P3s differ in the following ways:

• The risks of design, construction, financing, and operations are transferred from the public entity to the private sector to some extent.
• Because the private sector is responsible for long-term operations after the facility or infrastructure is constructed, P3 contracts average 35-40 years in length.
• The private sector recoups its costs and investments by imposing usage fees (such as a toll) or agreed-upon availability payments paid by the public entity.
• The contract creates a special purpose vehicle to carry out the project and protect investors and contractors.

P3s do not replace traditional design-bid-build procurement, nor is a P3 appropriate or feasible for every project.  However, P3s represent an additional tool in public entities’ toolboxes to complete projects and provide public services.

Other countries and global regions – particularly Canada and countries in Europe and Eastern Asia – have utilized P3s for decades to provide high-quality public infrastructure for their citizens.   Virginia, Texas, Florida, and California were early adopters of P3s in the United States, and many other states have followed suit.

The popularity of P3s have exploded within the past few decades because they are growing increasingly attractive and feasible for public entities. This is due to several reasons:

• • • Public entities may lack adequate funding to keep pace with growth. The private sector provides a majority (or all) of the funding for a P3 project. This allows a project to move forward when it otherwise would have been delayed or scrapped if public funds are exclusively used. This is particularly relevant to Utah as it just achieved the highest growth rate in the nation, and it is estimated that the state’s population will nearly double by 2065.^{1 2} Acquiring the necessary funding to build new and replace old infrastructure pose a challenge to Utah’s public officials. For example, Utah’s water and wastewater infrastructure will likely require $5.2 billion over the next 20 years.³  Federal funding and grants may provide temporary assistance, but public officials will need to adopt a long-term strategic vision and find creative solutions for funding.
• • • P3s offer lower whole-life costs. Although P3s typically have higher upfront costs due to the cost of private financing and the additional analysis that occurs during the procurement process, a well-crafted P3 offers a lower cost to the public sector when the whole life of the project is considered.  This is because the private firm that builds the project is also responsible for operating and maintaining it, and, as a consequence, the firm has a strong incentive to reduce long-term maintenance and operations costs.
• • • P3s transfer risk to the private sector.  A P3 allows the public sector to transfer project risks that would be better managed or mitigated by the private sector.  As a result, total project risk is reduced.
  • • Public entities benefit from private sector innovation and ideas.  Unlike traditional forms of contracting in which the public sector plans a project and private firms bid to construct it, the partnership between the public and private sectors in a P3 often begins at the planning and design stage.  This allows a more thorough exchanges of ideas and designs.

Utah has a long and successful history of the private and public sectors working together; however, a P3 is more than the government contracting with the private sector.  Because the private sector finances P3 projects and often maintains and operates them for a long period of time, the private sector has much more “skin in the game” and has a compelling incentive to provide high-quality and long-lasting infrastructure.

Although P3s expand the private sector’s involvement and responsibility in public projects, a P3 is not considered privatization.  Unlike privatization, a P3 asset is subject to the oversight of the public sector and is considered public property (even while the private sector is operating the asset). Additionally, a P3 contract has an expiration date when the operations of the asset is transferred from the private sector to the public sector.  In a privatization scheme, the asset would remain with the private sector indefinitely.

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