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North America has great expectations for Public-Private Partnerships. Do they make sense for your organization?

October 25, 2016

Public-Private Partnerships (P3s) are fast becoming an important way to deliver large infrastructure projects, but they also bring new challenges for general contractors.

David McVicker

Senior Vice President, Head of National Contract Surety

David McVicker has operational and underwriting responsibility for Zurich’s National and... About this expert

interchange overview

There’s little doubt that the aging infrastructure in the United States and Canada is costing both economies countless hours of lost productivity and efficiency. In its 2013 Infrastructure Report Card , the American Society of Civil Engineers gave an overall GPA of D+ to the condition of U.S. roads, bridges, dams, railways, schools, pipelines and other critical publicly owned structures. Canada faces the same challenges, with one-third of its municipal infrastructure considered to be at risk of rapid deterioration according to the 2016 Canadian Infrastructure Report Card .

Currently, 33 states in the U.S., one territory and the District of Columbia have passed legislation enabling the use of P3s for public projects. In Canada, the federal government and nearly all of the provincial governments have adopted enabling legislation that permits the development of P3 projects. Over the last two decades, P3s in the U.S. and Canada have been increasingly used as a procurement vehicle for building roads, bridges, tunnels, light rail systems, wastewater facilities, healthcare facilities, prisons and schools.

No matter how experienced contractors are with traditionally financed public projects, P3s bring a whole new level of complexity and risk transfer that requires close attention during the contract phase in particular. This alternate project delivery model requires the risks insights that experienced surety professionals are uniquely capable of providing throughout the length of the P3 project.

There is much hope riding on the future of P3s to help rebuild and repair the aging infrastructure in North America. Surety remains the most proven and time-tested method of security for all infrastructure projects, but especially P3s with their distinctive risk transfers for general contractors.

Beyond providing performance and payment bonds, a good surety is highly committed and capable of keeping the P3 project moving in the face of many challenging issues that may arise. In the end, this should benefit all the key stakeholders—owners, developers/concessionaires and the taxpaying public.