Approaches for Structuring Concession Lengths and Toll Rates for Transportation Infrastructure PPPs

Many US transportation public-private partnerships (PPPs) are based on the concession model, under which the structure of user fees and the agreement duration is central to ensuring a fair balance of risk and reward between the public and private participants. Yet previous studies of toll-rate structuring and concession-length determination have treated these two variables largely independently. Toll charges, for instance, are typically established as either supply-based, linked to the cost of constructing, maintaining, and/or operating the facility; or demand-based, adjusted to influence driver behavior in certain ways such as through variable time-of-day congestion charges. Concession lengths are designed separately to enable tax-depreciation advantages for the private sector and/or to mitigate traffic-demand risk. Considering these two variables together, though, provides new opportunities to improve the risk-and-reward profile for both partners. A review and comparative analysis of dual-variable approaches, illustrated by projects in which these strategies have been used, offers additional tools to consider in structuring future PPP procurements.