Cambridge, Mass., officials decided in 1999 to take an aggressive stance against climate change. But, after eight years of struggling to reduce energy consumption, they were not even close to meeting their goals. With the assistance of local foundations, the city in 2007 created the Cambridge Energy Alliance (CEA), a nonprofit that has drawn on expertise from the private and public sectors to reduce the city's environmental impact. Through CEA, thousands of Cambridge residents and businesses are receiving favorable financing and assistance for environmental projects.

Now, the city has set a goal of saving more than $100 million through environmental efficiencies by bringing together small business, energy service companies, industry, community groups and residents into a public-private partnership, says Robert Pratt, CEA president. "They wanted to do something big," Pratt says. "They created CEA to find ways to get everybody on board."

At a time when financial resources are scarce, governments are looking more closely at public-private partnerships as a means of tapping the expertise and economic power of the private sector to make possible large projects that might otherwise fall flat. "There's a need for work to catch up on repair and improvement of our infrastructure. Federal and state funding is not giving nearly enough," says Fort Bend County, Texas, Judge Robert Hebert, who is effectively the county executive. "There are fewer options and more interest in public-private partnerships."

While government officials who have experience in the relationships tout their benefits when designed effectively, they also warn that they can be very complicated and even financially disastrous without proper planning. "These are not the answer to all problems," says Richard Norment, executive director of Arlington, Va.-based National Council for Public-Private Partnerships (NCPPP). "But they are the answer to some of them. They are definitely an option that needs to be examined."

Take careful steps

NCPPP has seen increasing interest in its programs not only from governments around the country, but also from foreign nations, which have traditionally relied on private partners to finance and build projects, with the public paying the cost back over 20 or 30 years, Norment says. What distinguishes public-private partnerships in the United States from private financial initiatives in Europe is the continuous and lasting participation of the government in the project. Where foreign governments often turn projects entirely over to their private partners and then buy them back over 20 or 30 years, U.S. partnerships bring in private firms to add expertise and sometimes financing, but retain ultimate control. How the relationship is ultimately structured depends on what works best for both the public and private partners, Norment says. "I like to say that if you've seen one public-private partnership, you've seen one public-private partnership," he says. "No two are identical."

Critical to the success of any public-private partnership is a comprehensive review of all of the implications of the agreement, Norment says. NCPPP has identified six keys to success, which include strong support from public leadership and an education process that informs the public about how the relationship will work. Also important, he notes, are picking the right partner, continuing public participation, a detailed contract, and a guaranteed revenue stream.

The landscape is littered with projects that did not have sufficient public support, did not look at all areas of possible conflict or were not based on good public policy or good business economics, Norment says. "Three years ago, there was a lot of money sloshing around," he says about naïve business investors. "They got into a lot of trouble."

In addition, stakeholders sometimes misunderstand the impact of the project. He cites a situation in California where, once fully informed, unions moved from opposition to full support for public-private partnerships, including investing their pension funds. "There was a misconception that it would lead to a loss of public sector jobs," he says. "Once they learned about the project, they understood it would actually expand their job base."

Gene Schiller, who has been on NCPPP's executive committee for 10 years, believes that the current environment is friendly to these types of joint projects. "These times lend themselves to a great deal of creativity," he says. "You're only limited by the imagination of the people involved."

The Southwest Florida Water Management District (SFWMD), where Schiller is deputy executive director, has engaged in a number of public-private partnerships. In particular, he points to the water desalination plant that SFWMD built with the Tampa Bay Water District, which is operated by a joint venture of Voorhees, N.J.-based American Water and Madrid, Spain-based Acciona Agua. He says that the complex project required a tremendous level of skill involving a number of different organizations. "Getting players for these projects is easy," he says. "Getting them to play together is the hard part."