Subsurface public-private partnership projects: Brave new world for risk allocation

Public-private partnerships (PPP) are gaining in popularity at the federal, state and local levels as the public sector seeks private capital to finance infrastructure and other projects that traditionally have been funded with public funds. In general, a PPP involves a development agreement between a public owner and a private sector concessionaire. Under the development agreement, the concessionaire is responsible for financing, designing, constructing and typically operating and maintaining the completed project for a concession period (often multi-decades in duration). The concessionaire typically enters into an agreement ? the design-build agreement ? with a design-builder to design and construct the project. The concessionaire may secure financing from banks, investors or from a combination of these and other sources (collectively the financier). While the PPP experience in the United States has been modest to date, an increasing number of projects involving tunneling or other significant subsurface work are already being delivered in the PPP mode. Public owners have significant options to address risk allocation for subsurface conditions on PPP projects. The same sound and fundamental principles of fairness in risk allocation that apply in other major subsurface projects should be applied and adopted in the PPP context