Given their many positive attributes, why are PPPs still in their nascent stage in the US? For one thing, studies indicate that government officials continue to harbor misgivings and misconceptions that PPP proponents must be prepared to address. Often, the reluctance to consider PPPs reflects a lack of understanding of the details, based on a dearth of comprehensive information. A 2009 survey by consulting firm Halcrow Inc. shows a clear correlation between experience and interest in PPPs. While 70 percent of 75 state and local officials surveyed know of projects outside their own states, 61 percent have had no direct PPP experience and don't fully understand the terms and benefits. But more than 90 percent of the surveyed state and local officials with experience with PPPs expressed interest in them.26
Still, three-quarters of the officials expressed ambivalence. Officials with knowledge of PPPs cited the difficulty of implementing and contracting such projects, while the inexperienced officials were worried about losing future cash flow from the projects and said that government manages transportation better than private companies do. Both groups also expressed concern about unacceptable profits made by private businesses at the expense of users, and inexperienced officials particularly worried that a private entity might skimp on maintenance and repairs to boost profits.27 But the economic downturn isn't perceived as a major obstacle to more PPPs: 71 percent of the officials consider them just as attractive or more so today.
"The availability and access to tax-exempt municipal bonds to finance infrastructure projects has historically provided a mechanism in the US that is not readily available around the world," says Pagdadis, adding, "While this is a legitimate reason to consider traditional funding streams, proper due diligence of a project will look at the whole life-cycle cost of the project, not just the capital cost, and will subsequently determine the best way forward."
Public opinion is another hurdle to the spread of PPPs in the US. Some Americans view public-private partnerships with suspicion, particularly when partners from abroad are involved. Others fear foreign control of vital assets and other infrastructure systems. Like some public officials, they suspect that foreign or domestic private companies may end up reaping exorbitant profits and exploiting the government and consumers by charging ever-higher usage fees. Such public-perception issues have generally slowed the acceptance of more PPPs, at least in transportation. "It's very asset-specific," says Morgan Stanley's Veech, adding that parking facilities and the water supply, for example, aren't necessarily considered core government functions. "Citizens generally don't care if the meter maid is hired by a private company," he says. On the other hand, "real 'trophy' assets often have a more complicated political dynamic. The New Jersey Turnpike, for example, is close to a cultural icon and evokes a wide range of opinions and emotions whenever the issue of selling it is raised."
Texas has encountered resistance to its PPP efforts, partly because of fears about losing state sovereignty over the roads and sacrificing national security, according to Chris Lippincott, a spokesman for the Texas Department of Transportation. "The debate has been skewed by misplaced anxiety, especially about foreign participation," he says. Indeed, in 2007, Texas limited the department's authority to create comprehensive development agreements (CDAs) that involve private partners. "There was a feeling," Lippincott says, "that Texas was moving too fast and too far and that we should call time out on private-sector partnerships. But we will continue to involve the private sector where it makes sense and is legal." Several Texas CDA projects involving managed toll lanes are proceeding with private-sector involvement.28
While public officials certainly must be sensitive to the public's reluctance to bring international partners into major US transportation projects, they may be able to put to rest unfounded fears about losing control of America's infrastructure to foreign companies and governments. A sound public communication strategy is essential: By communicating a PPP's benefits, such as the expected savings to taxpayers, and demonstrating the use of local labor and other resources in the project, they are more likely to win popular backing. Many officials also acknowledge that after years of underinvestment in infrastructure and the loss of expert tradespeople, engineers, and project managers, foreign companies are bringing new advances in construction methods. These advances directly benefit Americans while spurring new investment in technology, methodologies, and human resources by US engineering and construction firms. Of course, the best way to defuse negative perceptions will be to produce more successful PPPs. There is understandably concern about the unknown, but people will become more comfortable and accepting after they see some positive results in their communities. "Public support is often more easily secured if money is earmarked for a specific project or purpose, such as repairs for crumbling roads or bridges, rather than being utilized for general budgetary purposes," says Veech.
___________________________________________________________________________
26 McGraw-Hill Construction, Public-Private Partnership: Accelerating Transportation Infrastructure Investment, 2009.
27 "Time Is Right to Educate Government Officials on PPP, Survey Says," LBO Wire, Dow Jones & Company, Inc., May 8, 2009.
28 Interview with Chris Lippincott, spokesman for the Texas Department of Transportation, August 13, 2009.