As higher ed faces significant funding and maintenance challenges, many institutions turn to public-private partnerships (P3s) to achieve their infrastructure goals. Broadly, P3s refer to a variety of contracting arrangements between a public entity or non-profit and a private sector entity to finance, construct, renovate, manage, operate and/or maintain infrastructure.
Well-structured P3s can provide numerous benefits, such as expedited project delivery, access to private sector financing and expertise, and facility lifecycle maintenance. However, confusing terminology and the ever-widening variety of P3 structures have contributed to many P3 misconceptions in higher education, making leaders hesitant to consider these arrangements.
Below are the most common myths leaders hold about P3s—and their underlying realities.
Myth 1: P3s are only for public institutions
Private higher education institutions enter similar partnerships (still often referred to as a ‘P3’) with private companies as a way to transfer infrastructure project risks and secure alternative financing.
Myth 2: P3s are a form of privatization
Unlike full privatization that involves the transfer of ownership of an asset or service to the private sector, P3 projects are publicly owned, publicly controlled, and publicly accountable.
Myth 3: P3s result in a loss of institutional control
While the level of control retained by an institution varies across P3 structures, P3s always involve shared governance and oversight between public and private partners.
Myth 4: All P3s involve private financing
P3s often involve capital investments by a private sector company, but some P3s have been entirely funded with public, tax-exempt dollars. For example, the University of Kansas funded most of their P3 through a partnership with an affiliated non-profit corporation, KU Campus Development Corporation, who borrowed funds from the Wisconsin Public Finance Authority.
Myth 5: All P3 deals have the same structure
P3s take on a wide variety of structures that allow for different levels of control, risk, and responsibility allocation depending on unique project goals. No two agreements are identical.
Myth 6: P3s are only used to develop student housing
To date, the majority of P3s in higher education involve student housing as the primary focus and may include complementary auxiliary assets such as parking, dining, retail. However, some P3s have begun to incorporate other facilities such as academic space (e.g., labs, classrooms), student unions, athletic facilities, and physical plant improvements.
Myth 7: P3s can be leveraged to solve all campus infrastructure problems
Not every project is suitable for a P3. P3s represent just one of many possible tools to achieve campus infrastructure goals, and leaders must examine each project’s P3 suitability on an individual basis.
Emerging P3 trends in higher education
Historically, higher education leaders viewed P3s primarily as a means to secure additional funds for major capital projects. However, institutions increasingly view P3s as a risk mitigating mechanism. Even institutions with sufficient funding options to execute capital projects independently still leverage P3s to transfer the long term risks of ownership, management, and maintenance, as well as to reap the benefits of private sector expertise. This shift in perspective has led many leaders to revisit the definition of value for P3s, with many institutions even willing to enter net-negative financial arrangements in exchange for risk transfer.
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