Eight Strategies For Successful Public-Private Partnerships
Eight Strategies For Successful Public-Private Partnerships explores ways to evolve the P3 delivery method. This content is an outcome of engagement with industry leaders and within the Society for College and University Planning (SCUP), as presented at the 2018 Pacific Region Conference and the 2019 National Conference. This paper articulates knowledge that was shared at the conferences, as gained from three recent projects: the University of California, Merced 2020 Project, and the Student Housing West and Family Student Housing projects at University of California, Santa Cruz.
As increasing enrollment, fiscal constraints, aging infrastructure, deferred maintenance, and decades of underinvestment challenge universities and colleges throughout North America, many institutions look to Public-Private Partnerships (P3) to deliver capital projects. A P3 is a contract between the public sector (in this case, the University) and the private sector (a Developer) that outlines the provision of assets and the delivery of services. Under traditional delivery models, the entire capital costs of the project are typically paid over the design and construction period, with no linked funding for ongoing Operations and Maintenance (O&M).
The P3 contractual structure can be tailored to best address the institution’s needs and organizational framework. Contractional options range and depend on each party’s level of engagement, available resources, and the allocation of responsibility across the different functions: design, build, finance, operate, maintain, transfer, and own. The most comprehensive P3 model, for perspective, is Design-Build-Finance-Operate-Maintain (DBFOM), in which capital costs are not paid by the University until the asset is operational; likewise, the contract may include funding for O&M services for 30 to 40 years.
Depending on the terms of the P3 contract, some key advantages to the University may include the ability to:
Renew existing facilities and provide new facilities
Build large-scale projects
Spread payments for the facility over a 30 to 40 year period
Leverage debt service
Guarantee that all occupants benefit from a building that is at full operational efficiency
Ensure that buildings are in good turn-back condition beyond turn-over
Count on a predictable financial model
In some cases, in which a University needs to expand or renew its physical assets but lacks the financial capacity to do so, P3 can provide an alternative financing structure to achieve these goals.
During the past 10 years, as universities have undertaken P3 projects of all scales and types, this delivery option evolved from a transaction-based model focused on the financial bottom line to one in which social and environmental values are given higher priority. Recent examples of University P3 projects include housing, classrooms, teaching and research laboratories, dining halls, academic offices, health and recreation facilities, conference centers, student services facilities, and amenities. Several of these program types are not revenue-generating. These projects offer insights for evolving P3 to deliver the highest social, economic, and environmental value. Following are eight strategies for successful P3’s that turn transaction into transformation on University campuses.
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