The other equity: How can P3s help raise levels for everyone?

Having a stake in the community is an increasingly important part of the benefits of new construction projects, and P3s have the advantage of being in it for the long haul

Credit: Getty

When President Joe Biden was touting the benefits of his bipartisan infrastructure bill, which became the Infrastructure Investor & Jobs Act (IIJA), he often spoke of the importance of ‘equity’.

While some big investors may have initially got excited that Biden was referring to them and their role in the delivery of new infrastructure across the country, in fact the president was referring to the way in which infrastructure can be used to increase opportunity for everyone and boost efforts to deliver equality across all divides, whether they be racial, economic or even political.

The P3 market is well placed to deliver on the promises made by the Biden administration, given the fact that its very nature is to provide a service for the long term - usually several decades.

However, private partners cannot expect that simply by turning up and delivering their projects, their responsibilities around equity have been discharged. More and more, authorities are wanting to see their private partners go the extra mile and integrate themselves more effectively into the communities in which they operate.

This is being reinforced by the Biden administration’s continued focus on ‘Buy America’, placing an emphasis on local supply chains over international ones. For building projects, that can often mean more of a demand from the public sector around ensuring the local workforce is employed on projects - and that training programs are implemented to ensure the local talent is of sufficient caliber to take on the roles that are available.

Shawn Matlock, director of capital programs at Prince George’s County Public Schools, said that a critical element on his authority’s project was to ensure its partners “reflect the diversity” of the areas in which they will be working. This has been underscored by the second procurement, in which the three shortlisted teams each have at least one dedicated Minority Business Enterprise (MBE) equity member, which will eventually take a 20% stake in the project.

“That is showing that there is strength out there that is untapped,” Matlock told delegates at the P3C conference in February.

He added that the authority is now looking to go one stage further in attempting to bind the local community to its schools program, by looking to get 10% of the contract’s value crowdfunded, “because we believe that the people themselves should have a stake in it”.

Those on the panel welcomed this commitment from PGCPS and highlighted that by requiring the MBE investor to take a 20% stake, it is ensuring that it has a real voice at the table.

“MBE equity needs to be part of the developer side, making key decisions,” said Brandy McDonald, project director for infrastructure asset management at Fengate.

“If minority-owned equity is in the room with the others, it can help drive the bus,” agreed Sarah Wu, managing director at American Triple I.

For this to work, however, will require a certain level of acceptance from some of the big equity investors that they need help.

Sia Kusha, senior vice president and group head of business development & partnering at Plenary Americas, explained that such an approach can and should end up benefiting all concerned. He pointed to his firm’s experience working with Phoenix Infrastructure Group on the DC streetlighting P3 program. “Jeremy Ebie [founder & CEO of Phoenix] has spent more time in that community than many of us at Plenary, because he lives there.

“The ability for us to have long-term community visibility [through partners like Phoenix being on the ground] is key.”

Using local organizations is becoming an increasingly important requirement for public authorities when tendering contracts, as part of the overall vision of improving an area not simply through the creation of a shiny new building. “You can make a deal reflect what the community looks like,” said Matlock. “This deal [the PGCPS schools P3] has been a real capacity builder.”

McDonald said having goals and targets embedded into procurements is also important: not because it enables a tick-box exercise, but because it gives the private sector something to aim for and, more importantly, aim past.

Wu agreed. “Public policy is massively important,” she said, pointing out that if certain benchmarks around performance are included, this “translates into motivation and inspiration to meet and beat them”.

Ebie highlighted another potential benefit of using local expertise and a diverse consortium in a P3: “By engaging over 30 years, it will help to create and bring forward new projects,” he said. “Cities and counties are very diverse and for that reason everyone has got to be involved. We are looking to expand the pie at every level.

“That is how we create value and create new projects.”

Such an approach is therefore holding out the prospect of a win for all sides in the future of P3 deals.