Advances in Public-Private Partnerships

PPP projects are contractually complex and require the participation of many actors and a large number of tripartite and quad-partite agreements that connect the actors jointly and severally. Central to the PPP agreement is the role of project lenders, often syndicated and represented by a lead financier and a securities trustee. The party most exposed to project risk in financial terms is the financier. In most project finance arrangements, lenders play an important role in monitoring the consortium’s performance under the contract which subsists in parallel to the performance monitoring of the government agency to ensure the services delivered by the consortium meet specification. This paper presents a study using a cross-sectional analysis of PPP financing in Australia with three case studies in Victoria, Queensland, and New South Wales (NSW), Australia. The object of the analyses is to discover common features in the way major infrastructure PPP projects are financed in Australia, identify differences to practices in overseas markets, and gain knowledge and lessons learnt that may inform future PPP policy and private finance in Australia and overseas.

The demand for the development of urban rapid rail transit (URRT) is increasing. Traditional financing mode, i.e., government investment for URRT projects, is gradually unable to meet the increasing demand and high cost. More and more innovative financing modes have been applied in recent years, but it is hard for decision makers to compare and select from different financing modes. This paper identifies firstly all feasible financing modes for URRT projects based on theoretical analysis and case studies and then analyzes the constituent elements of each financing mode. Four most common constituent elements including investment entity, operation entity, source of funding, and government support form are extracted, based on which a pool of all financing modes could be constructed, including those supported by related theories, have been applied in major cities all over the world, or proposed by relevant researchers. Furthermore, all financing modes could be expressed in a standardized format highlighting their features and facilitating comparison among various modes. The conclusions provide a more standardized classification of different URRT project financing modes so that decision makers could compare alternative financing modes and make a better decision in a specific project environment more easily and comprehensively.

Public private partnerships (PPP) have developed into formal, horizontal, contractual, cooperative relationship between public, private, and multilateral donors, using shared resources to fulfil responsibilities of public service delivery pursuing shared yet divergent objectives. PPP use complementary strengths of different sectors to meet requirements of public service delivery. Partnership between public and private players has evolved: from informal to formal; contractual to cooperative; collaborative to multistakeholder partnerships. Divergent objectives of stakeholders pose challenges to sustainability of PPP. Two approaches: converging divergent objectives or satisfying divergent objectives of stakeholders. The second approach is proposed to investigate the issue of sustainability of PPP in this paper.

PPP schemes applied to roads have been used in Mexico since the late eighties. Although the first concession program allowed the Mexican Government to develop more than 4,000 kilometers of highways with private participation, flaws in the design and implementation of the program led to financial difficulties that were solved through a large bailout that was implemented by the Government in 1997 and that led to wide-ranging institutional changes in the Mexican toll road sector. Despite the difficulties encountered, since available public investment resources for large-scale road infrastructure projects are not sufficient to develop the road projects that are needed to improve, modernize and extend the Mexican road network, during the first decade of the current century new PPP models were designed and implemented to allow private resources to participate in the construction, operation and maintenance of roads in Mexico. These models have included concessions, availability-based payment models, privatization of existing roads and long-term maintenance contracts, and they have allowed the development and completion of more than 30 projects during the last decade. To support the implementation of these models, the Mexican government created two public trust funds to help ensure the preparation and the viability of these projects from a financial perspective. It has also modernized the legal framework for project development with private participation and it also strengthened the institutional capabilities of several agencies to facilitate project preparation and implementation. This paper is based on the authors’ long experience in the Mexican toll road sector. Against this background, the history of Mexico’s PPP program in the road sector is analyzed. The paper focusses on the characteristics of the PPP models that were applied to road projects during the period 2003–2012 and presents the main results that were achieved. In the final sections, lessons learned throughout the various stages of the program and from the many different projects that were developed are presented, together with a discussion of future areas of opportunity.

