Published date:

Public-private partnerships are becoming more popular in the construction industry. Government agencies do not have the time, or in some cases, legal authority to borrow the entire cost of a project at once. Therefore, more of these types of arrangements are being used as an “availability payment” option. The contractor would build the project and then the agency would pay when milestones are reached. This would leave the state free to use the money it has to complete other projects.

In the case of Nevada Department of Transportation and their Project Neon, NDOT would pay their contractors when substantial, previously arranged milestones in the project are met. These could include the opening of the HOV lane connector or the completion of the southbound connector ramp. The public-private agreement would last for 35 years, with payments continuing for the life of the contract.

The approach of using these types of payment options is to allow a large project to get underway more quickly even if the state does not have all the money necessary to finish the project. The agreements also shift much of the risk to the private entity rather than the taxpayer and ensure against missed deadlines, since contractors will not get paid if the work is not done.

However, there are also risks. The state would be bound in a contract with bills due regardless of available funding. The state departments must take into account all future revenue projections.

In order to maintain compliance with all funding requirements and monitor all the contractor payrolls associated with the project, state agencies and contractors have turned to electronic monitoring systems. Companies like LCPtracker Inc reduce the need for storage and collection of paper certified payrolls or daily reports on construction projects. Project Administrators can easily track and monitor all payrolls and reporting requirements through an electronic system that will automatically flag errors or discrepancies. For more information and a preview of services available from LCPtracker, click here.

To read more public-private funding and Project Neon, see the full article.