TAHOMA, Calif. — California's nonpartisan watchdog agency said in a report Thursday that the state's use of public-private partnerships has fallen short.

The Legislative Analyst's Office said in the report that the two state agencies that entered into the P3 agreements – the California Department of Transportation and the Administrative Office of the Courts – could have done better with the funding tool that brings private companies into public infrastructure projects.

"These departments did not use clear P3 processes and appear to have selected projects not well-suited for a P3 procurement," the LAO said.

Those two departments are responsible for the state's only P3 infrastructure projects in recent years: the Presidio Parkway in San Francisco and a new courthouse in Long Beach.

The state analyst said that it also found that the analyses done to compare project cost options were based on several assumptions subject to significant uncertainty and interpretation, tending to favor a P3 approach.

The private-public financing tool does have benefits, the LAO said, including transferring risks to private partners, greater price and schedule certainty, a higher level of maintenance and a "free up" of public funds for other uses.

But it also said the limitations include higher costs, a higher risk of unforeseen challenges, limited government flexibility, risks rom the procurement process and fewer bidders.

The LAO laid out several ways for California to further increase the benefits of using a P3 for infrastructure projects.

For example, the legislative analyst said the state could better specify P3 selection criteria in state law, require comparative analysis of procurement options and require the Public Infrastructure Advisory Commission to approve P3 projects.

As it stands, state law allows only three state departments — Caltrans, AOC, and the High-Speed Rail Authority to use some form of a public-private partnership.

The authority is in charge of California's mammoth high-speed rail project meant to link San Francisco and Los Angeles. It has outlined ways to use P3s in its business plan, but the project is still in itsearly stages.

At the behest of former California governor Arnold Schwarzenegger, the state began a push towards using P3 financing during his administration. That effort resulted in the Long Beach and Presidio Parkway infrastructure projects. Both have had to overcome lawsuits by public employee unions.

In December 2010, state officials signed an agreement to hire a consortium led by Paris-based Meridiam Infrastructure NA to finance, design, build, operate and maintain the new courthouse facility in Long Beach.

In June this year, Caltrans and the San Francisco County Transportation Authority closed $1.1 billion of financing on the Presidio Parkway project, the first transportation P3 built in the state under the 2009 law.

California entered that agreement with Golden Link Concessionaire, a consortium led by Hochtief PPP Solutions NA and Meridiam Infrastructure.

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