Public-private partnerships (P3s) can be a useful procurement and financing tool for governments to deliver new or improve existing public infrastructure. This approach has typically been used for projects whose future revenue streams, such as tolls, are anticipated to cover project costs fully. In other cases, though, infrastructure projects may be economically valuable yet not financially viable; to enable these financially-weaker projects to be delivered as P3s, governments must provide one or more fiscal support mechanisms. This research identifies six categories of such fiscal support mechanisms based on a review of literature and practice: a) change in policy or law, b) financial support, c) technical assistance, d) guarantees, e) monetary support, and f) usage/service fees. With these categories established, three projects were explored in which several of these mechanisms were employed. This assessment serves as a starting point to better understand the use of fiscal support mechanisms and to analyze how taxpayer monies and user fees may more effectively be leveraged to advance the development of public infrastructure through P3s.

Public-private-partnership (PPP) for road projects started to be of interest in Finland in the beginning of 1990s. PPP road projects were in their infancy, but there were some examples internationally and Finland mainly followed the progression in England. Approval for the first PPP road project was approved for Route E-75 (Järvenpää-Lahti) beginning in 1997. There were two additional PPP road projects. The first PPP project was a shadow toll type arrangement, while the next two projects used the availability payment mechanism. The first PPP project was one of Europe’s earliest PPP road projects that had come to its completion. There are very few results and experiences from completed PPP projects worldwide, and the Finland case offers valuable lessons learned, especially from hand-back to the client. The objective is to present Finland’s experiences from PPP projects related to value for money, lessons learned, payment mechanism, hand-back requirements, and various aspects of the PPP model. Two other PPP projects are also discussed in the paper. The methodology is from data collected by the client, interim reports, and from official studies in PPP projects in Finland. The result discusses Finland’s experiences and challenges in PPP projects. Sharing experiences and results from international PPP projects provide valuable insights for other countries considering the PPP model for infrastructure projects.

PPPs as new organizational forms were, and still are, intended to respond to societal problems previously held as intractable. In all emerging countries, the originality of PPP raises new questions of governance: the problem of sharing economic, social, and political responsibility among various segments of society in the development of the country; and the adoption of new institutional forms to enhance the efficiency of government action. These issues are raised in both developed and emerging countries, but with more acuteness in the latter. In all cases, the central questions regarding the relation between the public and private sectors are that of what constitutes the public side of the partnership and marginalization of the public. This paper addresses the first challenge by tracing historical and contemporary developments on the need for PPPs; current public protests against PPP initiatives which are perceived as impositions to what the greater public want. Using a principal-agent (P-A) model as a lens, the paper provides a detail understanding of what constitutes the first ‘P’ (the public) in a PPP construct and shows how dominant approaches in PPP project arrangements have failed to embrace the real first ‘P’ (an inclusive approach) and have been dominated by the artificial first ‘P’ (an exclusive approach). Furthermore, the paper addresses the second challenge—management of stakeholders, by reviewing existing theory and practice positions on project stakeholder management through case studies and other sources and establishes the uniqueness of a PPP project environment which influences PPP multi-stakeholder management approaches. Finally, the paper provides an appropriate definition of the first ‘P’, and recommends the need for a paradigm shift from exclusion to inclusion in PPP arrangements; and also advocates for a paradigm shift in PPP stakeholder management and provides a conceptual model for appropriate stakeholder management in PPP projects.

The discovery of change and redesign of organizational processes are potential strategies that give credence to achieving a long-term goal for public-private partnership (PPP) infrastructure projects. The private sector plays an important role in PPP infrastructure projects due to its increased competition and successful implementation of effective change process. The change process is an organizational tool that implies an alteration to current organizational strategy, vision, and processes. One major management approach to respond to a change is known as business process re-engineering (BPR). The private sector has recognized the benefits of BPR in the following areas: increase productivity, reduce process time and cost, and improve design quality. The success of BPR in any project has been the cultural adjustment for management techniques in facilitating project development team for effective design processes and requirements. The major indication for BPR failure is lack of vision. In the public sector, BPR successes and failures have not been fully delved with. Therefore, exploring BPR successes and failures in PPP infrastructure projects will surely provide the main idea for this paper. Specifically, this paper reviews the literature relating to factors that cause successes and failures of BPR implementation in PPP infrastructure projects. More importantly, the paper will explain how BPR implementation in PPP projects can help achieve financial viability through increased productivity.

