Public-Private Partnerships in Higher Education: A Decision Guide for CFOs and Trustees

The pitch sounds familiar: Accelerate delivery, transfer risk and preserve borrowing capacity. Public-private partnerships (or P3s, as they’re commonly known) promise universities a way to address capital needs without straining traditional financing tools.

Sometimes they deliver on that promise. Often, they don’t.

The difference typically comes down to whether institutional leadership treats a P3 as one tool among several rather than the default answer to every infrastructure challenge. For CFOs and trustees, the critical question isn’t whether P3s work in higher education. It’s whether they make strategic and financial sense for your institution.

The framework below draws on current market experience and insights from professionals who regularly guide institutions through these complex transactions.

Start with the Problem, Not the Solution

Robert Alfert has seen what happens when institutions lead with structure rather than strategy. As a partner at Nelson Mullins, he advises universities, state agencies, and public entities on large-scale infrastructure and development projects across the country. Alfert’s practice spans higher education, transportation and public-sector P3s, giving him a clear view of what separates successful projects from expensive mistakes.

“I always start with the question, ‘How did we get to P3?’” Alfert said. “Have we evaluated all other delivery methods and financing options to make sure it’s the right one?”

That question matters more than most boards realize. Institutions that begin with “we need a student housing P3” have already limited their options. Those that start by identifying institutional priorities — enrollment growth, workforce recruitment, deferred maintenance, underutilized assets — create space for better solutions.

Alfert’s preferred approach is to bring senior leadership together for a working session with a clean slate. Build from a wish list, not a predetermined structure. “You start from a whiteboard, and you’re surprised how quickly ideas take shape when the right expertise is in the room.”

Only after priorities are clear should the conversation turn to delivery method and whether a P3 is the right fit.

Assemble Your Advisory Team Before You Need Them

Timing matters in P3 transactions. Institutions that engage advisors only after deciding to pursue a P3 typically get narrower advice focused on a predetermined path rather than evaluating alternatives. Many times it’s the P3 industry leading the path through unsolicited proposals, which (on their face) may appear the optimal solution.

Alfert frames the advisory team as “three legs of the barstool:” legal, financial and technical. Each brings a different lens to project delivery and finance options, risk allocation, lifecycle cost and operational feasibility. They’re most effective when working together from the outset, not sequentially.

For trustees, this is a governance decision with material consequences. Advisor selection and timing can determine whether leadership is evaluating options or simply validating assumptions.

Face the Cost-of-Capital Reality

Here’s the uncomfortable truth: Private capital costs more than tax-exempt financing. Sometimes significantly more.

“Private capital is very expensive compared to tax-exempt bond financing,” Alfert noted, citing projects where private rates ran multiples of traditional public borrowing costs.

This doesn’t automatically disqualify a P3. But it demands clarity about what the institution is buying with that premium (known as the “Value for Money” analysis), such as:

• Preserved bonding capacity for other strategic priorities
• Accelerated delivery timelines
• Performance guarantees for construction and lifecycle maintenance
• Transfer of specific risks the institution cannot or will not manage internally

If you’re paying more for capital, what certainty, speed or flexibility justifies that premium?

Too many institutions focus on monthly payment affordability without understanding the total cost difference. CFOs should run the numbers clearly. Compare the all-in cost of private financing against traditional tax-exempt debt, and quantify what the institution receives in return for that delta.

If the answer is speed or convenience, that may not be sufficient. If the answer is, “We’re transferring construction risk we can’t manage and preserving borrowing capacity for our academic building program,” that’s a different conversation.

Not All P3s Look the Same

The traditional design-build-finance-operate-maintain (DBFOM) model remains common, but the market has evolved. Institutions are increasingly customizing structures based on specific needs and risk appetites.

Recent variations include:

• Design-build-finance (DBF) arrangements where the institution retains operations
• P3-style financings with no user-fee revenue component
• Hybrid models transferring only select assets or risks
• Ground lease structures for mixed-use development on underutilized land

“We’re seeing a lot more creativity in how these deals are structured,” Alfert observed.

For decision-makers, the relevant question isn’t which label applies. It’s which responsibilities and risks should remain with the institution versus transfer to a private partner. The structure should follow from that answer, not dictate it.

Beyond Student Housing: Expanding Use Cases

Student housing dominates higher-ed P3 activity because it’s familiar, revenue-generating and relatively standardized. But smart institutions are looking beyond the obvious.

Emerging applications include:

Workforce and faculty housing: Particularly in high-cost markets, some institutions are reframing housing as a talent strategy rather than a real estate transaction. How does housing availability affect faculty recruitment and retention? Can the institution compete for talent without addressing this constraint?

Mixed-use development: Underutilized land near campus can support projects that serve multiple purposes, like student housing, retail, community amenities, faculty housing and revenue generation.

Parking and auxiliary services: These are less glamorous than housing but often good candidates for performance-based partnerships where private operators can assume demand risk.

Select athletics and community facilities: When identifiable revenue streams exist (memberships, naming rights, event revenue), these can support P3 structures.

The common thread: institutions are getting more strategic about matching project type to delivery method, rather than defaulting to traditional approaches.

Build Governance into the Deal, Not After

P3 agreements span 30, 40, sometimes 50 years. The institution’s work doesn’t end at financial close. Instead, it shifts from dealmaking to long-term partnership management.

Effective governance requires:

Clear, measurable performance standards – Use specific metrics with consequences for underperformance.

Financial transparency and audit rights – The institution must retain visibility into how the private partner is managing the asset and whether projected returns are materializing as structured.

Defined change processes – Projects evolve. The agreement should specify how changes are requested, evaluated, priced and approved (with clear authority levels).

Regular reporting to senior leadership and trustees – Provide not just annual updates, but ongoing visibility into performance, financial health and emerging issues.

Institutional expertise – Someone on staff needs to understand the agreement thoroughly and monitor compliance. This can’t be outsourced entirely.

Institutions that treat governance as an afterthought often discover — years into a 40-year agreement — that they’ve created a costly, inflexible relationship with limited recourse for addressing problems.

Three Questions Every Trustee Should Ask

Before approving a P3, board members should be able to answer these clearly:

1. What institutional problem are we solving? Not “we need housing” but “we’re losing students to competitors with better housing options” or “our current housing stock is driving $30 million in deferred maintenance.”
2. Why is a P3 better than traditional delivery for this specific project? What are we gaining (speed, risk transfer, preserved bonding capacity) and what are we giving up (cost, control, flexibility)?
3. Which risks are we transferring, and which remain ours? Be specific. Construction risk? Operating risk? Demand risk? Market risk? For retained risks, does the institution have the capacity to manage them?

If leadership can’t answer these questions clearly and in detail, the institution should pause before moving forward.

The Bottom Line

A well-structured P3 should feel inevitable in hindsight — the right tool for a specific problem at a particular moment. It should be easy to explain to stakeholders, oversee and justify financially. If it’s not, that’s a signal.

The best P3s emerge from clear priorities, early expert involvement, honest financial analysis and structured governance. The weakest ones follow from pressure to do something without first defining what problem needs solving.

A seasoned higher education CPA firm is a great resource when considering a P3. Contact us to discuss how this framework applies to a project or opportunity at your institution.

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