How To Structure a P3
Range of P3 Structures
Min
Contractor’s incentive (including innovation)
Risk transfer
Price certainty over asset life
Time to market
Max
Optimized risk
transfer while
maintaining full
ownership of asset.
Risk allocation is well
understood, defined
and regulated.
Design Build Finance Operate Maintain (DBFOM)
Design Build Finance Maintain (DBFM)
Design Build Operate Maintain (DBOM)
Design Build Operate/Maintain (DBO/DBM)
Some additional risk transfer to the private
sector in the form of design and/or financing risk.
Asset may be operated and maintained by public
sector or tendered to service providers following
construction completion.
Serviced infrastructure models
including hand back to the
public sector at the end of
contract.
Design Build (DB)
Design Build Finance (DBF)
Minimal risk transfer to the private sector over the life of the
asset. Maximum control by public sector during and between
design, construction, and operation phases. The most
common form of public sector infrastructure procurement and
the furthest away from P3 models.
Traditional
Design Bid Build
Asset may be operated and maintained by the public sector or
tendered to service providers following construction
completion.
Min
Asset is provided to
public sector at
construction
completion.
Flexibility to change (control)
Asset is
provided to
public sector
at construction
completion.
Performance based
payments over long
term (i.e. 25 or 30
year) concession
contract
Completion payment
to the contractor
Milestone payments
to the contractor
Max
Design-Bid-Build
User Fee (Tolls)
Tax-Exempt Debt
Government Entity
Operator or
Government
Designer
Contractor(s)
Design-Build
User Fee (Tolls)
Tax-Exempt Debt
Government Entity
Design-Build JV
Designer
Contractor(s)
Operator or
Government
Design-Build-Operate-Maintain
User Fee (Tolls)
Tax-Exempt Debt
Government Entity
Special Purpose
Vehicle
Design-Build JV
Designer
Contractor(s)
Operator
Design-Build-FinanceOperate-Maintain
User Fee (Tolls)
Government Entity
Tax-Exempt (PABs)/
Taxable Debt
Special Purpose
Vehicle
Design-Build JV
Designer
Contractor(s)
Equity
Operator
Benefits of P3 Structures
• P3s not a panacea – benefits depends on the specifics of the
project and the public sector’s characteristics
• Need to understand incentives of the private sector and design
the project and procurement structure to benefit from this
• P3 structures aim to allocate risk to party best able to manage it
• Lender due-diligence helps to fully understand and price risks
• Establishes payment for performance
• Whole-life cost approach optimizes construction and operations
• Government control maintained through highly developed
contract mechanisms including incentives, penalties and
oversight
A Final Thought…
Why is the warranty on my car
longer than the warranty on the
bridge it’s driving over?