When an infrastructure fails prematurely because of poor workmanship, the developer of a public private partnership (P3) project incurs a significant cost that typically could have been prevented if a more systematic attention to higher risk requirements had of been in place. This practice paper will demonstrate how a risk based requirements verification system has been applied on a number of major transportation P3 projects as a way of addressing just such a problem. By using a total digital approach to design review and construction inspection, and by applying a systematic risk profiling approach, more and better performance verification data can be collected to clearly and objectively depict the status of the project. With this approach, Developers can move beyond just saying they want a high quality project, they can actually determine with a measured level of confidence, what the level of performance is being observed. A lower level of performance is a predictor of possible future failures. The traditional approach of describing the scope of a transportation project has been by writing text in paragraph format or creating a series of books that read somewhat like a novel. The scoping of the work can be greatly improved by capturing all the expectations or requirements within a relational database structure. With each requirement identified, any number of attributes can be related, such as risk, owner, phase, cost, method of verification, and observed performance. As the design effort is completed, the applicable design input requirements can be verified to ensure that they have been appropriately incorporates into the design. The performance of the design team to meet the requirements when the design is reviewed can be measured and the result used to identify areas or disciplines that are under-performing. Similarly, when the design is realized on the worksite, the performance of the construction forces can be measured to objectively identify strong performers and underperforming efforts. Poor performance can be addressed early in the life of the project and not later when the cost impact can be multiple times higher.

A concern of several municipalities is to find the most economic way to keep their tramway track network at acceptable performance levels. This paper uses as a case study data from the City of Rome to estimate the annual cost for the municipality to carry out track network maintenance using the private sector through a form of public private partnership (PPP). Assuming that the private sector partner will be selected through a competitive bidding procedure, it is essential that the municipality carry out a preliminary study to estimate a reasonable level of annual payment required to compensate the private company for the services rendered during the concession life. This paper uses a recently developed financial model to simulate the project financing under several performance levels or standards, specified as the maximum allowed vertical displacement of the rail surface or in terms of the root mean square displacement, both related to a specified spatial wavelength. For each specified level of service, the minimum annual payment to the concessionaire is calculated using the model. The paper assumes that, in view of the relatively poor existing condition of the network, the concessionaire will be required to carry out a replacement of the existing track in the first year of the concession. Two different types of replacement will be investigated. Following the replacement, maintenance operations are carried out through different frequencies of rail grinding, defined as a function of the performance standard specified.

Many countries have been developing high-speed rail (HSR) projects as a response to increasing needs of medium and long distance travels. These projects face many challenges and risks, such as financing, construction, and operation risks, just to mention some examples. Due to budget constraints and public debt ceiling, instead of using traditional public finance, some countries are considering adopting public-private partnership (PPP) arrangements as a way to deliver these services. International experience showed that there is no optimal model for implementing HSR projects because each country has its own specific problems. However, learning from past experience of HSR projects, particularly analyzing how risk was addressed, may help in the implementation of these projects in different contexts. A particular attention will be given to the structuring and design of Portugal and Thailand HSR projects. Both projects will be analyzed bearing in mind the political design-making process, the business model adopted, and the type of contracts under consideration. Some policy implications are drawn based on these two case studies.

In the United States, operations and maintenance of roadways have traditionally been the responsibility of state departments of transportation. However, several states started to adopt various alternative project delivery methods in the 1990s, including public-private partnerships (P3) for infrastructure projects. Since each state has the discretion to develop its own P3 program, P3 implementation in the United States varies across states and projects. In this paper, the author introduces a framework to classify and analyze key elements of operations and maintenance practice in US P3 roadways using three parameters: (a) the division of responsibilities, (b) requirements and standards, and (c) payment mechanisms. Based on case studies of 15 large-scale P3 roadways, this paper profiles the arrangements of P3 contracts and discusses applicable strengths of and potential issues with different arrangements. This paper aims to contribute to the early and collective effort to systematically compare the different P3 approaches adopted in the United States. The findings can help public agencies design P3 contracts during the procurement phase to meet their long-term objectives, and they can also help private developers understand the risks associated with different types of P3 arrangements typically found in the US P3 market.

