A public-private partnership (P3) is a contractual agreement between a public agency and a private sector entity. P3 agreements are designed to leverage the skills and assets of each sector to efficiently and effectively deliver services or facilities to be used by the general public. Each party to the agreement shares in the risks and rewards potential in the delivery of the service or facility.
For public entities, P3s have several benefits. They allocate lifecycle costs and risks of loss and delay to the private sector and allow the public sector to access private capital. In return, private sector partners share the profits associated with P3 projects and have the opportunity to increase those profits by realizing efficiencies and economies in the delivery of services or facilities. The results are streamlined project delivery and infrastructure delivered at a lower cost than traditional project delivery methods.
P3s are characterized by the following:
- They are used to provide both economic and social infrastructure.
- They involve the sharing of investment, risk, responsibility and reward.
- They differ from privatization. The governmental entity retains ownership and controls, and regulates and remediates non-performance.