P3 Could be a Competitive Advantage for US Manufacturing

Public-Private Partnerships help the public sector develop various projects and improve infrastructure in ways that benefit the public at large.  These projects and infrastructure improvements, which always raise economic and financing issues, can be particularly challenging during difficult economic times. While P3’s contribution to making capital improvements and similar initiatives a reality is well recognized, we might consider other areas of our nation’s economy that could also be assisted through the joint initiative of the public and private sectors.  One other area to consider is manufacturing.

Rebecca O. Bagley, CEO of Nortech, a regional nonprofit focused on technology based economic development in Northeast Ohio, recently wrote on Forbes.com that “collaborative public-private partnerships have emerged as an important component in this new era of American manufacturing.”  In support, Bagley describes her recent attendance at a Department of Energy/NIST roundtable, which focused on American manufacturing.  An assertion made at the roundtable was that P3 could play an important role as the US manufacturing sector transitions into what is now a highly innovative and globally driven manufacturing marketplace.  As an illustration, Bagley points to the recent announcement of a 30 million dollar federal grant made to the National Center for Defense Manufacturing and Machining in order to establish a National Additive Manufacturing Innovation Institute in the Techbelt (described as the Cleveland to Youngstown to Pittsburgh corridor).  In Bagley’s piece, Carnegie-Mellon President, Jared L. Cohon, says the “new manufacturing institute is about industry teaming with university partners…”.

As Bagley points out, solutions and innovation are to be found not only in the technology and processes we as a nation develop, but in the creativity we use in making these things happen (e.g. through P3), which in itself represents a competitive advantage.  Bagley’s piece, “Are Public-Private Partnerships The 'Secret Sauce' To A Resurgence In American Manufacturing?” can be found at
http://www.forbes.com/sites/rebeccabagley/2012/09/04/are-public-private-partnerships-the-secret-sauce-to-a-resurgence-in-american-manufacturing/

A Creative Solution for Non-Revenue Producing P3 Facilities?

Now that public/private partnerships are starting to proliferate, morphing from the traditional transportation-based programs to vertical construction for universities, municipalities and more, the next question is how to apply the P3 delivery method to non-revenue producing public facilities.  P3 projects are possible because private equity investors and lenders seek revenue-producing public facilities, such as toll roads, dormitories and stadiums, in which to invest or loan design and construction funds in return for an anticipated rate of return. Toll roads have been the benchmark for such construction, with vertical construction picking up steam.  However, thus far, private money has gravitated only to projects that would generate their own revenue, from which the rate of return can be repaid or supplemented. While this is understandable, such a philosophy has left vital non-revenue producing public facilities out in the cold. But perhaps that isn’t necessary. A little creative thought may be all that is needed to find a way to make P3 applicable to such projects.

Witness the state of Virginia, who recently augmented the revenue-producing capability of its turnpike rest areas with sponsorships. According to the Street Smart blog of the Daily Press on August 30, 2012 by Jon Cawley, GEICO is sponsoring “Safe Phone Zones” at Virginia’s rest areas as a means of generating more revenue to entice a Pennsylvania-based caterer to run the facilities’ concessions as part of a public/private partnership.  The Virginia governor claims Virginia as the first state in the country to secure a sponsor in a program of this sort.  Kudos to Virginia for its creative thinking. 

Why can’t sponsorships be part of a revenue-generation plan for non-traditional, non-revenue generating public facilities? Sponsorships could be joined with other creative techniques, such as land-swapping deals, tax concessions and reallocations, low-interest bond financing, and mixed-use office space rentals to cobble together a financial package that could make sense for otherwise non-revenue generating projects.  The beautiful thing about P3 is the sky is the limit. Parties are constrained by only their imagination (and politics).  So follow Virginia’s lead. Work sponsorships and other non-traditional revenue sources into your programs and let’s build America!