1. How To Structure a P3

2. Range of P3 Structures Max Min Tuyen
Design Build Finance Operate Maintain (DBFOM)
Design Build Finance Maintain (DBFM)
Serviced infrastructure models including hand back to the public sector at the end of contract.
Performance based payments over long term (i.e. 25 or 30 year) concession contract
Optimized risk transfer while maintaining full ownership of asset. Risk allocation is well understood, defined and regulated.
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.
Max
Min
Flexibility to change (control)
Risk transfer
Price certainty over asset life
Time to market
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.
Asset may be operated and maintained by the public sector or tendered to service providers following construction completion.
Traditional
Design Bid Build
Milestone payments to the contractor
Contractor’s incentive (including innovation)
Design Build (DB)
Design Build Finance (DBF)
Completion payment to the contractor
Design Build Operate Maintain (DBOM)
Design Build Operate/Maintain (DBO/DBM)
Asset is provided to public sector at construction completion.
Tuyen

3. Operator or Government
Design-Bid-Build
User Fee (Tolls)
Tax-Exempt Debt
Government Entity
Designer
Operator or Government
Contractor(s)

4. Operator or Government
Design-Build
User Fee (Tolls)
Tax-Exempt Debt
Government Entity
Designer
Contractor(s)
Design-Build JV
Operator or Government

5. Design-Build-Operate-Maintain
User Fee (Tolls)
Tax-Exempt Debt
Government Entity
Special Purpose Vehicle
Designer
Contractor(s)
Design-Build JV
Operator

6. Design-Build-Finance- Operate-Maintain
User Fee (Tolls)
Government Entity
Tax-Exempt (PABs)/ Taxable Debt
Special Purpose Vehicle
Equity
Designer
Contractor(s)
Design-Build JV
Operator

7. 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

8. A Final Thought…
Why is the warranty on my car longer than the warranty on the bridge it’s driving over?
Here’s one question that PPPs might answer. In the highway construction industry, companies aren’t typically able to (nor asked to) offer warranties. Usually the public sector assumes control after construction, and while they may be able to litigate, the company that built the infrastructure asset may well not be in business. One effect of long-term P3 arrangements is to lengthen the life cycle of assets and to align the interests of the constructors with those who operate and maintain the asset – by making one company responsible for the whole thing.