Public-Private Partnerships and Infrastructure Development

P3 projects are poised to boom with the Bipartisan Infrastructure Law

Barring big changes in public funding in the next few years, the public-private partnership (P3) will probably grow into one of the most common modes of government infrastructure delivery in the nation. A P3 is a long-term infrastructure agreement between a public entity and a private company that takes advantage of the private partner's specialized technical and risk management expertise to remove burdens from the public partner. 

P3s can: 

• Offload risk to the private partner
• Marshal the expertise of professionals
• Allow access to specialized resources
• Cover long-term operations and management (O&M)
• Offer performance-based agreements.

In the past few years, there's been a spike in federal funding available for infrastructure due to the $1.2 trillion Bipartisan Infrastructure Law. That funding will expire in the next few years and it's not likely that Congress will be able to agree on anything so ambitious again soon. Yet thousands of critical projects in water, transportation, communications, and support systems for American life cry out for attention. The P3 mode is ideal for expediting these projects.

P3 for Water Infrastructure

Many decision-makers know little about the relatively new P3, and they as well as taxpayers tend to have ambivalence about private sector involvement, particularly in public water systems. Fears remain that a drinking water P3 will lead to a loss of accountability and democratic control, higher costs, lower quality, and less access.

A reassuring initiative to address these concerns is Texas' inaugural P3 brackish water desalination plant. This innovative project is being facilitated through Water-as-a-Service®, a trademarked approach that essentially represents a public-private partnership offered by a leading water treatment company based in Florida.

The project has saved millions in debt for the taxpayers of Alice, Texas, and the deal cuts the cost of water below what the city is already paying. Instead of paying down millions in debt, all the taxpayers will pay is lower water bills.

As climate change brings more frequent and lengthy droughts and arid conditions, places like Alice are seeking alternate freshwater supply options and are ready to try nontraditional sourcing. All the pieces are in place to drive P3 deals in the water sector.

P3 for Transportation Infrastructure

A flow of $25 billion from the Infrastructure Law and a large increase in consumer travel led to a bump in 2023 aviation projects. Global air travel is projected to climb to 9.4 billion travelers in the coming year, finally recovering to pre-pandemic levels. American airports are aging, so demand is likely to climb for aviation projects. New terminals and consolidated rental car facilities are needed, and increasing realization of public-private partnership (P3) benefits is further encouraging municipalities to break ground on projects.

Additionally, the replacement of bridges, interstate highways, and other transportation infrastructure has long been delayed, but the federal cash is making high-dollar projects doable. On Interstate 10 in Louisiana, for instance, a P3 deal to replace the 70-year-old Calcasieu River Bridge and widen the interstate will be executed in 2024 with a $1.5 billion investment. The P3 just might be the vehicle for all these transportation plans. 

P3 for Communications Infrastructure

Many states are preparing initial proposals to allocate funds that the National Telecommunications and Information Administration (NTIA) provided under the Broadband Equity, Access, and Deployment (BEAD) program for 2024. So far, Louisiana and Virginia lead the pack in proposal development, with Delaware, Kansas, Nevada, Vermont, and Alaska not far behind. The proposals must identify locations that qualify as unserved, underserved, or community anchor institutions and outline the competitive bidding process the states will use to select projects. 

The BEAD program required some amendment and it's unclear how much the changes will help those trying to participate under P3 frameworks, especially those dealing with municipal broadband projects that have development and planning agreements, but the NTIA will consider waivers to expedite projects. Regardless, states, counties, and cities are moving ahead even where the BEAD program has not been a good fit. BEAD may now be flexible enough to support a well-structured municipal P3 project that can build a broadband service network for end users and build associated middle-mile and conduit components to generate revenue. 

While large-scale infrastructure is by nature costly to deliver, operate, and maintain, the P3 is a workhorse delivery mode that takes on the responsibility of long-term O&M. The many advantages of the P3 are becoming too tempting to pass over in many sectors. Look for a growing future for the P3.