At the end of the concession, the O&M of the facility, along with the right to collect tolls (if any), reverts back to the public sector. It is in the public interest that the facility is returned in good condition, preferably requiring none to minimal public investment. The PPP contract terms could specify the condition at which the facility must be returned to the public, and may include penalties to the private sector for not meeting these requirements.
Opinion/Comment from "Other Individuals/Interest Groups" Survey: Not clear whether the private lessor will exercise good stewardship for the facility. When the lease is up, in what condition will the facility be returned to the public? |
For example, hand-back requirements in the Port of Miami agreement include a hand-back reserve, which is built annually in the later years of the concession term. The hand-back reserve is used to ensure that the facility is turned over to the Florida DOT in top condition. Failure by the concessionaire to provide annual deposits to the hand-back reserve will result in deductions to the annual availability payments (Clary 2008).
The PPP agreement for the I-495 HOT lanes in Virginia requires the concessionaire to provide a letter of credit or performance bond that can be used by the Virginia DOT if the hand-back requirements are not met. A PPP contract with heavy emphasis on performance standards for compensation could also protect the public interest by ensuring that a specific condition is maintained on the facility throughout the full concession term. In the United Kingdom, the Highway Agency retains 40% of the payments during the last five years of the concession, and disburses the payment to the concessionaire once it determines that the facility has been returned to the government in good condition (Izquierdo and Vassallo 2004).