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  • Metro Region Freeway Lighting
  • Metro Region Freeway Lighting

Project Team What is a P3?

The Highlights
  • There are many benefits to P3s including …
    • Completing projects faster with fewer delays.
    • Allowing government agencies to use their limited financial and staffing resources for other projects.
    • Producing high-quality projects, using state-of -the-art technology and best practices.
  • The P3 between Freeway Lighting Partners and the Michigan Department of Transportation is the first in the nation to focus on improving freeway lighting.
The Details
  • P3 or PPP is shorthand for public-private partnership. The term "P3" is used to describe a legally binding contractual agreement between a public-sector body, such as a government agency, and a private-sector body, such as a business.
  • The public-sector body typically oversees the P3 project throughout its life cycle, while the private-sector body is responsible for commercial activities, including construction, finance and everyday operations.
  • Government agencies may choose many types of private-sector bodies, including construction, engineering and financial organizations, as partners for P3 projects. However, an important characteristic of any successful P3 project is the transfer of risk from the public to the private-sector. Government agencies may be familiar with setting policies, but less accustomed to managing the risks associated with commercial projects, so they pass those risks on to the private-sector for the benefit of both parties.
  • If a private company accepts responsibility for building and perhaps operating and maintaining a freeway lighting project, it exposes itself to risks associated with construction delays, increased labor costs, rising interest rates, extreme weather conditions and natural disasters. However, the company also accepts these risks, willingly, because the rewards of a P3 project -- a stable, long-term investment opportunity and prospect of revenue, from fees for services -- outweigh the risks.