Severe budget restrictions in the public sector are forcing local and state governments to get creative to continue to provide services—and public-private partnerships (PPPs) are one interesting if controversial option on the table.
PPPs, which carry a unique set of risks, "are one solution that a state might turn to, to provide public infrastructure in a tough tax time," says Kevin Coen, construction-infrastructure insurance director for Liberty Mutual.
In such partnerships, public-sector entities turn to the private sector in order to build or maintain infrastructure projects. It's a complex arrangement that involves construction companies, a capital lender, project architects and state bodies, Coen explains.
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