Michael Best Attorneys Michelle Wagner Ebben and Syed Madani co-authored featured article, “Don’t Drop the Ball: Managing Risk in P3 Contracts” in Construction Executive published on December 6, 2018.
It is difficult to pick up the local business journal or attend a networking function without reading and hearing about the latest and greatest P3 project. P3 – or public-private partnership – projects are becoming increasingly popular as cash-strapped governmental bodies and budget conscious private sector entities are looking for creative ways to finance projects and encourage investment and development within their communities.
Many contractors find P3 projects appealing due to the perception that they combine the best part of public projects (safe, reliable funding) and the best part of private development (highly profitable investments), all while benefiting the public. While that is true in many cases, P3 projects also come with increased risk for contractors. This is because the main stakeholders, the municipality and the private sector partner, are each working outside their traditional roles and, thus, are quick to shift or push off additional or extraordinary risk. Such risk often lands squarely in the lap of contractors.
Understanding and assessing such risk, however, can be problematic as no P3 project is alike. Every P3 arrangement is – at its core – just a contractual relationship between a private sector entity and a public sector entity to develop, construct, renovate and/or maintain an asset for public benefit. Each project, however, can be structured dramatically differently as municipalities and their private sector counterparts negotiate financing, control and responsibility of the project overall. Construction is a risky business, but successful contractors know how to assess, manage and pass off such risk.
To read the entire Construction Executive article, click here.