Client Alerts & Publications
An Innovative Method of Streamlining P3 Procurements
Published Date: April 1, 2014
Within the last decade, Public-Private Partnerships (P3s) have played an increasingly crucial role in the construction and renovation of transportation and utility infrastructure. On the other hand, P3s have not been as popular a procurement method for social infrastructure projects such as hospitals, civic buildings, courthouses, police departments, wastewater treatment facilities, libraries, parking lots and schools. As many have already realized, that is about to change due in large part to the necessity of these projects and a lack of available funding. As such, state and local governments are now turning to P3s to finance vital social infrastructure projects across the country.
The benefits of P3 procurement include reduced costs, better value, timely/early completion, and access to private capital and private sector innovation. As opposed to typical procurement methods, in which public entities arrange for project financing, hire the designer, manage the construction bidding phase, and oversee the project’s construction, P3s only require the owner to select a qualified team that can ensure the development, construction, maintenance and operation of the project over its entire lifecycle. Furthermore, depending on each state’s legislative framework, many P3 social infrastructure projects are taking off through both solicited and unsolicited proposals.
However, despite overall cost benefits, the standard P3 procurement process can often be remarkably expensive and time consuming, such that social infrastructure projects (often much smaller than the transportation and utility infrastructure projects) are viewed by some as too small to warrant the P3 due diligence and transaction costs. This is largely due to the fact that bidders have no guarantee of either capturing the project or recovering the bid and preparation costs, which can be substantial. Moreover, the owner must delay both the design and the commencement of the work until the conclusion of what can sometimes be a lengthy procurement process.
In response to these concerns, this article proposes a dynamic procurement option that will streamline the selection process, minimize cost to both the owner and bidders, and maintain competition.