0522_InfrastructurePlanTransportation Secretary Elaine Chao recently informed the U.S. Senate that the President’s $1 trillion infrastructure plan will be announced by the end of the month. The new plan is anticipated to rely upon public-private partnerships (P3s) to bridge the gap between the cost of needed infrastructure and available government dollars.

The American Society of Civil Engineers recently estimated that, over the next 10 years, there is a $2 trillion investment gap between available government funding and required infrastructure investments. Unfortunately, our infrastructure is in a severe state of disrepair, and the recent failures of aging roads, bridges, and dams highlight the need to solve this investment problem–with urgency.

Fortunately, private investors have $120 trillion in assets and are always on the lookout for good long-term investments, and a well-structured P3 certainly qualifies.  Although a P3 requires that the private partner accept risks in exchange for its anticipated returns–there is no free money–private investors can mitigate those risks by pooling their investments and by monitoring and disciplining the private contractors to ensure performance targets are achieved.  The end result is a win-win for both the public and private sectors.  The public obtains the private investments required to construct infrastructure that the government could not afford on its own, as well as an additional layer of oversight.  And so long as the private sector delivers what is promised, it obtains a reliable long-term investment. 

Although P3s are often dismissed as “privatization” or associated with a handful of early failures, as opposed to the hundreds of worldwide successes, there is a growing bipartisan acknowledgement of the benefits P3s can bring.  Sen. Mark Warner, for example,  recently proposed the Building and Renewing Infrastructure for Development and Growth in Employment (BRIDGE) Act, which contemplates a vastly increased role for PPPs in solving our infrastructure crisis.