The Commonwealth of Puerto Rico, a territory not incorporated of the United States, through the Puerto Rico Highway and Transportation Authority (PRHTA) and Autopistas Metropolitanas of Puerto Rico, LLC established the first highway public-private partnership (PPP) in the island under Act No. 29 of June 8, 2009, known as the Puerto Rico Public-Private Alliance Law. Under this consortium, Metropistas will be responsible to rehabilitate, conserve and improve the built freeway infrastructure and enhance safety to all road users of PR-22 and PR-5 to provide world class services, under a 40 years grant agreement. As part of this consortium, the design, construction, operation and management of a dynamic toll lane (DTL) was included to reduce traffic congestion and expedite traffic flow, while using the Metro Urbano Lane, a bus rapid transit system (BRT). The DTL has an exclusive right of way operated at 40–45 mph that was constructed in the median of the PR-22, has a length of 10.4 kms (6.4 miles) which connects the Western Region of Toa Baja with Metropolitan Area of San Juan. The DTL ensures traffic flow using a dynamic toll adjusting rates according to traffic conditions in real time, using video technology to identify crashes and communicates with drivers through electronic signs. This paper will describe the process of how the PPP was established in the Commonwealth of Puerto Rico, its major components, followed by a description of the DTL, how it was designed and constructed, and its impact in reducing traffic congestion and improving the overall level of service (LOS) of the PR-22 corridor. The variable fare structure associated with guaranteeing a particular level of service will also be documented as well as the lessons learned in establishing this innovative PPP in this freeway corridor of the island.

To supplement current and future budget shortfalls for improvements to water and wastewater infrastructure, public-private partnerships (PPPs) are being advocated by the American Society of Civil Engineers (ASCE) and others as a practical mechanism to ensure financial sustainability. A PPP involves a partnership between a government entity and a concessionaire—consisting of one or more private companies acting as a single, private incorporation—who make an agreement on funding, building, and operating a traditionally government-provided service, such as water and wastewater infrastructure. This is different from a traditional contract between a government entity and a contractor because the concessionaire remains responsible for the operation of the project during the entire concession life. A financial model that can be used to input costs and activities for water and wastewater infrastructure projects is described. This model was developed as an adaptation of the financial model for PPP projects included in the Toolkit for PPP in Roads and Highways, developed by the World Bank Group (WBG). The proposed financial model can be used by practitioners, government agencies, and decision makers to estimate key financial indicators that are essential to assess the feasibility of private investors’ involvement in a water and wastewater project. The input for the software consists of key parameters that can be easily changed (e.g., construction, operation, and maintenance costs, equity and subsidies, inflation and interest rates, tax rates, concession life, and estimated rate of water consumption and wastewater discharge). The output of the software is project financial indicators (e.g., project internal rate of return (IRR), return on equity (ROE), annual debt service cover ratio (ADSCR)) and the contribution amount from the public sector, if required to keep water consumption or wastewater discharge fees at affordable levels. A case study is presented to show under which conditions projects can be financially successful as a PPP. For example, increasing the public agency’s investment subsidies enables the decrease of the wastewater discharge fee and the increase of ROE, making a PPP wastewater treatment project more attractive to consumers and private investors.

