The BridgeLantic Partners Group has over $1BN experience in the Public Private Infrastructure sector.
Public-private partnerships, or P3s, are partnerships between governments and the private sector. Investment from the private sector is used to build public infrastructure, such as roads, hospitals, or schools, or to deliver critical public services like water and wastewater. Unlike the traditional procurement method, a P3 incorporates all parts of a P3 project into one contract.
The P3 model enables organizations to build infrastructure sooner and more cost-effectively, than in a conventional delivery model, providing better value for money for tax and rate payers.
Cost overruns are rare on P3 projects, as this approach allocates risks and responsibilities to the public and private sectors based on their areas of expertise. For example, the public sector bears the risk for changes in laws and the private sector bears the cost of construction delays.
P3s also deliver better designed facilities that are well-maintained during the contract term, which could be from 15 to 30 or more years.
Private sector investment in Public Infrastructure is set to grow.
Data from the World Bank reveals Private participation in infrastructure (PPI) reached $91.7 billion across 263 projects, marking a 23% increase from 2021. The total number of projects, however, was still below pre-pandemic level.
The transport sector continued to lead the sustained recovery into 2022, outpacing other sectors significantly. At $66.2 billion in PPI investment across 85 projects, transport comprised 68% of the total 2022 PPI investment. This increase can be explained by more investment in roads, which have historically been the largest subsector in transport commitments.
The energy sector also gained a significant share of PPI in 2022, with a 21% increase for a total of $25.9 billion.
Investments were increasingly focused on environmentally sustainable options—85% of new energy projects were in renewable energy, compared to an average of 63% over the last five years.
A risk-smart approach to Pubic Private Partnership Projects
Senior Partners in the BridgeLantic Partnerships Group have developed a new method for delivering P3s more effectively and efficiently.
The JIT FASTRACK P3 project delivery system organizes and structures key risk elements if the scope and schedule of the project, taking into account the following factors:
- Length of the concession agreement (i.e. 25 yrs)
- Risk allocation and transfer structure and formula
- The general formula to calculate residual risk. Residual risk = inherent risk – risk management controls
- Net Present Value. NPV is used to determine whether or not an investment, project, or business will be profitable in the future.
Public and private investors in Infrastructure projects expect a strong return from their investment, and the delivery method is the most crucial part to ensure a strong return on investment.