Some government officials also worry about accountability and transparency, given the high-level profile and media publicity surrounding many PPPs. While such concerns are certainly valid, other countries have managed to keep the public's trust by balancing government stewardship with private participation. They pay close attention to safeguarding labor contracts and environmental standards, and they create a system of checks, balances, and controls for PPPs. Savvy government agencies also make sure that citizens become involved in the process early on and are kept up-to-date as a PPP evolves.
Lippincott advises states to move carefully with PPPs and explain clearly the value of involving private companies and the limits on their participation. "There is no way to overstate the importance of early public involvement in the process and of giving context to private-sector participation," he says. "We have to do a better job of explaining that just because a foreign company collects tolls doesn't mean it owns the roads. The idea of a public-private partnership shouldn't be menacing if it is placed in the context of being just another way for the private sector to help us build what we need. After all, we contracted out road construction work to private companies long before public-private partnerships."
Organizations created specifically to protect the public interest, such as Partnerships BC in Canada and Partnerships Victoria in Australia, help to ensure transparency. Canadian and Australian project information, for example, is available in detail on public websites. The online sites explain, among other things, why a PPP approach won out over the usual procurement process. In its study of Australian PPPs, The Allen Consulting Group concluded that they are far more transparent than traditional projects, based on the amount of available public data it uncovered in its own research.
As for the private-sector partners, they have a very strong motivation for accountability: Their financial success depends on the quality and timeliness of their project work and the long-term performance of the infrastructure services they provide. Little wonder, then, that investors consider PPPs among the most challenging and complicated deals they have encountered. Says Veech, "There is an operational component- figuring out how you're going to run a particular infrastructure asset and determining the fundamental management structure-as well as a complicated legal overlay, political dynamics, and often intricate concession agreements. Taking six to nine months to prepare a bid is not uncommon."
In Florida, transportation department officials are holding the PPP consortium on a major highway improvement project in Broward County to a high performance standard by tying compensation to results. I-595 Express, LLC, the consortium created by ACS Infrastructure Development, was awarded the contract to serve as the concessionaire to design, build, finance, operate, and maintain the project for 35 years. But the state says that the consortium will receive no compensation until the highway improvements are fully operational, thereby providing powerful incentives for meeting the five-year design and construction plan. In addition, performance-based availability payments will be made monthly during the operating period of the project, but the payments can be reduced if quality and performance requirements in the contract are not met and roadways are not available to traffic.29
"The I-595 project is so major that it would have taken years for the state to piece together on its own," says Leon Corbett, project finance manager at the Florida Department of Transportation. "By grouping the entire project into one effort as a PPP, we may have advanced its completion by 15 years." He considers PPPs "still in their infancy in Florida, with six requiring private-sector financing either under way or nearly completed, and several more in the procurement stage." 30
To be sure, public-private partnerships are complex, highly technical arrangements that will require educating government officials and American taxpayers to the benefits and refuting any false notions they may have about the private sector's motives. It's a matter of demonstrating to public officials and taxpayers alike the tangible benefits of PPPs in cost savings and efficient operation of transportation systems and other infrastructure. LambdaStar is currently in the process of privatizing the Harrisburg Parking Authority in Harrisburg, Pennsylvania, after having won the concession. Shaykin finds the privatization process "both interesting and complex." He says PPPs represent "an intersection of cutting-edge finance, political and labor relations skills, real estate sophistication, and operating business skills. It is harder than it looks from the sidelines. But when it works, it's a win-win."
Government agencies shouldn't rush into PPPs until they feel confident about them, but with proper counsel and guidance from PPP experts in the US and abroad, they can acquire the necessary knowledge to consider a partnership rather than rely solely on traditional and often inefficient and costlier approaches to infrastructure renewal. The most successful partnerships will combine strong political backing with rigorous public-sector oversight and provide the right balance of incentives and flexibility to attract participation from the most experienced market leaders in the private sector. Undoubtedly, PPPs can generate a win-win for both government and private-sector partners.
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29 "I-595 Improvements, District 4, Project Overview," http://www.i-595.com/Public_Documents/I-595%20Proj-ect%20Overview_08-04-09.pdf.
30 Interview with Leon Corbett, project finance manager at the Florida Department of Transportation, August 14, 2009.