Advantages Of Public-Private Partnerships

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Public-private partnerships are collaborations that occur between both the public and private sectors in order to improve the delivery of public sector services. Through combining the goal-oriented factors of the private sector and the established stability of the public sector, public-private partnerships are able to produce projects that are of maximum efficiency while delivering a high-quality product to the public. Public-private partnerships, also known as PPP's, have been known to achieve many success for public sector projects including cutting costs, reducing the time it takes to complete a project, allocating risks and improving infrastructure (Perl, Page 1). Throughout this paper, I will be arguing the reasons why government's should…show more content…
When private sector contractors are involved, it enables the developer to take advantage of a broad array of specialized resources that are available to its team and allows the public sponsor to use the cost saving innovations of the public sector (Perl, page 10). Cost reductions can be both direct and indirect depending on the nature of the project. Direct costs are the estimated savings for the overall project using the P3 method versus the traditional method. An example of savings in direct costs that can be attributable to the P3 method is the jet van tunnel ventilation system in the largo project (Perl, page 11). This project saved an estimated 10 million dollars in comparison to the vent shafts that the Washington Metropolitan Area Transit Authority (WMATA) (Perl, 11). Indirect costs differ in the sense that they account for the avoided costs while using the P3 method. An example of reduced indirect costs through the P3 method would be when the overhead costs of MnDOT and Metro Transit associated with the Hiawatha Corridor project were trimmed by an estimated $25 to $38 million. This was a result of the project's completion one year sooner than its projected completion had it been done using only the private sector (Perl,…show more content…
This was an extremely effective strategy in the Denver T-Rex project because as soon as designs were complete enough to purchase items, construction could begin therefore overlapping design and construction. In doing so, the timeframe of the project was also shortened. When timelines are shortened, if supplies must be purchased later in the process they will be less likely impacted by inflation. This strategy is currently commonly used in Canada. A third form of saving is life-cycle costs. Life-cycle costs are essential the costs to maintain and preserve infrastructure over years to avoid deterioration. The innovation brought forth by the private sector, including longer lasting and alternatives to existing products, are able to extend the life of P3 projects and consequently reduce life-cycle costs. According to an article titled The rising advantage of public-private partnerships, "Based on published studies of the design, construction, and maintenance of social infrastructure projects, such as schools and clinics, in Europe, we find that the P3 approach can reduce life cycle cost up to 20 percent compared with the traditional approach." (Rocca, 2017). One way of assessing these costs and benefits associated with a PPP is through a VfM (Value for Money) analysis. The purpose of a VfM is to assess the costs of the PPP-based

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