The main objective of the private sector in a PPP is to achieve a target return on investment on the equity invested. The European private sector expects a return on its investment of 7% to 17% (Jeffers et al. 2006). Data analysis by Infrastructure Management Group shows that the long-term return on equity on recent concession deals involving "brownfield" toll roads was expected to be around 12%, whereas returns of 14% or higher were expected on greenfield projects (Page 2008). Buxbaum and Ortiz (2007) identified windfall revenues as one of the main public concerns related to long-term concessions. This concern was further validated by the public agencies surveyed in this synthesis, where all but one respondent indicated that excessive rates of return to private investors are an important concern.
Revenue sharing provisions, refinancing regulations, and contract rebalancing provisions are strategies that allow the public sector to benefit from revenues that are higher than projected and/or limit excessive returns to the private sector (Mayer 2007). In Virginia, both the Pocahontas Parkway and the I-495 Capital Beltway HOT lanes concessions include provisions requiring the private partners to share toll revenues based on the rate of return achieved. Revenue sharing provisions are also common in Texas' CDA and were also included in the Northwest Parkway lease agreement.
Some observers have suggested that a facility should be returned to the public sector once the private partner has met a specified rate of return, and the French and Spanish concession models allow for termination of a concession once an agreed upon internal rate of return is achieved, although estimating and determining when the rate of return has been achieved could be difficult (Mayer 2007; see also section on Use of Proceeds and Revenue Sharing later in the chapter). This would allow for the benefits of private capital being used for transportation infrastructure, but also guard against excess profits. However, it provides no incentive to keep costs down.
Another way that the public sector can maximize the work performed in a PPP agreement that is based on a set amount of available funding is through "bidding scope," which has been used by the Missouri DOT. On the I-64 reconstruction project, the Missouri DOT set a "not to exceed" price available for the project and provided some minimum scope items, as well as a conceptual design of the project for information. The bidding teams were asked to propose the "most scope" they could deliver for the set price, and this was evaluated as the most significant portion of the "best value" determination. A similar approach is currently being considered for the rebid of Missouri's bridge program to replace more than 550 of the state's lowest-rated bridges. The Missouri DOT will set a price and then list all the bridges to be replaced in a priority order. Bidding teams will be asked to propose how many bridges from this list they would complete for a set price.