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3 Factors for a Successful P3 Procurement 

John Muñoz Vice President, Management Specialist
Embarking on a P3 project? Here are three components necessary for creating a beneficial experience for both the public and private sector parties.

A public-private partnership (P3) is formed when a public agency, such as a state department of transportation, enters into an agreement with a private-sector entity for the design, construction, finance or operations of a project. P3s allow for greater private-sector participation in the delivery, financing and long-term operations of public infrastructure projects. They can be powerful and effective tools in achieving public policy, cost and schedule objectives; relieving public agencies of the burden of financing a project; speeding up delivery; fostering efficient management; and increasing opportunities for innovation. If you or your organization is considering using a P3 to deliver your project, keep in mind these three factors to make the experience successful and beneficial for both the public and private sector:

P3s thrive on teamwork and collaboration, so keep the lines of communication open.
John Muñoz, CDM Smith Vice President

Com­pe­ti­tion is a Good Thing
Robust com­pe­ti­tion with a level playing field for all proposers establishes an objective bench­mark for mea­sur­ing private-sector value. The optimal number of highly qual­i­fied bidders is typ­i­cally three to four per pro­cure­ment, with the hope that all submit a proposal, or that at least a minimum of two com­pli­ant bids are sub­mit­ted. To further ensure that the pro­cure­ment is bringing good value, the public sector should develop their own bench­mark on the expected value of the pro­cure­ment based pri­mar­ily on recent com­pa­ra­ble pro­cure­ments in the market. The public sector entity should finalize its benchmark before receiving bids, then compare its measures to the bids to de­ter­mine the best value proposal.

Due Dili­gence Pays Off
Thorough analysis by the public sector of the an­tic­i­pated project costs and revenues will help the public sector gain the private sector’s interest in pursuing the project. The required due dili­gence includes the status and timing of en­vi­ron­men­tal ap­provals, robust utility identification, extensive soil condition data collection, and thorough hazardous materials investigations. The results of these efforts should be factored into the overall risk-adjusted project costs and cal­cu­lated through a struc­tured process whereby the public sector pro­cure­ment team eval­u­ates the risks, the like­li­hood of those risks oc­cur­ring, and the effects on cost and schedule, if they occur.

Get It in Writing
The pro­cure­ment doc­u­ments and the terms and con­di­tions for the P3 agree­ments need to clearly and ef­fec­tively protect the in­ter­ests of the parties. The pro­cure­ment doc­u­ments should describe what the public sector wants and how the pro­posers will be fairly and ob­jec­tively eval­u­ated. As a project tran­si­tions to im­ple­men­ta­tion fol­low­ing com­mer­cial close, the in­di­vid­u­als that procured the project will likely change, and others could have dif­fer­ent in­ter­pre­ta­tions of certain pro­vi­sions of the agree­ment. As P3 agree­ments typ­i­cally extend across 40 or more years, the impact to the risk profile envisioned when the contract was executed could be sub­stan­tial.

Though every project is dif­fer­ent, the benefits of public-private partnerships are bountiful. Remember these three tips when procur­ing a P3 project, and take ad­van­tage of the benefits that P3s can provide when nav­i­gat­ing the pro­cure­ment process and during project im­ple­men­ta­tion. P3s thrive on teamwork and col­lab­o­ra­tion, so keep the lines of com­mu­ni­ca­tion open between the project sponsor, the project sponsor’s pro­cure­ment team and the private sector.

John Munoz John Munoz
P3s can be powerful tools used to finance projects, to meet cost and schedule goals, and to achieve public policy objectives.
John Muñoz
Vice President, Management Specialist
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