As discussed elsewhere in this report, PPPs offer a number of advantages to sponsors of public transit infrastructure projects. However, achieving these benefits can be impeded by long-standing statutes, regulations and procedures at the Federal, state, and local levels, all of which can influence a transit agency's ability to pursue PPPs to expedite delivery of transit projects.
The success of PPPs can be facilitated or significantly constrained by the legal and regulatory environment in which they function. Key issues to be considered by transit agencies contemplating the use of PPPs in their capital improvement programs, including applications for Full Funding Grant Agreements for projects under the FTA's New Starts program, include procurement rules, contracting methodologies, timing of the PPP agreement relative to the environmental process, regulatory risk, and availability and timing of public investment.
Exhibit 4.1 provides a comprehensive list of the legal and regulatory issues associated with transit PPPs. Certain of these legal and regulatory issues may need to be addressed to apply selected PPP approaches to transit capital projects.
Exhibit 4.1: Summary of Legal and Regulatory Issues Potentially Facing Transit PPPs
| • Legal capacity of parties and legal requirement of sponsor to provide services • Ability of private sector to be involved in surface transportation infrastructure development financing, or operations, particularly foreign companies • Authority of other governmental entities over transit facilities and development access rights • Authority to regulate services, fares, and profit sharing • Ability/restrictions over transferring private contract responsibilities to other parties • Competition and anti-trust regulations • Existence and legal basis of cost recovery for PPP partners • Ability to provide performance guarantees • Property issues of land acquisition - condemnation, use, and disposal • Adequacy of procurement and selection procedures • Contract provisions and surety requirements • Administrative coordination throughout PPP contract • Adequacy of oversight and monitoring procedures • Dispute resolution and liability provisions • Changes in design standards or construction specifications during transit facility development • Shifts in public policy towards PPPs or technology changes that impact the project's viability or provider performance • Special provisions associated with use of Federal funds - Davis-Bacon, Buy-America, Section 13(c) labor protection • Tax and accounting liabilities • Public sector borrowing restrictions • Currency and profit repatriation rules • Property laws regarding proprietary technologies and transfer of know-how |
The requirements for achieving the most out of PPPs are sometimes at odds with traditional methodologies for procurement, contracting and financing of public projects. Certain steps have already been taken to promote use of PPPs for transit projects, including passage of legislation in a number of states. At the Federal level, FTA has long provided significant flexibility in its procurement requirements to accommodate design-build and design-build-operate-maintain contracting. However, FTA has recognized that changes to its rules and procedures for processing requests for financial assistance are needed to incentivize greater investment and risk-taking on the part of private partners.