To P3 or not to P3: P3 assessment practice, P3 deal structures, and the will to P3 as a tax shield




Freedman, Elliot

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If public-private partnerships (P3s) represent much beyond alternate service delivery (ASD) re-branded, then it is the addition of private financing (PFI) that differentiates P3s from plausible procurement alternatives. With PFI as the incremental difference, this paper analyzes the will to P3 given the nonrecourse finance deal structures used in P3s in practice. The will to P3 is shown to be a debt interest tax shield one firms garner without facing the trade-off between asset exposure and borrowing costs. The latter, lenders' monetization of the default risk of tax-transparent but limited liability P3 project companies, is P3 endogenous risk - incident on governments through P3 fees. In order to avoid assessing the causality of PFI to risk transfer beyond that achievable in ASD with fixed-price contracts and performance adjustments. P3 value for money (VfM) assessments are shown to reference an implausible alternative of pure public provision. Therein. the value of P3 risk transfer with which a non-P3 alternative is decisively discredited is shown not to be analyzed. but rather imported from guesstimates on early P3s.



Public-private sector cooperation