Higher education institutions increasingly leverage P3s to deliver campus projects, including with respect to energy and utility assets, instead of traditional project structures that involve the institution owning and funding the assets.
Although P3 projects have common themes, their features vary widely from project to project. This note focuses on some of the basic drivers, objectives, and issues that are likely to arise in various types of P3 projects that universities and colleges might undertake.
Why consider a P3 in the first place?
A higher education institution may consider utilizing a P3 for a variety of financial and nonfinancial reasons.
From a financial perspective, a P3 might reduce the institution's near-term capital expenditure requirements and long-term life cycle costs. A P3 might provide greater long-term cost certainty related to the assets or services provided as part of the P3. To the extent the P3 involves collecting revenues from third parties, the P3 may reduce or eliminate the institution's historic collection risk related to such revenues.
From a nonfinancial perspective, a P3 might allow an institution to shed to the private sector the responsibility of providing services or assets outside of the institution's primary mission of providing education.
Separately, the institution may be able to raise overall performance standards for services provided. For energy-related assets, this could include energy efficiency and a reduction in carbon emissions.
Different approaches to P3 projects
The diverse range of services, facilities, and buildings on university and college campuses generate numerous opportunities for P3 arrangements. However, the objectives and considerations vary considerably across different types of assets.
Typical examples of facilities that might be the subject of P3 projects include, among others: campus parking; energy and utilities; student housing; and construction of academic, sporting, or other university facilities. These four examples of common P3 facilities provide a good basis to illustrate how the features of a P3 project structure can vary from asset to asset. The following table offers a summary.
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