With slashed budgets and depleted resources, public agencies simply don't have the firepower to improve infrastructure and provide what is needed to attract new investment. The private sector has similar budget woes, especially emerging from the recession. Yet, when government and industry collaborate to share a common vision, they can find creative ways to stimulate economic growth, expand the tax base, and provide good-paying jobs.
The final result - a public-private partnership (PPP) - is a legal agreement between a public agency and private-sector companies by which a mutually determined plan is followed to deliver an improvement or service that will benefit the public. PPPs are a popular way to complete important projects that have either stalled or wouldn't get off the ground because of funding issues or political bottlenecks.
"One illustration of the growth in interest in PPPs is the rapid increase in state legislation to provide the framework for development of PPPs," indicates Richard Norment, executive director for the National Council for Public-Private Partnerships in Arlington, Virginia. "In the last five years the number of states that have this legislation on the books has gone from 21 to 33, with several more expected in the near future. All of these are driven by the limitations in public budgets and the growing visibility of successful PPP projects."
In most cases, the PPP is the funding tool that delivers badly needed infrastructure. Partnerships can vary from one public agency and one private-sector company to multiple agencies and companies. Businesses don't have to officially be part of a PPP in order to benefit (for example, a PPP that builds new telecommunication infrastructure not only benefits local companies by providing faster service, but also attracts new businesses that become customers of existing local businesses).
Why should a company care about public-private partnerships if it is thinking about relocating or expanding? Because PPPs provide a glimpse into how a region functions, as well as its level of commitment to economic growth. The health of infrastructure is critical to the economic environment of a community. If the government entity understands how partnerships can help meet the public needs in these areas, it has an enormous positive impact on the efficiency of business operations.
"If given a choice between sites with positive or less-positive PPP environments, the CEO should look at the state of the infrastructure, how it might impact the growth potential of the business, and also examine if local government can address any remaining infrastructure needs," adds Norment.
"PPPs can illuminate a forward-thinking government partner and serve as a good sign of a strong, pro-business climate," adds Christopher Lloyd, director of infrastructure and economic development for Richmond-based McGuireWoods Consulting. "They are another tool that can be used to quickly and efficiently deliver needed infrastructure or other priorities that have an economic development nexus."
Leading Public-Private Partnerships
Virginia and Texas are credited by most experts as having the strongest support for PPPs in the nation. Both have extensive legislative and regulatory frameworks that support the use of PPPs (the Texas statute, passed less than a year ago, is heavily modeled after the Virginia statutes, which are now over 10 years old). New PPPs in Virginia include road and metro projects in the Washington, D.C., area and Hampton Roads. Texas has also focused on transportation infrastructure, including upgrades to the LBJ Freeway and the Cotton Belt Rail Line. The Alliance Texas public-private partnership has helped bring more than $40 billion in economic impact for North Texas, including a recent announcement by GE Transportation that it will invest $96 million in a new plant in North Fort Worth.
In Kentucky, The Department of Defense has teamed up with private contractor Lend Lease to build the first "net zero" military housing in Fort Campbell. This PPP includes multiple public- and private-sector partners that have an interest in learning how to commercialize these design breakthroughs in the construction industry.