Traditional/conventional Government procurement of public infrastructure leaves most of the project risk in the hands of the Government. This includes project cost overruns, operational maintenance and life cycle responsibility for the asset and further includes the financial risk.
All levels of Government have in large part moved towards a new procurement model for significant infrastructure projects forming what we know as 'Public-Private Partnerships' or 'P3' Projects, which transfers the finance burden - both equity and debt - to the private sector.
In a typical P3 project, a private sector entity undertakes to design, build, finance, own and maintain the asset for a fixed term. This term generally ranges from 30-50 years and is called the 'Concession Period'. The upside to the Government body is that the cost overrun risk is transferred to the private developer as are the risks arising from maintaining the asset throughout the concession period. The developer also becomes responsible for obtaining the project financing and providing equity participation.
As P3 projects are large (financially/physically) and complex in nature, Consortia are created to undertake these concessions from bid to win and are generally comprised of;
The Design Team
The Finance Team
The Legal Advisory Team
The Risk & Insurance Advisor
Each member of the Consortium plays an important role and all are integral to the success of the project.
Most projects are awarded by the Authority to the winning Consortium following a competition process. It is common the competition will be monitored by an independent 'Fairness Advisory' who will generate an 'Independent Value for Money Report' to satisfy the public audience. This underlines the high degree of transparency the process must maintain. The P3 removes the necessity of the Government raising capital; an important factor at this time.
The P3 process can bring projects to 'a shovel in the ground' far more quickly than traditional procurement models.