Suggested strategies to address these impediments by project phase are listed in Exhibit 32. These strategies are organized into the following categories:
• Getting started
• Defining the partnership participants
• Funding and financing the project
• Balancing the roles, responsibilities, risks, and returns
• Nurturing the partnership
These categories reflect the evolving phases in the development, implementation, and execution of the PPP project over its life cycle. While PPP approaches to project delivery are not the only way to solve the fiscal problems facing state and local transportation agencies, freedom from institutional impediments alone cannot make a poor project successful. Experience has shown how institutional impediments such as those shown in Exhibit 31 can stop or significantly delay worthy projects.
Exhibit 32 - Strategies to Address Impediments to Transportation PPPs
| • Getting Started - PPP project success or failure will depend on many factors - most important is the nature and level of interest of project stakeholders and their willingness/ability to commit to the project as partners. - Establish broad legal authority to enable transportation agencies to use PPPs. - Identify a public "champion" to bulldog the project from start to completion. - Define a clear project vision so interested private and public sector parties can assess their interest. - Establish clear guidelines for PPP development, including milestones, roles, and responsibilities. - Tailor each PPP to its institutional, jurisdictional, transportation, economic, and financial context. • Defining the Partnership Participants - Involve all public and private stakeholders with an economic or other interest in the project willing and able to participate as partners in project financing commensurate with their expected benefits. - Involve private sector partners in project conceptualization as soon as possible to gain maximum advantage of their insights and suggestions. - Encourage private sector creativity to cost-effectively achieve the project vision. - Focus on performance outcomes/benefits of the project - not the just the procedures. • Funding and Financing the Project - Let the project define financing - but allow the financing to define project delivery. - Consider the full range of possible funding sources, not just tolls - i.e., new credit programs, joint development prospects, new revenue sources, private activity bonds ■ Define the financing plan before beginning development ■ Identify project benefits and beneficiaries ■ Let government partner sponsor social programs ■ Understand the allocation of financial risks ■ Identify contingencies and have a plan to fund them - Enable private sector partner(s) to make a reasonable return on their investment - no profit potential means no private capital will be put to risk. • Balancing the Roles, Responsibilities, Risks, and Returns - Transfer financial/project risks to the private sector provided it has the authority and capability to manage conditions that are likely to impact these risks. - Avoid imposing excessive risks on the private sector that will keep them away, particularly in the area of tort liability where private risk may be much higher than public risk. - Avoid trying to make a "bad" project into a "good" project merely by turning it into a PPP project ■ Quality projects may be enhanced with a PPP approach ■ "Bad" projects are unlikely to become viable even with a PPP approach ■ The private sector will avoid "bad" projects if it bears the risk of failure. • Nurturing the Partnership - Maintain an air of civility among the partners based on mutual self-interest and respect. - Establish ongoing communication among the project partners throughout the project development process to quickly recognize achievements and address problems in a constructive manner. - Communicate status, progress, and results of project quickly and openly to the public to gain their understanding, support, and enthusiasm. - Establish an objective, transparent, equitable, and accountable contract procurement and administration process where the project roles, responsibilities, risks, and rewards are clearly defined, with appropriate due diligence to ensure compliance with contract terms and conditions. |
In addition to the strategies listed in Exhibit 32 for addressing impediments to transportation PPPs, Exhibit 33 lists additional ways to address these issues before they can cause a project to fail, including the protection of the public interest in public infrastructure long paid for by motor fuel taxes and other federal, state, and local revenue sources.
Exhibit 33 - Additional Strategies to Address Issues Related to Transportation PPPs
| • Define toll rate adjustment schedule based on pre-established criteria (such as consumer price index or highway construction price index) and prescribed coverage ratios that avoids the potential for windfall profits to the private partner. • Define maximum profit levels or rates of return on invested capital by private sector partners, with potential revenue sharing above certain profit levels. • Require sponsor approval of any transfer of responsibility for functions provided by the private sector partners, including ability to sell or transfer financial interests in the project. • Define standards of performance for services provided by the developer, operator, and preserver of the project over the term of the contract agreement that are beneficial to users of the facility. • Hold both private and public sector partners accountable for project and service delivery consistent with the contract terms that protects the public interest in the project and the non-financial benefits the facility provides to various stakeholders. • Define court of jurisdiction as state where sponsor and facility are located. • Retain responsibility for financial management of proceeds from long-term concession leases, with up-front (if applicable) and on-going payments to the private sector team members (or consortia) based on payment terms of contract. • Establish transparent and equitable procurement and selection process that provides equal access to all interested parties, while permitting the application of innovative approaches and technologies that may be unique. |