Public-Private Partnership: How Can Construction Companies Enjoy The Benefits Of This Growing Opportunity?

Public-Private Partnerships (P3s) for infrastructure projects are enjoying tremendous success in various countries, especially Canada, Australia, and the UK. Between 1985 and 2011, approximately 2000 P3 projects were funded worldwide, out of which 377 P3 projects were funded in the US alone. The growing trend holds immense benefit for engineering and construction firms in the US and in other countries all over the world. Some of the key benefits of P3 include greater operational efficiencies gained from capitalizing on the knowledge and skill of the private sector firms and proper allocation of the risks to the companies who are best able to handle them. Compared to the typical construction projects, P3s offer greater financial rewards, greater control, and flexibility.

But how can US engineering and construction companies enter this competitive game which is dominated primarily by foreign companies with extensive experience in P3 abroad?

Well, the first and indeed the most important step are to understand the basic of P3. Public Private Partnership is a contractual arrangement between a public agency and a private-sector entity in which the private partnership in the project is greater. In such an agreement a special entity called special purpose vehicle is created to design, build, maintain, and manage the asset for a contracted duration. There are several members in the special purpose vehicle, including design, engineering, and construction firms, bank lender, and a company to own and maintain the asset. These private parties are responsible for investing in the project, receiving equity interest, and taking substantial financial and operational risks.

Second important thing that engineering and construction firms in Canada should do to enter the P3 market is to be able to boast an impressive track record for finishing major infrastructure projects on time. In addition, they must be able to prove their reputation, local connections, and experiences. They must be able to prove themselves as someone having adequate knowledge about key government officials, laws, regulations, codes, suppliers, and local sub-contractors.

P3s like most other business opportunities involve a lot of risk. Before venturing into P3, construction and engineering companies should determine their risk tolerance and should evaluate the risks and rewards of specific projects. It is important to measure the risk involved in a project and then chart a plan to minimize those risks.

It is important to look at the various P3 projects in the US or in other countries to gain a better understanding on how these projects work. By visiting the websites of those projects, one can probably know the risks that are involved. Companies should then ask themselves if it is worth taking some or all of those risks.

Companies interested in P3 should access and develop their skills. If companies are taking on equity position in the project, they must possess financial expertise.

There are many other things that companies should work on to enter the P3 market. For better understanding of P3 and to be a player in the P3 market, it is advisable to use public private partnership advisory services from a reputable company in Canada.