Across the country, public sector agencies are seeking creative solutions to closing an increasing gap between transportation infrastructure costs and funding. Public-private partnerships (PPPs) have the potential to provide part of this needed investment. In addition, there are those who believe that PPPs can bring cost savings and efficiencies on project delivery and operations, although there is not much evidence to confirm this belief. One recent study commissioned by Infrastructure Partnership Australia (2007) evaluated the efficiency of PPPs relative to traditional procurement, and found that they were more cost-efficient and more frequently completed within schedule. Given the right incentives, private investors have shown a willingness to invest heavily in new and existing transportation infrastructure, and properly structured contracts can result in cost savings. Much of the information promoting or criticizing PPPs comes from those who have a direct stake in the outcome of the debate.
In recent years, interest in PPPs for highway infrastructure projects has surged in the United States as a result of a confluence of several trends (Brown 2007; Zhang 2008):
1. Automobile travel demand is high and is expected to continue growing;
2. Inflation has outpaced the rate of motor fuel tax increases, thus decreasing available revenue for trans portation investment, and significant existing state municipal debts have limited public agencies' abilities to obtain more money from the tax-exempt bond market;
3. Transportation infrastructure costs are rising as a result of construction cost inflation and the aging of existing infrastructure; and
4. Pension funds and insurance companies, both domes tic and international, have enormous amounts of cash to invest in steady, predictable, long-term cash flows.
It was the high-profile asset monetization deals of existing facilities (referred to as brownfields) on the Chicago Skyway- $1.83 billion in up-front payments, and the Indiana Toll Road-$3.8 billion in up-front payments, that really caught the attention of elected officials. Some saw such deals, referred to now generically as public-private partnerships, as a way to tap value from existing infrastructure. Others saw these contracts as relinquishing control over decision making on public assets to the profit-motivated private sector without adequate public oversight.
Such asset monetization agreements are only one type of PPP that can be used for highways, but they have inspired great excitement and debate over the merits and pitfalls of PPPs. One of the primary areas of concern is how are public interests protected and what information is available to decision makers such that the public interests are protected. A recent report from the Government Accountability Office (GAO) concluded that although PPPs appear to be a viable alternative to support transportation investments, "it is difficult to be confident that [the public] interests are being protected when formal identification and consideration of public and national interests has been lacking, and where limited upfront analysis of public interest issues using established criteria has been conducted" (GAO 2000b).
This synthesis examines the information available in the United States and internationally in decision making related to PPPs. Note that a PPP can be used for all manner of transportation projects: highways, transit, freight, air, and waterways. This research focuses on the use of PPPs for highway projects, but sometimes uses examples from other modes, where appropriate.
PPPs in the United States are evolving, and there are no set rules that prescribe specifically when and how these partnerships should be pursued and implemented. States are learning and adapting as they acquire experience and gain more exposure to the various PPP mechanisms. There is no "one-size fits all," and the ultimate decision of what type of PPP is appropriate for a particular project will depend on many factors, making each arrangement unique. Nevertheless, governments can draw lessons from United States and international experience that will help craft an arrangement that achieves the transportation goals and needs, while protecting the public interest.