There are many types of PPP arrangements involving different roles, responsibilities, risks, and rewards for the public and private partners participating in a transportation project. However, for most PPP approaches, there are certain activities that comprise the implementation and execution phases that are generally common among them. These are listed below in Exhibit 23, which provides an overview of a typical PPP project development effort.
Exhibit 23 - Overview of PPP Project Development Process
| • Identification of possible PPP approaches and prospective private providers • Organizational development - roles and responsibilities of designated internal team and knowledgeable external support resources • Internal due diligence/evaluation of project as a candidate for PPP arrangement • Pre-marketing/pre-procurement to guide process and gain private sector insights • Transparent marketing/procurement to assure equity and future accountability • Close transaction/contracting process with fully understanding of terms and their implications for project costs, schedule, quality, financial returns, and risk taking • Transition to delivery team involving public and private entities with defined responsibilities and risks • Project execution - public sector and private sector roles and responsibilities • Partner accountability based on contract terms |
Certain of the activities listed in Exhibit 23 pre-date the project PPP implementation process while others begin and end during different phases of PPP project delivery. Each of these steps and the determination of which partner should take responsibility for the action or if responsibility is to be shared should be based on the following factors, which are discussed more fully below:
• The procurement approach(s) and types of projects to be considered in the PPP program;
• The nature and scope of the project under consideration for possible delivery as a PPP;
• The functional capabilities of the sponsoring agency to carry out the project;
• The competitive availability of competent private providers for the public sponsor to partner with; and
• The duration of the partnership relative to the life-cycle of the resulting facility.
Exhibit 24 summarizes the key issues to be addressed by sponsors of transportation PPPs during the procurement and contract negotiation processed, grouped into four categories, including public interest and perceptions, transportation network coordination, and capability of the sponsoring agency to administer these processes.
Exhibit 24 - Key Issues During PPP Procurement and Negotiation Processes
| Public Interest Concerns | Public Perception Issues | Transportation Network Coordination Concerns | Administrative Capability Issues |
| Setting of toll rates and schedule/basis of future increases | Public sponsor agency outreach and communication to the public on nature and impacts of a proposed PPP project and its contract terms | Integration of individually operated PPP-developed or operated facilities within a regional transportation system | Capabilities of specialized resources to develop, negotiate, and administer a balanced PPP contract either resident to or retained by sponsor agency |
| Control over ultimate level of toll rates | Ability of public sponsor agency to share in project proceeds beyond acceptable rate of return to the private sector partners | Alignment of public mobility and economic development goals with private profit goals | Existence of legal authority to enter into PPP contracts for surface transportation projects |
| Acceptable limits on rates of return on private sector investment | Rationale for instituting direct user charges, such as tolls or variable pricing, as part of the PPP arrangement | Coordination and communication between surface transportation agencies and the private partners involved in project PPPs regarding operational and pricing of surface transportation facilities within a region | Adequacy and transparency of procurement framework to protect the public interest while providing equal opportunity to prospective private firms/teams |
| Responsibility for and treatment of windfall profits or losses | Where tolling is imposed, whether there is a non-priced alternative and the consequences of not applying pricing to the project in terms of project delivery schedule and cost | Integration of PPP project facilities with other infrastructure and service components of the regional transportation system | Ability to identify and avoid conflicts of interest among partners to PPP contract, especially during procurement and selection processes |
| Uses of excess revenues or proceeds from long-term leases | Whether and how project proceeds are focused on the transportation facility or network affected by the PPP when direct user charges are applied | Full accounting for compliance with planning, environmental clearance, and permitting requirements during project development process | Suitable contract administration process and staff to ensure terms of PPP contract are adhered to by all partners |
| Control over nature, extent, and frequency of refinancing | Ability of responsible public entity to protect the public interest while respecting the private sector's rate of return requirements | Ability to grant flexible staging of environmental clearance, permitting, and right-of-way acquisition activities as the project proceeds, consistent with NEPA and other Federal/state/local requirements | Existence of continuous performance measurement and reporting process to hold PPP partner accountable for compliance with contract obligations |
| Control over transfer of private partner responsibilities or involvement in PPP contract to other private entities not part of original team | Degree of foreign involvement in PPP and foreign control over project proceeds | Ability to ensure that project proceeds are used to enhance transportation mobility in the area served by the PPP project where user charges are applied | Continuity of public sponsor agency staff to oversee development and execution of PPP contract terms |