While each transportation project is unique in various ways, the use of PPPs to deliver transportation projects can offer a number of advantages to the sponsoring agency. The key advantage of PPPs for transportation projects is the ability to harness additional financial resources and operating efficiencies from the private sector to expedite development and preservation of public use infrastructure. This can produce the benefits listed in Exhibit 7 on the following page.
In considering the potential application of PPP approaches to public transportation, the primary opportunities come from joint development, transit-oriented development, and multimodal project development (also called a public-public-private partnership). Exhibit 8 lists potential primary and secondary benefits of transit-oriented development for public sector and private sector partners, respectively.
Realizing the benefits of partnering with the private sector requires a project of relative urgency, lack of adequate public resources to complete the project in a reasonable timeframe, and public sponsor ability to develop and administer a flexible PPP contract agreement which represents a win-win situation for both public and private partners. It is unrealistic to expect the potential advantages resulting from a PPP to automatically turn an infeasible project into a feasible project. It is also unrealistic to expect the private sector to be attracted by projects that do not have the potential to provide a reasonable rate of return on their investment in the project.
Exhibit 7 - Potential Benefits of PPPs for Surface Transportation Projects
| Additional Resources | Accelerated | Reduced Costs and | Transfer of Selected | Greater Access to Technology and Innovation | Increased Accountability |
| Leverage | Consolidate sequential | Increase functional | Transfer project cost, schedule, | Promptly introduce and apply most cost-effective technology to lower project delivery and operating costs | Apply performance-based, not prescriptive or quantity-based standards |
| Provide ready access to additional staff and specialized expertise on a cost-effective, | Improve coordination and communication among partners with aligned incentives | Accelerate project delivery schedule to reduce potential for increased material costs due to inflation | Public sector retains risks | Use asset Management tools for infrastructure inventory, condition assessment, tracking, and reporting of asset preservation to reduce life-cycle costs at defined levels of service | Apply performance-based material and |
| Expand access to private capital markets for | Reduce potential for claims and extra work order requests | Apply business best practices from domestic and international industry experts with broad exposure to innovative approaches | Recognize risks for both public and private sectors relating to gaining public, political, and institutional support | Use innovative technology that best serves the public and is desired by user groups to improve pricing and operating efficiency | Apply performance-based standards, requirements, and milestones defined in PPP contract |
| Conserve limited public debt capacity by using private debt and equity in project financing | Provide monetary incentives for early project delivery or service initiation | Apply life-cycle asset management, with greater investment up front for long-term savings from reduced frequency of reconstruction or replacement | Avoid moral hazard risks relating to improper actions or corruption in procurement and performance reporting | Access specialized expertise and supporting technical tools in such items as tunneling, motorist alerts, maintenance of traffic, and longer-lasting highways | Apply performance-based incentives based on project completion schedule and cost, or project traffic and revenues |
Exhibit 8 - Public and Private Sector Benefits of Transit-Oriented Development
| Public Sector - Primary Benefits | Private Sector - Primary Benefits |
| • Increases in ridership | • Higher land values |
| • Potential for lease payments or other revenues | • Higher rents on commercial or residential development near transit facilities |
| • Potential for dedicated tax revenue | • Shared costs for building foundations |
| • Revitalized neighborhoods | • Reduced requirements for parking spaces |
| • Smart-growth development | • More affordable housing opportunities |
| Public Sector - Secondary Benefits | Private Sector - Secondary Benefits |
| • Reduced traffic congestion | • Increased retail sales |
| • Increased property and sales tax revenues | • Increased access to labor |
| • Reduced sprawl through smart growth | • Reduced parking costs |
| • Reduced expenses for roads and other infrastructure | • Increased productivity of employees not delayed by traffic congestion |
| • Reduced crime and increased safety in vicinity of transit facility | • Increased physical activity in vicinity of development near transit facilities |
Source: Expanded from Robert Cervero, TCRP Report 102: Transit-Oriented Development in the United States, TRB, 2004, pp.120-131.