With the growing awareness of sustainability and global climate change, the Ministry of Transport of China (MOT) is taking essential steps to reduce carbon emissions from highway infrastructure on a life cycle basis. While much is known regarding energy saving and emission reduction projects by government investment, very little is understood about how climate change projects should be invested by private finance during highway planning, delivery, and construction processes. This paper presents the current low carbon practices (LCPs) are implemented purely using public finance for addressing the financial shortage issues in highway infrastructure projects, instead of using public-private partnerships (PPPs). A set of LCPs with the function of energy saving and emission reduction commonly applied in highway construction currently encouraged recently by transport government is reviewed. Five financial sources of PPPs for low carbon project implementation are identified and discussed, namely, central government finance, regional government finance, highway corporation finance, other state-owned enterprises (SOE) and society private company finance. A survey of the financial source from LCPs employed in several low-carbon highway infrastructure projects nominated by China MOT is introduced, and the suitability based on LCPs attribute analysis used in different road infrastructure projects. Furthermore, advice of financial promotion on LCPs effective implementation is proposed by its attributes of greenhouse gases (GHGs) reduction efficiency, energy saving efficiency, financial feasibility, technology readiness, risk and uncertainty, and community and industrial acceptance to assist state highway agencies in better incorporating climate change mitigation and adaption strategies into their project delivery processes.

Public authorities across the United States (US) and Canada have developed a growing number of public-private partnership (PPP) agreements in order to enhance their transportation infrastructure. Within this context, the PPP market has experienced the emergence of multiple private organizations involved at different levels, within a project’s lifecycle. Although the current literature on public-private arrangements recognizes these issues, the question of how private firms organize themselves in PPP projects remains largely unexplored. We address this shortcoming by developing a longitudinal network of private participation across PPP contracts in the US and Canada from 1990 to 2013. We identify the sponsors and contractors involved in the bidding phase of highway concession initiatives, describe their roles, and examine the nature of their relationships. Our research design relies on bidding data extracted from proprietary databases and publicly available information obtained from news reports and academic journals for those design-build-finance-operate-maintain (DBFOM) projects that had reached financial close by 2013. We identified the key participants, established the number of repeat relationships among them, the nature of their transactions, and their market experience. Our main findings are summarized in network maps, where we highlight the development and interactions of private actors in the PPP market. Our main contribution is the establishment of a point of departure for studying the network structures within the private sector in the context of a public-private agreement. Further research will examine how the participants combine their capabilities and resources to achieve a successful project.

Over the last two decades, there has been a movement in North America towards performance based contract (PBC) models for maintaining and managing road networks. In traditional method-based contracts, the owner agency specifies techniques, materials, methods, quantities, along with the time period for the contract. In contrast, in PBC, the client agency specifies certain clearly defined minimum performance measures to be met or exceeded during the contract period. PBC is a type of contract in which payments are explicitly linked to the contractor successfully meeting or exceeding certain clearly defined minimum performance indicators. Therefore, the PBC model maintenance and rehabilitation selection differs significantly from that of traditional asset management contract, and is more complex due to the pavement deterioration process and probability of failure to achieve the specified level of service (LOS) for various performance measures along the contract period. PBC tenure typically ranges from 3–10 years and could be extended to 30 years due to the nature of periodic maintenance and rehabilitation. In addition, pavement deterioration follows a stochastic behaviour, and the deterioration process and the improvement due to maintenance and rehabilitation activities varies based on many factors such as environment, traffic loading, material properties, and data used for the modelling, which results in a risk to the awarded contractor in such contract models. This paper presents a novel framework for post-award project asset management (PAM) of assets under PBC. A case study using data from the Ministry of Transportation Ontario (MTO) second generation pavement management system (PMS2) and previously published work by the authors of this paper is presented to illustrate the framework.

