Public-private partnerships (“P3”) have become an effective option for institutions to pursue their strategic objectives while managing a project’s speed to market, navigating complex political environments, leveraging financial capacity and expertise, and transferring risk and return to the appropriate parties.
As the range of P3 development structures continues to expand and provide exciting opportunities, the introduction of innovative project structuring accentuates the fact that public-private partnerships are not off-the-shelf deal structures. Instead, the deal structures of today are multi-variable equations that easily can become overwhelming.
The complexity of these structures is further amplified by the P3 industry’s lack of established governing bodies or consistent terminology for its transactions, leaving many institutions with questions about how (or if) to pursue one. As the industry continues to evolve, an increasing number of B&D’s clients are asking for support as they consider whether to pursue a P3 arrangement.
B&D’s extensive public sector experience serving higher education, PK-12 school, municipal, and other clients, as well as development advisor experience with nearly $2B in P3 transactions, give us significant insights into how such transactions should be managed.
Listed below are five important considerations for balancing institutional control with developmental risk, ultimately driving greater value throughout the decision-making process.
|The project champion should be responsible for leading a process that drives outcomes, aligns key stakeholders, and engages third-party advisors. This person does not need to be the ultimate decision maker, but she must drive a process that keeps the project objectives at the forefront of every decision.
An inspired institutional mission drives the most successful developments by providing a framework for projects with trans-formative potential. A project’s value is created by that vision, and success is measured by how it advances the institution’s goals and ensures that the strategic vision remains the centerpiece of any project.
|The institution should analyze market depth and financial output to determine the underlying project economics prior to soliciting a “private” partner. Defining project feasibility, including available revenue streams, at the outset will mitigate potential risk, allowing greater control in selecting a development structure that best fits institutional goals.