Use of a “neutral” in public-private partnerships (P3s)

There is a continuing funding crisis for the country’s infrastructure due to the shortfall in public funds and the aging condition of our assets. This crisis is fostering a new importance for collaboration in forming public-private partnerships (P3s) which can make a significant contribution to the problem.  P3s can attract new funding sources and improve project delivery, cost efficiency, performance and schedule by utilizing innovative contracting frameworks. This new framework can benefit by the use of neutrals in forming and implementing the P3 agreement.

Procurement on P3 projects can be a very complex, expensive and time consuming process. Time is definitely money and for a $1 billion project,  a delay in starting work might increase the costs by as much as $1 million a week. A Neutral P3 Facilitator (“P3F” or “neutral”) of either an individual or a firm, could be very useful in improving the efficiency and duration of the process. The P3F would be approved by all the parties to act in his or her capacity with limited authority to manage and facilitate the process of expediting the procurement and reaching agreement.

A neutral can also be better positioned to sort through common interests and objectives of both the public and private sectors, without any particular bias or stake in the eventual outcome. On P3 projects each party is often represented by their own extensive set of advisors and advocates, who pursue and maximize their party’s relative interests and positions. Proposal development and transaction costs are often in the 10’s of millions of dollars for large projects. The public sector’s consultants and advisors involved in the procurement in addition need to evaluate various alternative technical proposals, which need to be compared among each of the bidders.  A P3F could offer benefits to the process by fostering a more collaborative process.

Mediation concepts of neutrality, identification of interests, joint problem solving and confidentiality can help with the collaboration and thus reduce transaction costs. The benefit of using a neutral is especially present with P3s that involve a long term relationship and shared responsibilities, risks and rewards between the public and private sectors. Partnering workshops are often required in P3s to foster mutual trust and communication, which could be implemented by the P3F. The neutral’s scope could include some or all of P3 agreement phases including:  financing; development; design and construction; and operations.  The P3F’s involvement could continue through project completion.

Once the P3 agreement is executed, the P3F could also function as a mediator in helping to resolve any contract disputes over the course of the project.  The neutral will have the benefit of knowing the history of the development of the agreements, as well as knowing the major participants.  If the neutral is contracted to visit the project and meet periodically with the participants, there can be early access for resolution of conflicts, before disputes escalate and relationships sour. The P3F would thus assist the parties in reaching agreements in a timely and efficient manner, while maintaining focus on relationships and the long term interests.

In summary, since “collaboration” is the current trend in the engineering and construction industry and certainly the goal of true P3s,  the role for neutrals should be expanded and formalized to assist in expanding and insuring the benefits of these new processes.