With a full delivery approach, the construction contractor provides a wide variety of services beyond construction to the project sponsor. These services generally begin during the design phase and may continue through the operation and maintenance of the facility. The potential benefit of the Full Service Delivery approach is that it allows the project sponsor to leverage its resources throughout the design, construction, and operation of the facility. A primary form of full-service delivery is the Long-Term Concession or Lease Agreement.
Long term concession or lease agreements involve the lease of publicly financed facilities to a private sector concession team which provides full facility services for a specified time period. Under the concession lease, the private sector team agrees to pay an upfront fee to the public agency in order to obtain the rights to collect the revenue generated by the facility for a defined period of time (usually from 25 to 99 years). In addition to the concession fee, the concessionaire agrees to operate and maintain the facility, which may include capital improvements in some instances. Long term lease agreements are awarded based on a competitive process to a qualified bidder with the best bid price. In 2006, the major toll highways in France were transferred to private concessionaires offering the highest price for each of the four systems which were previously operated by quasi-governmental companies.
The potential benefits of long term lease agreements include:6
• Transferring responsibility for increases in user fees to the private sector;
• Generating large up-front revenues for the public agency;
• Transferring operations, maintenance, and capital improvement responsibilities to the private sector;
• Transferring most project risks to the private concessionaire; and
• Taking advantage private sector efficiencies in operations and maintenance activities.
There are many governments and transportation agencies considering long-term leases or concession agreements to take over responsibility for existing facilities (brownfield projects such as in the case of the French toll highways) or to develop new facilities (greenfield projects, a number of which are presented as case studies in subsequent chapters of this report). In Europe and Asia, transportation projects involving private financing are delivered using the concession or BOT/BTO project delivery approaches.
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6 Federal Highway Administration PPP website, www.fhwa.dot.gov/ppp.