These findings follow the chronological order of a PPP arrangement's life cycle-from preliminary project planning through project handback:
14. All public agencies emphasized the importance of adequate front-end or preliminary planning for a project to fully comprehend its business case and potential life-cycle value. This is necessary to understand what service a potential asset should provide and where value is derived. Such comprehension will undoubtedly influence the remaining decisions on project delivery, including whether the project is a PPP candidate.
15. The two most commonly cited attributes of a project that make it a PPP candidate were scale and complexity. The scale attribute is necessary to offset the transaction costs of PPPs, although variable monetary amounts (ranging from $10 million to $50 million) were suggested as the minimum scale necessary. Complexity is often coupled with scale, and this attribute is generally seen as the ingredient that enables, or perhaps compels, the private sector to find novel or unique project solutions.
16. When defining or scoping a PPP project, the primary focus should be on identifying and conveying the outputs desired without inappropriately compromising existing technical standards. Customers focus on project outputs-reliable travel times, safe travel environment, comfortable ride, etc. Thinking first about what customers desire rather than developing a prescriptive definition of the asset is a major transition in practice. However, an emphasis on defining and measuring outputs should not come at the expense of sound engineering. Most countries visited still rely on existing technical specifications and standards, at least to establish baseline technical requirements.
17. Risk analysis and allocation are paramount to PPP project success. Certainly, proper risk allocation is not a novel concept, but the public agencies visited with significant PPP experience have evolved from stressing maximum to reasonable risk transfer in PPP arrangements. Indeed, one public official described this evolution as a move away from "maximum risk transfer to optimal risk allocation."
18. All public agencies emphasized the need for transparency during the procurement process for PPP projects. The typical scale and complexity of PPP highway projects generate an unusually high level of public, political, and media attention. Nearly all of the agencies visited go to substantial lengths to make project documents and records accessible. More often than not, they publish all nonsensitive material on multiple government Web sites. In addition, some agencies use a public auditor to monitor proceedings. A practice such as this is particularly important in a procurement process that uses competitive negotiations. Further, most agencies stressed engaging citizens throughout the project's life cycle, from the earliest planning stages through the operating phase. Particularly, the need to inform the public about how to access and use a new facility before its opening was highlighted.
19. The commitment of the government to see PPP project procurements through to closure is essential to stability in this market. Given the enormous transaction costs involved in PPP projects, private participants must have confidence that the public sector is committed to closing deals expeditiously, with rare exceptions. Without this confidence, private participants will search for other places to put their business development funds at risk.
20. In many of the countries visited, the PPP project development time was remarkably efficient. In some countries, the entire procurement process, from circulation of an environmental document to attainment of financial close, averages 12 months. In such cases, the government has clearly done substantial front-end planning. Regardless, this level of efficiency is enviable, especially since environmental standards and public involvement appear to be embraced.
21. Multiple public agencies claimed that PPP projects provide better price and time certainty on design and construction when compared to the conven- tional approach. Several of the countries visited indicated that the scale and complexity of and competition for PPP contracts generally lead to design and construction efficiencies, which result in better pricing and scheduling by the private sector. In addition, public and third-party studies indicated significant advantages in these two areas.
22. Most countries use an independent verifier or reviewer to monitor the design and construction phases of a PPP project. The independent verifier serves as an objective third party to generally admin- ister (certify pay requests, etc.) and review (check compliance with requirements, make onsite visits, etc.) the project during design and construction. The payment schemes and contractual relationships used for the independent verifier varied. Victoria, Australia, introduced a proof engineer and a con- struction verifier to augment the independent verifier in its second PPP project (EastLink).
23. All countries use key performance indicators (KPIs) or performance measures in their PPP contracts to assess service, along with incentives and disincen- tives to motivate contractor performance. KPIs are the means for assessing whether the PPP contractor is providing the outputs desired from the asset. Contractors are usually monetarily rewarded for exceeding performance targets or showing positive trends, and they are monetarily debited for missing performance targets or showing negative trends. In one project, the public sector agency has decided to distribute any amounts debited from the contractor to the highway's users, since they paid for a level of service they did not receive.
24. Practices for managing changes and uncertainty throughout the contract period range from rebal- ancing actions to limited material adverse effect impacts. Rebalancing is a significant modification process, but it is intended to be applied symmetri- cally; the conditions can be modified in either the public or private sector's favor. Similarly, material adverse effect changes can be quite arduous, but in the countries where this approach is taken, the public agencies have evolved to substantially limit the triggers of such provisions. For instance, in lieu of granting zones with protection from competition or including no-compete provisions in contracts, the agencies have employed a range of techniques for handling this issue.
25. Effective PPP contract management is vital to maintaining the public sector's risk posture and to sustaining a good working relationship with the PPP contractor. The public agency's contract manager must understand the line between risk liability and risk transfer when interacting with the PPP contractor on issues. Further, the contract manager must recognize that the PPP contractor is likely his or her counterpart for the better part of 30 years, so keeping the bigger picture in perspective is more important than a petty disagreement or discrepancy.
26. Handback provisions appear to necessitate good asset management practices by the private sector, but the handback process is generally untested in the countries visited. Typically, the handback provisions specify residual service lives for the different elements of a facility, such as pavements, at the end of the contract's term. Undoubtedly, this is easier said than done. Many skeptics also worry that private contractors will permit the assets to gradually deteriorate and then attempt to renovate them to the minimum standard just before the end of the con- tract. Several comments a private operator made to the scan team might calm such concerns. First, the private contractor wants customers to use the asset, so it has an implicit incentive to maintain it. Second, and perhaps more important, delaying timely routine maintenance and performing major renovations toward the end of the contract period when traffic volume is stable and likely at its peak would disrupt this cash flow. Finally, the escalating cost of deferred maintenance is also a deterrent to poor asset management practices.