Public-private partnerships help universities fund capital projects

Introduction

Initially used primarily in the transportation market, P3s now are being used in other market sectors, including higher education.  Like the transportation market, the higher education market has endured recent decreases in public funding, and is spending less per student than a decade ago.  According to the Center on Budget and Policy Priorities, nearly every state is spending less per student than prior to the Great Recession, spending an average of US$1,600 less per student per year.  Lack of public funding also has led universities to cut services and raise prices, as well as to admit larger numbers of out-of-state and foreign students, both of which have proved unpopular.  Students are telling universities that they can no longer absorb higher tuition and housing fees, and continued increases are becoming less and less sustainable.  As a result, without state funding and consistent revenue increases to fall back on, universities are turning to P3s to fund new projects.

Public-Private Partnerships, or P3s, have rapidly grown in popularity in the United States, becoming an increasingly common way for public owners to fund construction projects.  While exact figures vary, P3 spending is expected to reach new heights in 2019 as public owners continue to search for creative ways to fund current and future infrastructure needs.

University P3 projects initially focused on student housing, which provided a fairly simple and well-understood model.  By leveraging a steady stream of student fees for housing and dining, universities have been able to successfully build student housing and support facilities.  Later P3 projects expanded to incorporate facilities that are more central to the university experience, including academic and research spaces, and central-plant infrastructure.

The purpose of this paper is to provide an overview of the current status, key developments, and trends in the area of university P3 projects. 

PROFILE

Daniel W. Kwon is a Director with more than 15 years of construction industry experience, including contemporaneous scheduling, schedule reviews, and providing project controls monitoring and reporting services; preparation of claims and development of expert work product and reports; and presentations in support of settlement negotiations, mediation, deposition, arbitration, and trial. He has testified in deposition, mediation, and arbitration. Daniel has served as a construction cost and scheduling claims consultant, and as a general contractor. He has also served as a management consultant, with emphasis on construction programs, where he has provided technical support and consulting assistance on mega-projects valued at more than US$20 billion in the oil and gas, nuclear, hospitality, mining, pharmaceutical/ life sciences, and construction industries.

This publication presents the views, thoughts or opinions of the author and not necessarily those of HKA. Whilst we take every care to ensure the accuracy of this information at the time of publication, the content is not intended to deal with all aspects of the subject referred to, should not be relied upon and does not constitute advice of any kind. This publication is protected by copyright © 2019 HKA Global Ltd.