1. PPPs are generally a modest but critically important percentage of the overall highway and roadway network. As described previously, only a moderate percentage of the overall highway and roadway networks are under PPP arrangements. Typically, however, the segments that are PPPs are critical components of the national or regional system for vehicular mobility. For instance, CityLink in Melbourne, Australia, is a vital perimeter road that provides commuters and freight access into the city's central business district via a high-quality, limited-access route.
2. Public agencies in the host countries have faced or continue to face challenges similar to those in the United States when it comes to providing service- able highways and roadways. Not a single public agency visited indicated that it had a surplus of funds available for expansion, restoration, and preservation of highway assets. The usual factors- escalating demands, deteriorating assets, insufficient public resources-cause the general scarcity of funds. The countries visited have used PPP arrangements to leverage private sector investment in highway assets, but they are doing so through established and credible processes.
3. Significant institutional learning has occurred in both the public and private sectors over roughly the last decade. Most PPP programs in the countries visited began in response to fiscal crises, and the private sector was viewed, particularly by politicians, as a potential solution. Early PPP arrangements in these countries, while well intentioned, did not necessarily provide the best value for the public. Since that time, the planning, procurement, and manage- ment of PPP projects have improved substantially. Significant institutional learning was evident in all the host nations. This circumstance is advantageous for the United States, a late mover in this market, because its institutions can adopt tested second- and even third-generation policies and practices.
4. Highway PPP arrangements, particularly in the most mature markets, are not primarily financial transac- tions, but are the selected project delivery strategy based on a value-for-money or feasibility analysis. In the majority of the countries visited, this perspective was either firmly held or gaining traction. For instance, the policy in Victoria on any potential infrastructure project is that budgetary funds must be available to support it for it to be considered for inclusion in a capital program. If the potential project has the attributes necessary for a PPP, it will be evaluated through Victoria's value-for-money guide- lines. Only if the project demonstrates value for money as a PPP will it proceed that way. Otherwise, the budgetary funds will be used to finance its con- ventional delivery. In Spain, the philosophy is slightly different. If the public sector's feasibility analysis indicates that a PPP approach is viable, highways are typically delivered by PPPs. In either case, though, the government determines that a PPP arrangement is the preferred method of delivery based on a systematic methodology.
5. Highway PPP arrangements do not automatically require user fees. The scan team found that various sources of funds are used throughout the world- from exclusively real tolls to a combination of real tolls and shadow tolls to exclusively shadow tolls or direct payment mechanisms (often principally availability based). While the user-pays concept remains a solid economic argument, the reality is that the sociopolitical environment in other countries, as in the United States, is a barrier to widespread tolling.
6. The maximum contract period (or concession period) observed was 50 years and most periods ranged from 30 to 40 years. This is a contrast to several recent long-term lease agreements of existing assets with periods ranging from 75 to 99 years coupled with large upfront payments in the United States. None of the countries visited have implemented a model of this sort recently. The two primary determinants described for the contract period were that (1) the timeframe should be long enough for most structures in the project to have gone through at least one major renovation, and (2) the period must be adequate to allow the PPP contractor a reasonable timeframe to collect the revenue necessary to obtain its expected return on investment.14
7. All public agencies indicated that PPP arrangements allow the delivery of projects sooner than possible through conventional channels. This is a common refrain among agencies with significant PPP experi- ence. In some cases, this detail is used as a tool to promote the PPP approach over traditional delivery methods.
8. One man's BOOT (build-own-operate-transfer) is another's DBFO (design-build-finance-operate). The definitions, acronyms, and nomenclature used worldwide for PPPs are far from standard. In lieu of trying to keep all of this straight, the key variables to consider are what scope of services the private sector is being asked to provide (or alternatively how the project life cycle activities are organized and pack- aged) and what source of funds supports the scope of services being solicited.
9. The necessary public sector mindset and skills base for successful PPP programs and projects differ substantially from those needed for conventional practices. All of the public agencies visited emphasized the significance of these two points and indicated the importance of building public sector capacity in PPP program management. In Australia, Victoria and Queensland have found it beneficial to establish temporary, independent authorities to manage highway PPP procurements, while Portugal created EP specifically to administer concessions. A U.K. Highways Agency representative also commented that when the Private Finance Initiative began, the agency was not "risk averse, but rather was risk ignorant." This circumstance has remedied itself with experience and effort.
10. Innovation by the private and public sectors in PPP arrangements is evident. In the case of the private sector, innovation is typically stimulated by competition for the award of an integrated, commercial enterprise (i.e., the right to develop, enhance, and manage an infrastructure asset for a finite time period). The resulting innovations are generally borne out of the integration of design, construction, and operation within a single entity and during asset utilization. Often, the private sector's creativity is tapped in the nonconforming proposals allowed and encouraged during the procurement process. In the case of the public sector, innovation is typically driven by stewardship of public interests. For instance, the EastLink project in Victoria, Australia, has provisions to return to the users of the facility a share of any debits (penalties) collected from the PPP contractor for failure to meet key performance indicators.
11. A reasonable balance among technical, commercial, and legal conditions and terms in a PPP contract is integral to its success. While all highway projects are engineering efforts, PPP projects are also long-term enterprises. As one public official put it, once the agency's engineering staff has established the project's principal technical provisions, it's a good idea to have the agency's commercial and legal team take them for a "road test" to assess their alignment with the business dimensions of the project.
12. In general, the representatives of the PPP contractors the scan team met with exhibited a focus on their customers, an emphasis on life-cycle management and value, and a pride in ownership and steward- ship of their assets. While the team recognizes that these individuals had an interest in behaving this way, their comments and answers demonstrated that their business model depends on these attributes. Moreover, if they desire to transfer this business model elsewhere, their track record will either enable or hinder this transfer.
13. Similarly, public agencies have recognized that a PPP arrangement is in fact a long-term partnership with the private sector founded on a contract. As such, the public sector's contract management team is responsible for sustaining this relationship. Doing so may require understanding the spirit as well as the letter of the contract.
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14 More amenable tax treatment of PPP arrangements abroad also appears to help reduce contract periods.