Public-Private Partnerships (P3s) Can Unlock More Federal Funds for Infrastructure

How to Build on the Generational Opportunities from the Infrastructure Investment and Jobs Act (IIJA)

  • P3s can increase the likelihood of an infrastructure project receiving approval

  • For public entities, the window of opportunity is limited, given competition for funds

  • The IIJA could accelerate the shift in the U.S. to P3s for certain infrastructure projects


Table of Contents

Goals of the IIJA
Resources for public entities 
Review and update the CIP
Understand the financial benefits of ESG
Examine allocation mechanisms
Tap the power of P3s
Paving the way forward 

The $1.2 trillion Infrastructure Investment and Jobs Act (IIJA), also known as the Bipartisan Infrastructure Law (BIL), is a generational opportunity for states, counties and local governments to reimagine infrastructure. With many public entities competing for a limited pool of funds, it is critical to act swiftly and prioritize projects that will have the greatest impact on communities for decades to come.

Public entities should already be reviewing their current capital improvement plans (CIP) to identify the most impactful infrastructure projects and leveraging public-private partnership (P3s) structures can help supplement available federal funding. As public entities seek to secure funding, they should reexamine their CIP, evaluate the potential social and environmental benefits of each project, understand the applicable allocation mechanisms for federal funding, and tap private partners who can help make project proposals more attractive. The future is already here and the infrastructure needs of today can be fulfilled today.


Review and update the CIP

Public entities should thoroughly evaluate each project in the CIP through the lens of sustainability, community impact and broader ESG goals. Appropriate adjustments should then be made to each project plan to meet these objectives and best align with the overall goals of the IIJA for securing funding. Public entities may be able to secure more funding by having developed a robust plan for projects and engaging the private sector in partnerships for supplemental funds.

Some legacy projects that have been in the CIP for several years may not be suited for IIJA funding. Projects that can deliver lasting benefits for a broad range of stakeholders over the course of 30, 40 or 50 years will likely stand out. It’s also critical to devise a strategy for ongoing maintenance. Deferred maintenance isn’t just a challenge for existing infrastructure; it’s an important consideration for new projects, too.

It’s also important to consider how population shifts during the COVID-19 pandemic may have strained resources or shifted priorities for stakeholders. Public entities should update their projects to account for recent and future changes to infrastructure needs.


Understand the financial benefits of ESG

Environmental, social and governance (ESG) factors can also help define a project’s applicable benefits. Projects that are sustainable, help connect communities and have clear environmental and social effects will likely draw more funds because they address the overarching goals of the IIJA. To bolster their cases, public entities can also point to examples of sustainable, profitable infrastructure models that have been deployed in similar localities in other countries.

Good infrastructure and upgrades can also help retain and increase business investment, jobs and tax revenue. The broader economic impact of projects, however, can sometimes be overstated. Accurate measurement of a project’s expected medium- and long-term benefits requires careful planning and detailed analysis.


Examine allocation mechanisms

To help increase the chances of securing funding, public entities should develop a detailed understanding of the structures for distributing funds in their state. One way to evaluate applicable allocation mechanisms is to review how federal funding related to COVID-19 stimulus was distributed in the state. Consulting with development authorities can also help determine how the project assessment aligns with demand and broader needs.

All federal money has an “expiration” date and will be reallocated if it’s not used in time. Public entities are incentivized to be prepared and act quickly upon receipt to complete projects on time and within budget. Project readiness can lead to speedier revenue flow and additional savings from revamped operations.

Alternative project delivery models — including P3s, the design-build approach and integrated project delivery — can also help streamline design and construction to meet specific timelines. Some states even have a dedicated body to support procurement, such as Virginia’s Alternative Project Delivery Division and West Virginia’s Innovative Project Delivery Division.


Tap the power of P3s

Focusing on P3s can increase the likelihood of a project receiving approval. Two tracks of funding can make a project more impactful and compound benefits, while mitigating risk. Private entities can also see many advantages from contributing to their communities through such partnerships, including reputational benefits and meeting ESG goals. For example, the National Electric Vehicle Infrastructure Plan provides nearly $5 billion for a network of EV charging stations along highway corridors, which presents an ideal opportunity for additional private sector investment.

The P3 financing mechanism can also assist with financial, technical and operational aspects of a project thanks to the private sector’s experience with technology and innovation, which can help deliver projects within budget and on schedule. A 2016 Syracuse University study found that P3 projects “are largely completed on schedule and on budget when compared to traditional DBB [design-bid-build] projects” where public entities manage project delivery.

P3s are not used as often in the U.S. as in some other countries, though their usage has been increasing thanks to the risk mitigation and innovation in public projects. The IIJA could accelerate that shift. The House Committee on Transportation and Infrastructure found that between 1989 and 2013, P3 contracts for major highway infrastructure projects above $50 million represented just 1.5% of the $4 trillion spent on highways across all levels of government during that period. However, roughly half of that P3 spending came during the last five years of that 25-year period. By contrast, the UK and Canada use P3s in an estimated 15-20% of infrastructure projects, and Australia uses P3s for approximately 5% of projects, according to a Bipartisan Policy Center analysis of an Organisation for Economic Co-operation and Development (OECD) report.

The IIJA requires P3 project proposals to include a value-for-money analysis, which highlights a project’s material benefits, and it stresses the importance of reforms to decrease the time involved in reviewing and permitting projects. The law also provides for new technical assistance programs to evaluate and develop P3 projects, including grants to help public entities boost organizational capacity or retain third parties to help identify and plan P3 projects. Experienced professionals can help public entities with the analysis and procurement process for P3s to secure federal funding.


Paving the way forward

Act now to update plans and secure funds to capitalize on the historic infrastructure spending in the IIJA. With many public entities competing for federal funds, the window of opportunity is limited. It’s important to understand allocation mechanisms and asses how alternative delivery models could enhance those projects. P3s can increase the chances of securing funds and heighten the benefits of a project while also staying on time and on budget. Hundreds of millions of people in communities across the U.S. are depending on it.

The experienced professionals in BDO’s dedicated Infrastructure Advisory & Public-Private Partnerships practice can help entities navigate the complexities of their projects. Contact us today to learn more.

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