While the literature on public-private partnerships (PPPs) argues that the private sector’s life-cycle approach to design and construction results in operational cost efficiencies, empirical support is missing. This study explored that issue conducting a four-prong investigation: First, a literature review searched for evidence of such efficiencies and methodologies to evaluate them: it found no empirical evidence of superior operations and maintenance (O&M) cost-efficiency in PPPs. Second, a simple methodology is proposed to evaluate life-cycle cost-efficiency, but adequate data and assumptions about O&M costs are needed. Third, since PPP projects in the United States are recent and currently subject to routine O&M, indicators to compare those costs were proposed. Fourth, a case study compared the routine O&M costs of a PPP to those of a system of traditionally delivered toll roads. The results showed that the PPP was more cost-efficient in operating expenditures (OPEX) per mile (−60%) and per lane-mile (−53%). The traditional system was more cost-efficient in OPEX per vehicle miles travelled (97%), toll transactions (332%), and toll revenue (20%). However, these three indicators depend on traffic volumes, which were overwhelmingly greater on the traditional system. While the case study showed cost-efficiency differences between public and private sectors, additional research is needed to empirically test the hypothesis of the private sector’s higher efficiency. Understanding the differences in cost-efficiency between publicly and privately managed roads will help decision-makers to minimize the life-cycle cost of their investments.

Public-private partnerships (PPPs) are currently being used by the Texas Department of Transportation (TxDOT) as an alternate method to deliver infrastructure projects. The addition of private resources allows TxDOT to move several mega projects from planning to design and construction. These mega projects cover corridor-wide segments of highways and are complex to design and construct. Several PPP projects are currently under construction in the Dallas and Fort Worth region of Texas, including the LBJ Express Project ($2.6 billion), the North Tarrant Express (NTE) Project Phase 1 and 2 ($2.05 billion), and the NTE Phase 3A and 3B Project ($1.6 billion). In all, these projects cover 36 miles of highway. For the owner, entering into a PPP changes a project’s design and construction management process. Typically, when the traditional low-bid method is employed, TxDOT has complete control over means and methods of construction. However, in PPPs, TxDOT focuses more on verifying that the delivered project matches the specified design and construction parameters. From direct observation, this paper documents the communication process used during the design and construction phases of these large PPP projects between TxDOT and the developer, design-build contractor, and independent engineer.

Value for money (VfM) analysis is currently used to evaluate public-private partnership (P3) concession proposals. But the VfM approach is not able to account quantitatively for benefits to travellers and others from delivering a project earlier than would have been possible under conventional procurement. Benefit-cost analysis (BCA) could address these issues and other non-financial benefits. This paper presents a preliminary BCA framework to assess a typical public-private partnership (P3) concession proposal and uses a hypothetical P3 proposal to illustrate it. The authors are seeking input from technical experts and P3 stakeholders before finalizing the P3 BCA approach.

The Texas Department of Transportation (TxDOT) has effectively implemented in the last years processes of alternative technical concepts (ATCs) and industry review innovation, as part of the procurement of its comprehensive development agreement (CDA), or public-private partnership (PPP) projects. As proposer and private developer to a number of these projects, the team of Cintra and Ferrovial Agroman have participated vigorously in the process, resulting in substantial improvements in the financial viability of a number of projects. This paper presents several examples of innovation through ATCs or alternatives suggested through the Industry Review, and successfully implemented in projects underway or recently completed. These include examples where the initial construction cost was reduced, as well as others where project connectivity and therefore capacity to generate toll revenue was improved to more than offset the extra construction cost. Based on this experience, ways are suggested which, in the view of the authors, can facilitate the ATC and industry review process innovation capture.

Since the global financial crisis limited funds have been available for major infrastructure projects, many governments and other agencies have had great difficulty in promoting and financing infrastructure development using public private partnerships (PPPs). Therefore, it is essential that supporting agencies and financiers conduct effective pre-design and pre-construction analysis and evaluation of the proposed projects. Traditional approaches have tended to focus on the meeting budget and project duration targets, but these single dimension evaluations may not take account of the more complex legal, organizational, and financial interfaces created by multiple stakeholder interactions. More effective approaches, mechanisms, and frameworks are essential in this early stage volatile environment and this paper attempts to address some of the vital issues involved in the inception stages of major infrastructure projects using PPPs. Stakeholders must have an effective performance measurement framework to evaluate PPPs before they make crucial decisions on major infrastructure projects. Fundamental to creating a new approach is to gain an understanding what evaluation methods are used at present by reviewing the important literature on PPPs. The paper concentrates on PPP characteristics and performance measurement. Analysis of the literature indicates that a more feasible framework based on the performance prism can capture more of the distinct characteristics of PPPs and is a more suitable framework for conducting these early project evaluations, providing more efficient performance measurement. This paper can be provide essential guidance for assisting in the design and selection of the most effective performance measurement indicators for PPPs in infrastructure projects.

