Loss of Public Control and Flexibility

Some critics warn that PPP agreements-especially for brownfield concessions that may last for several generations-constrain the government's ability to make further policy decisions that affect the road and its users for the duration of the contract.47 In response to the assertion that well-crafted PPP contract provisions enhance public control and accountability (see Public Control and Accountability on page 10), it has been argued that "no contract can be crafted well enough to … predict the public's needs and contingencies in the distant future," especially contracts that last more than 35 years.48 One Harvard scholar has critiqued what he calls the "overuse of long-term concession contracts as the method of regulation."49 To specifically address concerns about lengthy contracts, European Union countries limit PPP contracts to between 21 years and 35 years.50 Likewise, some states such as Florida, Maine and Mississippi-and Puerto Rico-have laws that restrict term lengths (see Appendix B).51 Some say, however, that these limits may prevent a project from achieving the best possible value for money, and that concession terms should be decided on a project-by-project basis.52

Noncompete or similar clauses in PPP agreements, especially for brownfield concessions, also raise concerns about potential loss of public control.53 These clauses prohibit, limit and/or elicit compensation for highways or other transportation facilities that may draw traffic from a leased toll road. The public sector's ability to deliver needed infrastructure is thus constrained. As a result of noncompete clause controversies and growing experience with other alternatives,54 the common approach now is for PPP agreements to include limited compete or compensation clauses that address the predominant potential financial risks from competing facilities, but that also seek to protect the public interest.55 Some states-such as Arizona, California, Colorado, Florida, Mississippi, North Carolina and Texas-prohibit noncompete clauses in statute (see Appendix B).56

In general, concerns about public control are addressed in PPP contracts by termination or "buy back" clauses that define how a facility may return to public control,57 as well as renegotiation clauses that define how either party may amend the contract. Engaging in termination, buy-back or renegotiation, however, may incur significant added costs and create difficulties for the public sector.58