Frequently Asked Questions
1) What is a public-private partnership?
In the US, the term “P3” does not have an exact definition. In the infrastructure arena, it commonly refers to a major capital project that includes any combination of joint public and private sector participation in a project’s design, construction, financing, operations and/or maintenance. WCX seeks to foster and help advance public-private partnerships in infrastructure, regardless of their exact structure, when they
- Keep assets in public ownership and
- Deliver clear public benefits above those offered by traditional financing and procurement methods.
2) What is Performance-Based Infrastructure?
Performance-Based Infrastructure is one type of public-private partnership in which infrastructure remains in public ownership and the private sector assumes the risks associated with its design, construction, financing and long-term maintenance. Another common term for this model is Design-Build-Finance- Maintain (DBFM). Key concepts in Performance-Based Infrastructure are:
- Public ownership of assets
- Partnership between the public and private sectors to allocate design, construction, financing and long-term maintenance risks to the party best equipped to address them
- Evaluation of projects based on full life-cycle costs, not just the cost of construction and
- The creation of prevailing-wage construction jobs.
While many forms of public-private partnership can provide additional public benefits, Performance-Based Infrastructure is the most likely to maximize the value of private sector participation in public infrastructure projects. These FAQs consequently focus primarily, but not exclusively, on Performance-Based Infrastructure.
3) How does the procurement process for Performance-Based Infrastructure differ from traditional infrastructure procurement?
There are two major differences in procurement method.
First, requests for proposals for Performance-Based Infrastructure projects are framed in terms of a project’s performance requirements, not requests for the least cost to construct a predetermined set of plans. This encourages the private sector to bring its best innovation in design and construction to meet the owner’s needs.
Second, many of the risks of design, construction, financing, and long-term performance (capital maintenance costs) are transferred from the public owner to the private delivery team. The risk transfer occurs because the private sector brings financing that is at risk if it fails to perform at any point during a project’s lifecycle. This risk transfer aligns the public owner’s objective of an on-time, on-budget project that minimizes long-term costs of ownership with the private sector partner’s opportunity for gain and risk of loss. This alignment of the private sector’s incentives and the public owner’s goal is a key component of Performance-Based Infrastructure.
4) Can the Performance-Based model work with multiple infrastructure types?
Yes. Any infrastructure currently owned and maintained by the public sector could function as Performance-Based Infrastructure. Examples include, but are not limited to, roads, bridges, tunnels, drinking and waste water facilities, educational facilities and courthouses. See Question 8 below for further information on potential Performance-Based Infrastructure projects.
For complete information, view the FAQ document here.