A new report by the Legislative Analyst's Office concludes California taxpayers have overpaid for two infrastructure projects that granted private businesses more sway in the process, but that the state could save big bucks through so-called "public-private partnerships" if they were executed properly.
State officials looked at Caltrans' and local governments' Presidio Parkway project in San Francisco and the Long Beach Courthouse, which is overseen by the state Administrative Office of the Courts. Both projects are still under construction. Each carries a taxpayer price tag of nearly $500 million and are being built through a public-private partnership.
Also known as "P3s," public-private partnerships usually are single-contract infrastructure agreements between a government entity and a private partner, often a consortium of several businesses. The private partner designs, builds, finances, operates and maintains the road, bridge or building. More traditional approaches to large public projects split the work between government agencies and several private firms that bid separately.
The LAO estimates the Presidio project could have been up to $140 million cheaper with a more traditional approach. Officials decided on a P3 based on several inaccurate estimates, including how competitive bidding would drive down construction costs. The courthouse project could have been up to $160 million less with a non-P3 approach.
Public-private partnerships can work for the state, the LAO said, but it needs to develop expertise to estimate costs and benefits correctly, pick the right projects and then negotiate the deals: "Based on our review of existing research, we believe that P3 procurement -- if done correctly -- has merit and may be the best procurement option for some of the state's infrastructure projects."