Public-Private Partnerships: Lessons Learned and Predictions for the Future

10/01/2014 Articles

Published in The Construction Lawyer, Volume 34, Number 4, Fall 2014

Most commentators recognize and credit the United Kingdom (UK) as the birthplace of the modern version of public-private partnerships (P3s) and related infrastructure funding mechanisms, although some version of the P3 model has undoubtedly existed for hundreds of years. Initial success with the P3 approach in the UK led, not unexpectedly, to its use on other projects in the UK and its migration around the world, most successfully to Canada and Australia, but also elsewhere, including to the United States.

Although the modern history of P3s is far shorter and more compressed than that of other, more traditional project financing and project delivery systems, it is rich enough that we can draw some conclusions that can be instructive for the future. As a result, public entities and the private sector now have many examples of P3 projects to analyze and evaluate as they look forward to the next wave of development, repair, and renovation of the world’s critical infrastructure.

Given the mixed rate of success of P3s around the world, it seems likely that the public and private sectors will continue to modify the approach to these systems, just as the approaches to more traditional project delivery systems have been modified in the past. The good news in that regard is the prevalence of a number of careful evaluations of past P3 projects, some of which are discussed below, which provide many lessons to be learned by those who want to use P3 projects in the future.

This article focuses on what we can and should expect from P3s as we move forward in this century. Those expectations are shaped in part by the past, so we start below with some background regarding the history and development of the P3 model in the UK and around the world, including a discussion of the recent assessments and evaluations that have been done in the UK, Australia, and the United States of the use of P3s over the last more than 20 years. We then move to a discussion of the key features of P3 projects that can, if poorly structured, result in failures. Next we focus on the key pitfalls in P3 arrangements, which can be minimized or avoided by using certain best practices, identified below, that have been developed by analyzing the problems encountered by past P3s. Finally, we end with a discussion of prospects and predictions for the use of P3 delivery systems in the future.

Link to full article - PDF.