Transparency and Public Participation

The lack of transparency in the PPP process has been voiced as one of the main concerns throughout the literature review, including the newspapers and media reports, and it is mentioned as an important issue by both supporters and opponents of PPPs. Buxbaum and Ortiz (2007) noted that transparency in the PPP process is key for public support of long-term concession agreements. The Chicago Skyway and the Indiana Toll Road concessions are particularly noted as examples in which transparency was lacking from the public perspective (as reported through the news media), even though public officials involved in these deals believed the process to be transparent and both transactions were subject to legislative review and approval of final terms. Both the Regional Plan Association of New York, New Jersey, and Connecticut (Regional Plan Association 2007) and the U.S. Public Interest Research Group released position papers highlighting the importance of transparency as various states (including New Jersey, Pennsylvania, and Texas) unveiled their intentions to pursue long-term concessions on existing and new toll facilities. The RPA (2007) suggests full disclosure of:

•  Current and proposed contract standards,

•  Toll policy under PPP,

•  Revenue losses related to tolls used for other investments,

•  Noncompete clauses or potential limitations to expansion of other transportation infrastructure, and

•  Transaction costs incurred by public sector.

RPA further suggests that adequate opportunities for public input and legislative review are needed. Baxandall (2007) proposed that contract documentation should be available for public scrutiny at least six month before a deal is signed, and that legislators should have a vote on the final terms of a PPP deal. However, private parties may not be able or willing to hold their financial offers for such extended periods of time, and the political risk that this would entail could discourage private entities from submitting proposals.

In our survey of state DOTs, only one state considered transparency as a "not important" concern, and this state has not considered or used PPPs to deliver highway projects. Approximately 30% of the interested parties survey respondents mentioned transparency as one of the main concerns related to and a factor to consider by decision makers on PPPs. When asked about measures used to protect the public interests, only one state (of 26 respondents) indicated that public access to information related to a PPP proposal was not important, whereas six states indicated this measure to be not applicable in their PPP process.

A PPP delivery system is characterized by a multistage process for contractor's selection (expressions of interest, contractors' qualifications, proposals, and best offer and negotiation), a multi-criteria evaluation process for contractor's submissions for each stage, and an agreement that generally covers all project phases of design, construction, and operation (Abdel-Aziz 2007). Because this method seeks more innovation from private partners, those partners have more intellectual property to protect, and thus transparency is necessarily lessened.

Although public scrutiny of decision-making is important to accountability of government spending, all rationales for maintaining confidentiality during the proposal process relate to ensuring a competitive tendering process that provides private bidders with incentives to deliver innovative designs for the lowest possible cost (Siemiatycki 2007). In the USC study, Buxbaum and Ortiz (2007) suggested that the public sector should be clear and up front about what type of information should remain confidential and provide an explanation as to why confidentiality is necessary during the proposal process. Confidential information, however, could be kept at a minimum to ensure public support. A balance between temporary confidentiality and full disclosure of selection criteria, scoring and agreements was proposed in our interested parties' survey as a mitigation measure to the concern of transparency. It should be noted that final awards and contracts between the public and private sectors are subject to the state freedom of information acts. Both Victoria, Australia, and British Columbia, Canada, have developed public disclosure policies that are aimed at achieving transparency in procuring PPP projects. The guidance developed by Partnerships British Columbia on public disclosure (2007) includes guidance on the level of disclosure by milestone of the PPP process.

Best practices have been developed to promote transparency in the PPP procurement process (Australian National Audit Office 2001). The International Technology Scanning report issued by Jeffers et al. (2006) similarly notes the important role auditors play in the procurement of PPP projects. The scanning team's recommendations include:

•  Implementing the use of a process auditor position for each PPP project;

•  Conducting audits throughout the project life cycle, not just of the end construction costs;

•  Involving internal audit staff and financial experts early in the tendering process to improve the quality of high way project Request for Proposal (RFP); and

•  Specifying outcomes desired and allowing contractors the opportunity to determine the detailed specifications to construct, maintain, or operate the project based on the outcome specifics.

Although specifying outcomes rather than outputs is a major driver of the innovation found in a PPP, this best  practice was actually the cause of a transparency issue in the case of The Canada Line. Siemiatycki (2007) reviews the confidentiality maintained during the tendering process of the extension of Vancouver's urban rail system by obtaining original technical, financial, and planning documents after bidding had ended. Using standards developed by the Australian National Audit Office (2001), he found that the tendering process followed, and in some case exceeded, best practices for maintaining confidentiality. These practices included withholding select technical and financial information from public scrutiny during the competitive tender process, releasing entire evaluation reports at the conclusion of the procurement process, and commissioning a series of independent reviews from consultants and a former Auditory General of British Columbia.

Siemiatycki concludes that despite these attempts at transparency, resulting public and elected public official dissatisfaction with one of the chosen implementation methods could have been alleviated by: (1) appointing an independent information commissioner to hear cases for and against disseminating information to the public, (2) sharing all information with elected officials so that they may better decide whether to approve or reject a project, and (3) requiring a government auditor general to certify that each summary report released throughout the project procurement represents the full range of issues contained within the full length document.

Jeffers et al. (2006) similarly recommend that an independent process auditor ensure that all necessary legal, accounting, business plan, and policy issues are addressed from the development of a PPP proposal through the final bid acceptance. Furthermore, states need to develop in-house capabilities to negotiate with, and oversee the operations of, private sector partners (Jeffers et al. 2006; Oberstar and DeFazio 2007). Non-in-house auditors and consultants may potentially have clients on both sides of an agreement and therefore may have conflicts of interest.

The complexity of a PPP can make it easy to hide true costs and benefits related to a project from the public (Bloomfield 2006). One of the true 'innovations' brought on by lease-purchase agreements is that payments made to the contractor are treated as operating expenses rather than capital expenditures. Thus, the public sector can enter into long-term leases without obtaining voter approval, maintain compliance with statutory debt limits, and avoid reporting long-term lease obligations as debts. These "off-budget" or "off-balance-sheet" financing methods avoid restrictions on debt, but do not avoid debt itself. Bloomfield recounts an example in Plymouth County, Massachusetts, in which misleading language suggested to the public that a private investor was paying for a new correctional facility, whereas tax payers were required to pay the entire project cost. Examples such as this underscore the need for government to make the PPP process as transparent as possible to the public.

The Virginia DOT has developed a process to review PPP submission that incorporates transparency and public participation. PPP proposals are reviewed by an Independent Review Panel that is comprised of members from various stakeholder groups. Furthermore, proposals are distributed to affected jurisdictions, and these are provided with a 60 day period to review and submit comments.

Transparency is not limited to the procurement process, and it is important that it remain beyond the procurement process, particularly when revenue sharing provisions are included in the PPP agreements (Samuel 2005). The public should have access to annual traffic and revenue information, audited financial statements, and other documents used to determine the toll revenue returned to the public sector. The concession agreements for Chicago Skyway, Indiana Toll Road, and SR 125 in California mandate public disclosure of annual finances and performance (Replogle 2007).