Existing agencies can have difficulty in applying PPPs due to differences in how public agencies and private companies function and value their efforts, which reflects differences in their respective cultures. Exhibit 30 lists several potential cultural differences between public agencies and their private sector counterparts to a PPP. Producing a successful PPP requires first recognizing and then bridging these differences through mutual understanding.
Exhibit 30 - Potential Cultural Differences between Public and Private Partners
| • Short-term versus long-term timeframe • User focus versus customer focus • Risk averse versus managed risk • Expensed assets versus investments to be preserved • Wait for full funding (debt free) versus build and pay off (using equity and/or debt) • Rigid versus flexible approaches to project development, financing, and delivery • Standardized versus innovative approaches • Domination of transportation infrastructure program delivery by local firms versus competition provided by domestic and international firms • Regulatory compliance versus empowered staff • Constrained resources versus leveraged resources • Process driven versus product/service driven |
Ten additional potential impediments to the successful deployment of PPPs for surface transportation projects are described in Exhibit 31 on the next page. Besides cultural differences which are the most difficult to change and are better accommodated, the most important threat to a transportation public-private partnership is institutional inertia, which can be reinforced by both culture and a long legacy of performing functions a certain way, as prescribed by FHWA or AASHTO. Each of the following ten impediments needs to be anticipated and mitigated where apparent so that PPP efforts are not sabotaged by the very agencies responsible for their development and implementation.
Exhibit 31 - Potential Impediments to Transportation PPPs
| • Institutional Inertia - opposition by transportation program administrators/staff and members of the construction/design industries to changes in traditional approaches • Fear of Change - by local firms that change will undermine their competitive positions • Distrust - between the public sector and the private sector - reinforces institutional inertia • Legal Prohibitions or Regulatory Restrictions - against attributes of effective PPPs -often instituted and reinforced by imbedded stakeholders in the status quo - Procurement (unsolicited, best value, design-build, warranties, environmental clearance) - Permitting (utility, navigable waterways, etc.) - Land acquisition (advanced, before and after pricing) - Environmental clearance • Lack of Familiarity with PPPs - including the mechanisms for developing and implementing PPP projects and the relative balance between public and private sector roles, responsibilities, risks, and returns - Limited public knowledge and understanding of PPPs - Lack of consistency in how agencies interpret statutes/regulations regarding PPPs - Scarcity of documented examples of successful PPPs in transportation - Lack of a specialized corps of professionals within state transportation agencies responsible for managing PPPs • Differences in Perspectives and Objectives - between public sponsoring agency and private provider firms - Process constrained public sector conflicts with expediency of private sector - Differences in financing goals and timeframes - Confidentiality concerns of private versus public sector transparency requirements - Public sector service focus versus private sector rate of return needs - Tax exemption advantage of public debt over private debt • Lack of Adequate/Dedicated Revenue Sources - to support project financing - Project must "add up" - be financially feasible for both partners - Private sector partner needs to earn a reasonable rate of return - User fees and other revenues may need to be tapped unless public funds can provide availability payments over the life of the contract in lieu of user fees, such as tolls - Dedicated revenue sources are the best way to support project financial plan • Loss of Control - facility operations, toll rates, use of revenues, public interest protection |