Public, Private, and Often Misunderstood: What P3s Are – and Are Not

P3s are a tremendous tool to help build large-scale complicated and critically important infrastructure. As useful as they are, they are also greatly misunderstood.

Public-private partnerships, commonly called P3s or PPPs, are agreements where governments partner with private companies to deliver infrastructure projects. Instead of the public sector separately managing design, construction, financing, and maintenance, a P3 often places those responsibilities under one private consortium while the public agency maintains oversight and ownership. This model is often called a “DBFOM,” design-build-finance-operate-maintain, because the private partner takes responsibility for more than just one stage of delivery. The infrastructure is still public, but delivery becomes more streamlined.

P3s work because they align incentives. Under traditional project delivery, designers, contractors, operators, and agencies are often separated, which can create delays, finger-pointing, and inefficiencies. In a P3, one entity is responsible for designing, financing, building and often maintaining the project long term. That means the same team designing the project is also thinking about constructability, operational costs, maintenance, and long-term performance from day one. They don’t simply do their piece and pass things off – potentially without regard for what the next party in the chain will have to manage.

P3s further incentivize innovation and economies of scale to the benefit of the project. Because their revenue and profitability depend on project performance, they are incentivized to reduce delays, control costs, and innovate wherever possible. While privately financed and built the assets are still wholly owned by the public. The public gets the benefit of major infrastructure without bearing the upfront cost and risk associated with building it, but the project still needs a repayment source.

Public-private partnerships can take many shapes but are often tied to a simple concession model. In cases like toll roads and bridges, a private consortium will consist of a financier, designer, and construction company. The financier will pay for the construction and in turn will collect toll revenue for a set term, often decades. This is no different than how a public agency or DOT would go about funding their projects except that in the P3 a private entity assumes all the risk for delivering and maintaining the asset.

However, many P3s are used for projects that don’t generate direct toll revenue. In these cases, the public agency makes annual payments tied to strict performance metrics that ensure the asset remains safe, reliable, and properly maintained throughout its lifespan. This model can work for all sorts of soft infrastructure like schools, parks, libraries and courts. In fact, many of the greatest opportunities for employing P3s are on smaller scales, distributed across communities, and in places one may not traditionally consider them. It isn’t just toll roads; all roads can lead to a P3 with the right scope and parameters.

Unlike traditional project delivery, where maintenance funding is often deferred or cut after construction is complete, the private partner is contractually responsible for long-term performance. This creates stronger accountability and gives public agencies far greater certainty around maintenance quality and cost. Of course, transportation has historically proved the P3 model, and thus hosts the most compelling case studies.

A terrific example is Pennsylvania’s Rapid Bridge Replacement Program where 558 bridges were replaced in one large P3 contract. The private partner was able to standardize designs, accelerate schedules, and lower costs through economies of scale. The program completed bridges in under five years, far faster than traditional delivery methods.

Another major example is Georgia’s SR 400 Express Lanes project. The project received the largest Transportation Infrastructure Finance and Innovation Act (TIFIA) loan ever issued by USDOT at $3.89 billion, while requiring zero up-front state dollars. The private partner will design, build, finance, operate, and maintain the corridor under a long-term concession agreement and repay 100 percent of the federal loan through future toll revenue, not taxpayer funding. The public takes on none of the risk but gains from the upside.

Many projects are incorrectly labeled as P3s simply because private contractors are involved. Many sport stadium projects rely heavily on public subsidies and infrastructure spending while the private team assumes little long-term financial or operational risk, this is not a P3. Similarly, airport concessionaires operating restaurants or retail spaces are simply tenants, not infrastructure partners. However, airports do offer a great example of effective P3s where a private consortium financing, operating, and maintaining an entire terminal under strict public performance standards. Real P3s involve meaningful long-term risk sharing, operational responsibility, and accountability between the public agency and private partner.

One of the biggest misconceptions about P3s is that they are simply privatization or that they are built with “free money”. In almost all cases, the infrastructure remains publicly owned and regulated. Instead, the influx of private capital allows governments to advance major infrastructure projects that otherwise would have been delayed for years or never built at all. Nor is this money free, the public agency will pay for the construction and maintenance over time either through deferred toll/concession payments or availability payments. What changes is how risk, financing, and delivery responsibilities are allocated.

America’s infrastructure needs are enormous, and traditional public funding alone will not be enough to meet the moment. P3s are not a silver bullet, nor are they appropriate for every project. But when contracts are structured correctly and incentives are aligned, they can deliver infrastructure faster, maintain it better, and unlock projects that otherwise would remain stuck on paper.

Written by Aaron Shavel, Policy Fellow, Owen Rogers, Public Policy Associate