In the House Report accompanying the FY 2004 Department of Transportation (DOT) Appropriations Act, the House Committee on Appropriations requested the Secretary of Transportation prepare and submit a report on public-private partnerships. The Committee report specified the following:
Public-private partnerships.-The Committee includes a new provision (sec. 636) providing a sense of the House that public private partnerships (PPPs) could help eliminate some of the cost drivers behind complex, capital-intensive highway and transit projects. Using qualification-based selection and performance-based contracting, PPPs integrate risk sharing, streamline project development, engineering, and construction, and preserve the integrity of the NEPA process, to result in significant schedule and cost advantages over traditional infrastructure development processes. To further demonstrate the effectiveness of PPPs, the provision encourages the Secretary of Transportation to apply available funds to select projects that are in the development phase, eligible under title 23 and title 49, except 23 U.S.C. 133(b)(8), and that employ a PPP strategy. The goal of this effort would be to evaluate how PPPs provide means to achieving cost savings. The Secretary is also directed to work with states and local entities to identify and eliminate existing impediments to successful implementation of PPPs and provide a status report to the House and Senate Committees on Appropriations within 120 days of enactment of this Act.[2]
The U.S. DOT has long encouraged the use of public-private partnerships. We welcome this opportunity to highlight the cost and time saving benefits that can be realized when transportation projects are built using a public-private partnership. To provide a fuller understanding of these benefits, our report includes a discussion of the history of public-private partnerships in transportation and a description of public-private partnership initiatives already undertaken by the U.S. DOT. The report is also designed to be a resource document for States that are interested in using public-private partnerships as an alternative method to the traditional procurement processes.
The report is a compilation of information collected from a variety of sources. The U.S. DOT first reviewed existing literature on the use of public-private partnerships on transportation projects. This review included reports on public-private partnerships authored by the FHWA, GAO, CBO, State governments, private sector consultants, law firms, and international scholars. Because interest in public-private partnerships has only recently reemerged, the literature available is not extensive. Consistent with the Committee report language, the U.S. DOT also invited State Departments of Transportation (State DOT) who are actively engaged in the use of public-private partnerships, as well as private stakeholders (contractors, designers, consultants, law firms, and trade associations), to share their experiences with public-private partnerships on transportation projects, identify impediments to the use of such agreements, and to provide their recommendations on how to eliminate these impediments.[3]
Consultation with local officials is a vital yet sensitive issue within the transportation planning process. Within metropolitan areas, the MPO provides the venue and policy context for this. In the development of a Statewide Transportation Improvement Plan (STIP), the MPO must consult with local officials, non-governmental organizations, businesses and other interested parties on the projects being considered for funding. Outside of metropolitan areas, FHWA and FTA are working to facilitate the most effective consultation processes within each State. FTA and FHWA will continue to ensure effective consultation between States and local officials in non-metropolitan areas in reviewing statewide planning and, specifically, in making findings in support of FTA and FHWA STIP approvals.
Chapter II defines a public-private partnership and discusses the history of public-private partnerships in both highway and transit construction. Consistent with the language in the House Report, public-private partnerships are defined broadly as a contractual agreement formed between public and private sector partners, which allows more private sector participation than is traditional. Chapter II also provides an overview of the U.S. DOT's initiatives to date to encourage the greater use of public-private partnerships within the highway and transit arena. Although public-private partnerships are often thought of as a recent innovation in public surface transportation, history shows that this is not a new concept. Chapter II examines where we have been and where we are concerning public-private partnerships. This information will help lay the foundation for understanding the value of public-private partnerships and assessing impediments to their formation.
Chapter III highlights the value of public-private partnerships and the primary benefits that may include delivering a higher quality transportation project quicker and cheaper when compared to traditional contracting methods.[4] This chapter begins with a discussion of the cost and time savings that can be realized with the use of innovative contracting methods such as design-build, warranties, and cost-plus-time bidding. It then explores additional factors that contribute to cost and time savings including: the flexibility to use private-sector financing, intellectual capital, and management resources; allocation of risk to the party best able to manage it; and the incorporation of life-cycle costs in the price of the project. It also describes some of the risks involved in using public-private partnerships.
As requested by the House Report accompanying the FY 2004 DOT Appropriation Act, Chapter IV explores the major impediments to the formation of public-private partnerships. These impediments include State laws and policies, local opposition, private sector concerns, Federal requirements attached to Federal funding, and Federal financing. This chapter serves as a compilation of the impediments that have been identified by the commenters to the report and in the information used in this report and is not necessarily suggesting changes to Federal law. The Administration's SAFETEA proposal contains recommendations that address some of these impediments. Others will require further analysis to assess the most effective way to respond. A discussion of Federal funding and financing is included because it has been cited as a possible barrier due to the requirements that must be followed when a State or locality elects to use Federal money on a project. The literature on public-private partnerships notes that the complexity of Federal laws can limit private-sector participation in highway and transit projects.
Chapter V is a compilation of the stakeholder suggestions on administrative, regulatory and legislative changes that would remove impediments to the formation of public-private partnerships. The recommendations focus primarily on changes to environmental and procurement practices and laws. The U.S. DOT's role regarding these comments is that of a conduit for the delivery of a significant number of stakeholders' recommendations to Congress. These comments were provided by those stakeholders with an interest in or experience with public-private partnerships. This report does not represent the views of all potential stakeholders. Furthermore, the U.S. DOT did not place a fine filter on the comments, but presented all thoughtful recommendations in this chapter. Although the Administration supports a number of changes similar to those discussed in this section, the recommendations listed in this chapter are strictly those of the submitters, not the Administration.
Chapter VI explains proposals included in SAFETEA that U.S. DOT believes will help overcome some of the impediments identified in this report. These SAFETEA proposals include: amendments to TIFIA; a commercialization of rest areas pilot program; environmental streamlining proposals; expanded tolling programs; amendments to the design-build statute; and expanding the use of private activity bonds to include highway and freight transfer facilities.