We enhance the quality of public assets and services through our innovative approach to partnering via our expertise in finance, design, development, construction and our lifecycle operational capabilities in the realm of:

• Affordable Housing
• Student Housing
• Military Housing
• Healthcare Complexes
• Fire, Police and Other Civic Buildings
• Educational Institutions
• Roads, Rail and Airport Projects
• Enhanced Use of Military Property
• Municipal Water
• Alternative Energy

Balfour Beatty Capital Group is uniquely positioned to partner with government-related entities and public sector firms to implement their strategic plans. Utilizing the Public-Private Partnership (PPP) model, and our financial strength, expertise and depth of resources, we can bring creative solutions to any project.

Public-Private Partnerships (PPP)

Introduction

Public-Private Partnerships are a successful and widely used delivery mechanism for essential public assets in many parts of the world – in the UK, Canada, Australia, South Africa and Europe as well as India, Singapore and many other countries. Many thousands of projects – from schools, healthcare and civic infrastructure to roads, rail and other transport projects to housing and accommodation projects - worth billions of dollars have been successfully delivered with this model, providing cost saving benefits to governments and the public.

In 1996, federal legislation in the U.S. paved the way for what would soon become the most successful PPP program in America—privatizing the design, construction , renovation, management and maintenance of on-base military housing. The U.S. government has successfully transferred responsibility for nearly 200,000 housing units on military bases across the country since then—entrusting their design, development, construction, and management to industry-leading private firms. Military families are truly getting what they deserve—brand-new or newly renovated homes, not to mention high-quality service in first-class communities.

The PPP program for military housing wasn't an entirely novel idea; for more than 200 years, government entities have been collaborating with private companies to deliver such essential services as infrastructure development, alternative energy, and water and waste management. The size of the military housing program did, however, serve to underscore the potential power of the PPP model—its sheer ability to solve some of the major infrastructure challenges facing the country today.

With the countries facing challenges of epic proportions—be they environmental, social, or related to decaying infrastructures—PPPs have proven to be a valuable delivery solution for issues ranging from educational and municipal needs, to transportation needs, workforce housing and renewable energy.

What It Is

A Public-Private Partnership is a system in which a private business venture or a government project is funded and operated through a partnership of a government entity or agency and a private company. The system makes PPPs an innovative strategy for delivering up-to-date, high quality public infrastructure. PPPs give the public an opportunity to leverage its limited resources to obtain high quality essential assets.

Based on first-hand experience and knowledge, the public sector has considered PPPs an effective tool to use in leveraging its limited resources. Some of the key benefits of PPPs include the following:

• Fast-track project funding and delivery - lower all-in costs of construction/ development by avoiding inflationary increases in materials, labor and rising financing costs, e.g. interest rates
  
  
• Exceptional design solutions – functional, flexible, inspirational, reliable, with leading edge environmental and sustainable design services solutions
  
  
• Private sector innovation - experience and expertise
  
  
• Freedom and flexibility - for the public sector to focus on educational outcomes
  
  
• Innovative financial solutions - leveraging of public and private financial resources
  
  
• An integrated team – offering a single point of responsibility, an optimal whole life cost solution, and pre-agreed subcontract terms and conditions
  
  
• A community focus – building on the success of previous projects in engaging with the community, both in terms of job creation and community use facilities
  
  
• Affordable solutions – able to provide excellent value, delivered through competitive financing terms, construction economies of scale and optimal whole life costing

• Public-private partnerships (PPPs) bring together, for mutual benefit, a public entity or agency and a private company in a long-term joint venture for the delivery of high-quality public infrastructure.
  
  
• PPPs are chosen when the public sector finds it difficult or impractical to deliver major investment projects or is seeking a value for money solution over the duration of a contract period, typically 20 years or more.
  
  
  
  
  
• A private company plans, designs, constructs, finances, operates and maintains the public facility. When it does, the private company assumes more risks and responsibilities for the work and success of the project. PPPs work because this higher level of responsibility provided by the private company results in a shared public-private risk for project success.

• PPPs come in many varieties, depending on the needs of the public entity or agency and the amount of risk transfer and responsibility undertaken by the private company. Balfour Beatty Capital is able to offer all of the following solutions as described below and stated by the National Council for Public-Private Partnerships (NCPPP).
  
  
  
  
  
• The various forms include: Design/Build/Finance (DBF), Build/Operate/Transfer (BOT) or Build/Transfer/Operate (BTO), Design/Build/Maintain or Operate (DBM or DBO), Lease/Develop/Operate (LDO) or Build/Develop/Operate (BDO), Lease/Purchase, Turnkey Construction-At-Risk. Details of how all these various forms operate are included on the National Council for Public-Private Partnerships website.

