Non-Compete Provisions in Public-Private Partnerships: A Review of Current Practice

Recently in the U.S., public-private partnerships (P3) have become increasingly utilized as a mechanism for closing the gap between revenues and expenditures in transportation mega-projects, however, public perception remains a major challenge to successful utilization. Recent projects have run into issues with public perception, particularly where non-compete provisions are utilized. The conventional wisdom, which is often reflected in the public’s perception, is that non-compete provisions in public-private partnership contracts are a zero-sum game, meaning the losses of one party directly balances the gains of the other. However, the design and selection of non-compete provisions can allow the objectives of the public and private sectors to not be in direct conflict with each other. This study reviews 13 toll concessions, and long-term lease contracts in the U.S. and examines the provisions related to competing facilities contained in each contract. The study found that there has generally been an evolution in non-compete provision types, from strict non-compete provisions or nothing in the 1990s, to limited compete and competing facilities compensation provisions in more recent contracts, as well as a move toward uniformity in language. This more recent generation of contracts explicitly outlines the “unfettered rights” of the public-sector to pursue necessary transportation improvements, as well as their responsibility to the public. These results suggest that the shift towards limited compete and competing facilities compensation provisions is one toward a more balanced approach than the previously used, restrictive provisions in providing a clear path for pursuing necessary improvements.