Evaluation of progress in contractual terms: Two case studies of recent DBFO PPP projects in North America
Hiroyuki Iseki and Rebecca Houtman (2012)view report
With continuous demand for transportation infrastructure and chronic funding shortfalls, public-private partnerships (PPPs) for infrastructure provision have garnered attention in recent years in the U.S. and abroad. High profile concession deals in Chicago and Indiana have raised concerns about the protection of public interests in PPPs. Such concerns have ignited heated debates, partly driven by ideology and vested interests, but also by questionable decisions made previously. While public agencies at all levels are interested in identifying successful PPP arrangements, the variety and complexity of PPP deals, combined with local factors unique to each project, make the development of a universal evaluation framework practically infeasible.
In order to improve our knowledge of the best PPP approaches for transportation infrastructure, we examine two recently completed Design-Build-Finance-Operate (DBFO) PPP deals in North America on six critical factors identified in the literature review: 1) pre-construction and construction risks; 2) asset valuation, traffic demand, and revenue risks; 3) non-compete provisions; 4) facility performance standards; 5) early termination terms; and 6) public and political acceptance. The case studies exhibit evidence of improved balances of risks, responsibility, costs, and benefits between the public and private sectors, incorporating knowledge from past experiences, and suggest an increasing sophistication of governmental decision-making and a move toward what we call a “middle-ground approach” to successfully addressing key issues of PPP implementation. As technical experience and familiarity with PPPs grow among transportation officials in the public sector, it is likely that success with and acceptance of PPPs will increase in coming years.