Private Finance Initiative (PFI)

• Developed in the UK, PFI is a method developed to provide private company financial support for public-private partnerships (PPPs) between the two parties. This model has now been adapted in many countries (including Europe, Australia and Canada) seeking alternative delivery methods for key public entity or agency infrastructure.
  
  
• PFI projects transfer the delivery risk from the public entity or agency to the private company, with a clear link to the public entity's or agency's payment for an asset to its ongoing usage, availability, and condition or facility maintenance services over its lifetime. Under the PFI method, the private company will finance the creation of an asset and accept financial and technical responsibility for construction and its subsequent operation and maintenance. The public entity or agency pays for the capital asset and facility management services over an extended period, typically 30 years.
  
  
• PFI projects deliver operational services for the public entity or agency and the private company receives payment. Capital investments are made by the private company and the public entity or agency provides services agreed upon in a contractual obligation. In most cases, the private company forms a project company to use in the contract with the public entity or agency. The project company will enter other principal subcontracts. One is usually with a construction company and the other is a facilities manager to build and maintain the project asset. They fund construction through an equity/subordinated debt from lenders and also long-term debt raised from the banking or the bond markets. The project company is compensated when the asset is available for use by payments, indexed to inflation, over the 30-year period to cover service of capital and all operating, maintenance and ancillary service costs.
  
  
• At the end of the contract period the properties revert to public ownership free of charge. Because of the life cycle investment carried out by the private company, the properties are relinquished to the public entity or agency in “good as new” condition. The private company provides guarantees for all elements of the buildings for extended periods, typically ten years for mechanical and electrical systems and a further 30 years for the structural aspects of the building or assets.
  
  
• Both the public entity or agency and private company have an interest in attracting cost-effective financing. Cost effective financing is typically achieved by the entity demonstrating the credit worthiness. Financing through the use of long-term bank debt or bonds is often cheaper than the equity alternative; however, the risk transfer is much greater on PFI projects, thereby providing value for money for the public entity or agency over a long-term contract period. As the income from PFI projects is received from the public entity or agency, the best method of financing is using the income to raise private senior debt funding. Project financing, based upon the project's cash flow, is also known as non-recourse financing.
  
  
• Structuring a PFI project involves a contractual structure that insulates the repayments to debt providers from project risks, while providing the optimal amount of true risk capital in the form of equity shareholder funding.
  
  

Few companies have the experience or the financial capability to undertake the next generation of PPP projects. Balfour Beatty Capital Group has both.

Superior PPP programs require deep experience, proven ability, and unwavering commitment, and that's precisely what we, at Balfour Beatty Capital Group, bring to our clients/partners through our innovative operating companies, Balfour Beatty Capital in the U.S. and Canada, Balfour Beatty Communities, and Balfour Beatty Energy Solutions.

To learn more about PPPs:

Presentations

• Global PPP Market by Richard Abadie (presented at the North Carolina conference on public-private partnerships, sponsored by Balfour Beatty Capital, Balfour Beatty Construction, Bank of America and McGuire Woods)
• Building Schools for the Future by Andrew Robertson (presented at the North Carolina conference on public-private partnerships sponsored by Balfour Beatty Capital, Balfour Beatty Construction, Bank of America and McGuire Woods)
• Public-Private Partnerships for Education Projects by Steve Allen, Chris Long and Jeff Zalkin (presented at the Florida Educational Facilities Planners' Association (FEFPA) Winter Conference 2008).

• Public-Private Partnerships: Creating Tomorrow's Infrastructure (PDF)
• Infrastructure procurement: delivering long-term value (PDF)
• For an investor, a key is defining the right revenue stream (PDF)
• Closing America’s Infrastructure Gap: The Role of Public-Private Partnerships (Deloitte Research) (PDF)
• PFI: Strengthening Long-term Partnerships (PDF)
• Investing in California’s Infrastructure (PDF)
• Understanding the Costs of Public Works (PDF)
• School Construction – Building a Better Schoolhouse (PDF)
• Need Space? School-Facility Public-Private Partnerships: An Assessment of Alterative Financing Arrangements (PDF)
• Value for Money Assessment Guidance (PDF)

• National Council for Public-Private Partnerships (NCPPP)—The Council advocates and facilitates the formation of Public-Private Partnerships at the federal, state and local levels. Also, it attempts to raise government and business awareness of how their cooperation can provide the public with quality, cost-effective goods, services and facilities.