The internal structure of the public works authority (PWA) of state and local governments should be split between a unit responsible for planning, project selection, and awarding projects, and an independent unit responsible for contract enforcement and the supervision of contract renegotiations. By splitting the objectives of the two agencies, governments avoid the temptation to weaken enforcement of contracts in favor of better relations with construction companies or PPP firms. The division of responsibilities also leaves less scope for corruption. Our proposal respects the principle that there should be one instrument for each objective. Since the roles of planning and contracting new works are opposed to the objective of supervising existing contracts, separation of the roles is a healthy principle.
The benefits of implementing these recommendations can result in important improvements in U.S. infrastructure delivery. Implementing PVR, by itself, can lead to large reductions in the required return on the project and in the revenue that must be collected from users. (The reduction is as much as 33 percent in some simulations.) Furthermore, if service standards are monitored and enforced by the PWA, enforcement is more likely than it would be without the private role because of the stakes that are at risk for the private partner. Many advantages of PPPs stem from the fact that they bundle construction, operations, and maintenance in a single contract. This provides incentives to minimize life-cycle costs, which are typically not present when the project is publicly provided.
These proposals can go a long way toward ensuring that a project will be successful, allowing PPPs to show their advantages, unimpaired by erroneous considerations.