included a construction and maintenance contract. The private sector partner agreed to pursue money-saving initiatives that included recycling bio solids, using biomass for fuel and preserving wildlife reserves. The steady revenue stream that the private sector firm is guaranteed is an attractive benefit and, on the other side, taxpayers benefit because they were not required to finance the project.
The first privately developed and operated open toll road facility in Texas, SH 130 (segments 5-6), is being developed under a public-private partnership. The agreement calls for the developer to design, finance, construct, operate and maintain the state-owned toll road for 50 years at an estimated cost of $1.3 billion. The state will get a much-needed transportation upgrade that taxpayers could not finance and the private sector partner is guaranteed a stable revenue stream for many years.
The Arizona Game and Fishing Department entered into an agreement with a private company to design, build, finance, operate, manage and transfer a new building for $20.9 million. The construction consolidated 114 different facilities into one LEED Platinum Certified location with significantly lowered occupancy costs for the agency. The P3 agreement allowed the company to manage and maintain the property for 25 years and then the property will be transferred back to the state.
In a P3 project with the United States Army in Yuma, Arizona, a private contractor entered into a design, build, finance, operate and transfer agreement to create new road courses and facilities for hot weather vehicle testing. As part of the agreement, the Army will then enter into a long-term lease of the property and allow the private sector partner to have access to the vehicle testing facilities for the testing of its own products. At the end of the 50 year lease, the site is then owned by the Army.
Another highly visible P3 was launched when a private sector partner was selected to design, build, finance and operate the $1.4 billion terminal at JFK airport. Terms of the agreement included a clause that allowed the private sector partner to manage and operate the old terminal while constructing its replacement on the same site. Success was declared when the result showed that the old terminal was operated profitably during the development of the new terminal, which opened at 90 percent occupancy and has generated income since inception. The private sector company continues to operate the terminal.
Logic tells us that there will be many similar agreements throughout the country in the next few years.
Mary Scott Nabers is president and CEO of Strategic Partnerships, Inc., a 16-year-old procurement consulting and procurement research firm headquartered in Austin, Texas.
