Structuring Public-Private Partnerships: Implications from the "Public-Private Investment Program for Legacy Securities"

This Note draws upon the experiences of participants in the U.S. Department of Treasury's Public-Private Investment Program ("PPIP") to provide insight on structuring public-private partnerships ("PPPs"). PPPs enable the government to leverage private sector capital and expertise with public resources to deliver social goods. Drawing upon anecdotal interviews with PPIP fund managers, Treasury officials, and legal practitioners, this Note provides an empirical analysis of the challenges that can arise in a public-private context and potential solutions in response. The experiences of PPIP participants reveal that the fear of political risk coupled with limited legal recourse are significant concerns for the private sector, but can be addressed by sufficiently attractive market-based incentives as well as extra-legal mechanisms. Moreover, PPIP demonstrates that these extra-legal mechanisms can also help reduce the financial cost of PPPs. Concurrently, building a process whereby private parties compete for participation in a PPP through an auction-like mechanism can help government actors accurately gauge the level of private sector risk-aversion ex ante and calibrate the optimal amount of financial incentive needed to attract private sector participation.