The arbitration in the Brazilian legal system and the consequent expansion and visibility of this instrument was brought up by the enactment of Law n^o 9.307/2006 (Brazilian Arbitration Law). The ratification and promulgation of the New York Convention by Decree n^o 4.311/2002, 44 years after the Convention held in 1958, conjointly to other regional conventions also address the issue of arbitration. Thus, Brazil incorporates arbitration in its legal practice as an alternative to litigation in a less consuming time.

The wide availability of electronic toll collection (ETC), and in particular the quick maturity of not so long ago considered state of the art technologies such as open road tolling (ORT), has boosted the deployment of managed lanes (ML) and high occupancy toll (HOT) facilities in the US. Together with pure high occupancy vehicle (HOV) facilities, they are all examples that have proven to be effective at reducing the levels of congestion in urban corridors. This paper presents the key design factors that were taken into account by the Developers of Managed Lanes in Dallas-Fort Worth region included in the TEXpress network when designing the HOV declaration system (Drive On TEXpress from now on Drive On), in order to ensure their success and to optimize the quality of service to the user. HOV users in these projects will be eligible for a toll discount if they self-declare as such. Our challenge was to find the more user-friendly, effective, and efficient self-declaration system. Alternative declaration methods such as lane-based declaration, electronic declaration, switchable transponder, and other options that were analysed will be reviewed. Results of several research projects conducted by states wishing to implement HOT or ML facilities have shown that current saturation enforcement techniques are not effective in reducing violation rates. However, given that no proven technologies seem to be currently available that completely removes the need for manual validation of occupancy previous to any citation, a combination of manual and automated enforcement seems to be the most efficient method to conduct enforcement. This paper will present and discuss the characteristics of the manual HOV enforcement conducted in the projects. Given the significant number of stakeholders involved in such a complex network, project coordination took a significant amount of the efforts of the project’s team. The document will also describe how the project was born and how the implemented solution was accepted by all parties. Finally, an analysis of the evolution of the usage during the first nine months of operation will be presented.

Planning and financing decisions for new highway capacity investments were primarily driven by three distinct but interrelated areas: vehicle miles travelled (VMT), traffic volume, existing congestion and forecasts. These measures have provided the soundness for long term borrowing to finance the new highway capacity. A sea change in mobility is altering planning, revenues, and financing and could seriously undermine a state’s/city’s ability to support debt for new capacity and how our transportation plans address congestion.

Highway congestion is primarily driven by three factors¹: demand that exceeds roadway capacity at specific times or events; crashes; driver behavior of changing lanes, inconsistent speeds, merging and exiting (and all driver misjudgments, errors, and impaired/distracted driving); and, land use patterns.

Today four significant changes are occurring that will dramatically address these congestion factors and reduce highway congestion. The four changes involve economics, demographics, technology and transportation management, and land use. These changes are creating uncertainties and increased risk for public and private decision makers, particularly for addressing future congestion and revenue forecasts. The paper will look at these changes and their implications to decision making. The industry’s heavy reliance reliance on VMT has skewed decision making.

The changes will require a new mobility matrix. The critical transportation decision issue should not be VMT, but how people move from point to point efficiently and effectively; where do they want to go and why, and how they choose their mobility choices². The new matrix will raise serious questions about the use of tolls as viable financing ways of funding new capacity. Transportation is a great deal more than traffic. Traffic is two-dimensional and wheeled-vehicle based. Even traffic is changing, with the rise of autonomous vehicles.

