P&O said investment bank Merrill Lynch had been appointed to prepare Bovis for a flotation, although this is still some time away. The sale will be part of a wide-ranging disposals programme.
P&O chairman Lord Sterling said March 2000 is the firm's preferred date, although it is willing to wait another year to obtain the right price for its 5000-strong subsidiary.
It is understood to be looking for £350m, which is the sum it was asking from WS Atkins during merger talks last year.
When the talks broke down, it was thought that P&O would retain ownership of Bovis, but executives decided to push ahead with a disposal at the end of last month.
Sterling said: "Having reviewed with the management how best to meet the long-term objectives of Bovis, its clients and its employees, we have decided to float the company."
Building last week reported that Bovis chairman Sir Frank Lampl and chief executive Luther Cochrane are to tour the City to prepare investors for a flotation.
Sir Frank is to remain on the P&O board and as head of Bovis until the flotation, after which he is expected to retire.
Sterling was at pains to emphasise that Bovis is not a traditional contractor, and attempted to boost interest in the company by describing it as more of a services provider.
He said: "Bovis is not an ordinary construction company. Its key qualities are its relationships –it is not adversarial. You will see it emerging more as a support services company, although of course specialising in construction.
"It is also one of the only global construction companies. In the USA, it is bigger than Bechtel."
He said P&O was examining the possibility of floating Bovis in the USA, where contractors are more highly regarded as an investment. He does not envisage P&O retaining any interest in Bovis.
Bovis' operating profit rose 30% to £21m in 1998. About 70% of its income is derived from repeat business.
Sterling added: "With its strong worldwide client base, global spread and long-standing reputation for a relationship culture, Bovis can look forward to continued growth in years to come.