• The aggregate money invested in the non-liquid assets of a P3 has to remain small compared with the balance sheet and full scope of the contractor's operations.

Risky Ventures

There's no free lunch; P3s also create risk. Financial risk exists for the design-builder if the project is not completed on schedule. Because the project is design-build, the financiers are counting on it to come online as scheduled to service the debt. Therefore, P3s typically do not allow contractor extensions due to bad weather, changed conditions and scope or other obstacles.

The relationships and contracts among the parties involved in a P3 can be complex. With each party trying to obtain the most favorable conditions, risks may be passed downstream to the contractor—where they do not belong. For instance, in a P3 the concessionaire typically manages the financing, but it may try to get the contractor to take on this risk.

The role of the design-builder also affects risk. For example, the responsibility to operate or maintain the asset requires different skills that may not be aligned with the contractor's experience. It also increases the contractor's duration at the site and may have cash-flow implications. A design-builder's P3 capital investment is likely to be non-liquid for many years.

Opportunity is the catalyst of free enterprise. Risk creates the chance to make a profit. Both exist within the developing P3 market, and both require careful exploration.

Rick Ciullo is chief operating officer for Chubb Surety and can be reached at RCiullo@chubb.com.