Key Characteristics of Public-Private Partnerships Part 1
Public-private partnerships, otherwise known as P3s or PPPs, are contractual arrangements formed between a private-sector partner and a public-sector partner. One common example of a P3 is a project funded by the government contracting with a private entity to supply provisions of labor and materials for a construction project. These types of partnerships could be used for a complex renovation project or an ongoing maintenance service to keep a facility in tip-top shape.
There’s no clear definition of what a P3 must entail, but it always requires the public and private sectors to collaborate. In this two-part article, a roofing attorney will discuss everything contractors should know about P3s. Before you take on a new type of partnership, it’s important that you understand all of the laws pertaining to P3s. Don’t let yourself be caught off guard by unfamiliar laws in the pursuit of success, consult a roofing attorney today.
Typically, the government agency funding a P3 project will retain ownership of the structure once construction has wrapped up. This could include anything from a new school to a park to a water treatment facility or new roofing for outdated public buildings. P3s are encouraged to provide a public service upon project completion. Although the government owns the property, the private contractor will control the design and development of the property. This means the contractor is responsible for investing their own capital into the project. This investment is recompensed through partner shares of the income that is generated from the property.
This requires a comprehensive contractual arrangement between the government agency and the contractor. Due to the complexity of these contracts, it’s advised that contractors consult a roofing lawyer before supplying any provisions of labor or materials to a P3 project. It also requires significant foresight and financial planning since the income being generated from the property gives the contractor a reasonable chance to cover the building costs. In other words, P3s can be risky for contractors if they don’t perform their due diligence alongside a roofing lawyer.
Defining the Risk for Contractors
According to the United States Government Accountability Office (GAO), P3 projects differ from traditional projects in that a “private-sector partner usually makes a substantial cash, at-risk, equity investment in the project, and the public sector gains access to new revenue or service delivery capacity without having to pay the private-sector partner.” This presents a considerable risk for contractors who are not aware of how these potentially lucrative projects play out. If your cash flow is already limited, you might want to stay away from P3s since your compensation may be limited until the property starts to generate profits.
To learn more about the key characteristics of P3s, read part two.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.