Contracts allocate risk. They do not create alignment. The partnerships that endure are built on a shared objective the contract merely records — and the ones that fail usually inverted that order.
The development
Public-private partnerships have become a default tool for delivering infrastructure that public budgets alone cannot fund — airports, highways, transit, and civic facilities financed and operated through long-term agreements between governments and private consortia. As public capital tightens and infrastructure needs grow, the model's use continues to widen.
The reference success is LaGuardia's Terminal B. A private consortium, LaGuardia Gateway Partners, financed and delivered a redevelopment of roughly eight billion dollars in partnership with the Port Authority of New York and New Jersey — rebuilding a terminal while the airport kept operating, and winning recognition as one of the country's most significant recent aviation projects.
But for every Terminal B there is a cautionary tale, and the two outcomes are more instructive together than either is alone.
The evidence
The history of P3s includes high-profile failures. Indiana's privately leased toll road ended in the operator's bankruptcy after traffic and revenue fell short of forecasts. Several availability-payment and toll-concession projects internationally have required renegotiation or public rescue when demand assumptions proved optimistic or risk was mispriced at the outset.
Guidance from public-finance bodies, including the U.S. Department of Transportation's Build America Bureau, converges on a consistent lesson: P3s succeed when risk is transferred to the party genuinely best able to manage it, when incentives are aligned to a shared definition of success, and when governance is built to hold over decades. They fail when the structure is negotiated before that shared objective exists — when each side optimizes its own position and the contract merely formalizes a misalignment.
The pattern is remarkably stable across sectors and countries. The instrument is rarely the decisive variable. The alignment underneath it is.
The tension
This is why treating a P3 as primarily a legal structure mistakes the instrument for the relationship. A sophisticated contract can allocate risk with precision and still produce a partnership that never truly aligns — because a shared objective cannot be drafted into existence after the fact.
The failure mode is familiar and expensive. A structure is negotiated before a shared purpose is established. Each side protects its position. The partnership technically exists but stalls under the weight of incentives the paperwork only recorded. Renegotiation, bankruptcy, or bailout follows — and the public, ultimately, absorbs the shortfall.
The discipline runs the other way: invest in the objective first, establish what success means for the public interest and the private participant alike, align governance around it, and let the structure follow. Slower at the outset; far faster, and far more durable, across the decade that follows.
Meridian View
P3s are most often analyzed as financial and legal structures. The record suggests the decisive variable sits earlier and is harder to model: whether the public and private parties actually share a definition of success before the paperwork begins.
Terminal B and the bankrupt toll road were not separated by contract sophistication. They were separated by whether risk sat with its right owner and whether the objective was genuinely shared — the alignment work that precedes, and outlasts, any clause.
The practical implication is uncomfortable for a deal-driven culture: the most important work in a P3 happens before there is a deal to negotiate. Skip it, and the structure simply formalizes a partnership that was never aligned.
A framework · What Separates Durable P3s
Across the successes and the failures, four conditions recur. Where they hold, partnerships endure; where they are skipped in favor of a clever structure, the contract outlives the alignment it was supposed to record.
- 01
Shared Objective First
A definition of success both the public and private parties genuinely hold — established before the structure, not assumed to emerge from it.
- 02
Risk Held by Its Best Owner
Each risk transferred to the party actually able to manage it, rather than pushed onto whichever side has the least leverage in negotiation.
- 03
Realistic Assumptions
Demand and revenue forecasts stress-tested against the optimism that has sunk toll roads and concessions — honesty about downside built in from the start.
- 04
Governance Over Decades
Decision-making and dispute mechanisms designed to hold across political cycles and the full life of the asset, not just to close the deal.
Strategic Implications
- For governments: resist negotiating structure before a shared objective and honest risk allocation exist; the cost of skipping that work is renegotiation, bailout, or a stalled asset the public still pays for.
- For private participants and investors: stress-test demand assumptions against the optimism that has sunk prior concessions, and confirm that each risk you accept is one you are genuinely best placed to manage.
- For both sides: design governance to hold across political cycles and the decades of the asset's life — the deal is the beginning of the relationship, not its conclusion.
Questions for Leaders
- 01Have we established a genuinely shared definition of success before negotiating the structure — or are we hoping the contract will create alignment?
- 02Is each risk being transferred to the party actually best able to manage it, or simply to the party with less leverage?
- 03Have our demand and revenue assumptions been stress-tested against the failures, not just the success stories?
- 04Is the governance built to endure across political cycles and the full life of the asset?
Sources & Further Reading
- Public-private partnership (P3) guidance and project resourcesU.S. Department of Transportation — Build America Bureau · 2024
- LaGuardia Terminal B redevelopmentLaGuardia / Port Authority of NY & NJ · 2018–2022
External sources are reference points used to establish evidence. Their inclusion does not imply any involvement by Meridian in the developments, transactions, or initiatives described.
Meridian Perspectives are the considered views of the institution, offered to inform the decisions of the leaders we serve.Last reviewed · February 2026