Non-compete clauses may be necessary for some projects and not for others. These clauses may include other requirements that a minimum number of users travel on the facility, in effect limiting the ability of public agencies to develop alternative routes. Non-compete clauses can have a significant effect on traffic demand on a PPP facility, toll revenues, and profits for private management firms. With non-compete clauses, an increase in traffic demand directly leads to an increase in cash flows for private management firms. In a situation where there is no alternative road, non-complete clauses create a geographic monopoly situation, which allows faster and/or larger toll increases. Because of restrictive non-compete clauses in the contract, California had to buy back its lease of the express lanes of SR-91 when the state DOT wanted to expand the highway capacity between Riverside and Orange Counties (Sullivan 2003; Swan and Belzer 2008). Indiana accepted non-compete clause which, combined with a loose toll cap, may allow the concessioner to raise the toll higher faster than inflation (Swan and Belzer 2008).
Just as with the requirements that states maintain non-toll routes, the ability to insert non-compete clauses into a PPP agreement seems to come with PPP experience. Three states with minimal PPP development, Alabama, California, and North Carolina, do not allow for a PPP project to infringe upon the ability of public agencies to develop nearby roads. States with more extensive PPP experience, Delaware, for example, allow non-compete clauses to be included in PPP agreements where appropriate. Whether or not to allow non-compete clauses depends on various factors, such as present and future traffic demand, geographic conditions of facility sites, and potential facilities that compete PPP projects, which vary by project. Therefore, it is recommended not to have non-compete clauses in the legislative level.