For many decades the history of highway revenues forecasts reflected steady growth in VMT, fuel use, car and truck registrations etc. as the primary sources for revenues. While the rates of growth varied by category and changed over time, these changes were not dramatic and certainly did not imply structural changes in the use of our transport system.

Planning and financing decisions for addressing congestion and new highway capacity investments were primarily driven by vehicle miles travelled (VMT), traffic volume, existing congestion and traffic forecasts.

However, over the past decade there has been a steady decline in key data sets critical toforecasting traffic and revenues: notably, VMT per capita and an overall decline in automobile VMT and the other measures for highway revenues, planning and decision making. This is correlated with revenues, both in terms of fuel use and registrations.

Starting in 2004 traffic and revenue forecasting were witnessing a serious, 9%, decline in VMT. This was unprecedented as VMT growth was positive and strong for decades with the exception of 1980. Until May 2014, the federal VMT forecasts were built upon the continued growth of the past and justified the recent declines of stagnant VMT growth on a faltering US/world economy, harking back the 1980 decline because of the recession. The May 2014 FHWA Forecasts of Vehicle Miles Traveled (VMT) Report³ cut the previous forecast growth light-duty vehicle travel⁴ between 24 and 44 percent and stating a “forecast showing the 30 year forecast growth rate in total VMT is only slightly above the 0.67% annual growth projected for light-duty vehicle travel through 2042 “⁵. Washington state’s “REVENUE AND RIDERSHIP PROJECTIONS SEPTEMBER 2014 FORECAST FISCAL YEARS 2015-2027”⁶ predicts similar VMT declines of 13% from 2013-2042. This forecast change has billions of dollars in less revenues for federal, state, and local transportation agencies; and requiring FHWA to provide clearer, more dependable, flexible and better forecasting tools for HRFM, and for potential new revenue sources to make up the gap in potential lost revenues from the slow growth in the May 2014 Report.

Not only are VMT forecasting declines affecting public transportation revenues, there is a growing shift in the relationship between auto travel and personal wealth (as measured by GDP). Garceau, Atkinson-Palombo and Garrick have done considerable work in this area and their work produced a critical fact:

“For decades in the U.S., VMT and GDP grew in a highly correlated manner that suggested intricate connectivity. In the mid-1990’s, GDP began growing faster than VMT, suggesting a weakening in driving’s contribution to economic growth and calling the nature of the relationship into question. As the U.S. economy recovers and driving rates stagnate or decline, the continued assumption of connectivity between driving and the economy may no longer be justified.”⁷

Together the decline in VMT and the divergence indicates that there are major shifts in factors affecting transportation and the economy that will have serious transportation revenue and forecasting impacts on our ability to finance and pay for new capacity, plan our transportation system and projects and address congestion.

Highway congestion is important to our conversation as excessive highway congestion is the primary justification to build and finance new highway capacity. Highway congestion is driven by three factors⁸: demand that exceeds roadway capacity at specific times or events; crashes; driver behavior of changing lanes, inconsistent speeds, merging and exiting (and all driver misjudgments, errors, and impaired/distracted driving); and, land use patterns.

Today four significant changes are occurring that will dramatically address these congestion factors and reduce highway congestion. These changes are creating uncertainties and increased risk for public and private decision makers in addressing congestion. Consequently, these changes also could result in serious revenue shortfalls for toll and congestion pricing revenue forecasts over the next 10–15 years. The four changes involve economics, demographics, technology and the slow but measurable public sector adoption of transportation management strategies and land use

The paper will look at these changes and their implications to forecasting challenges, reduced revenues, transportation planning and decision making criteria. The industry’s reliance on VMT has skewed decision making and the decline of VMT over the past 10 years and continues in 2013. State Dots have been slow in responding. Though there are some signs of an awakening and change of course. Among the early signs of awakening, is the the Caltrans 2012 household travel survey and USDOT’s 2013 Conditions and Performance Report.

The four areas to be discussed will require a new matrix for thinking about mobility. The critical transportation issues should not be VMT and traffic forecasting, but how people move from point to point efficiently and effectively; where do they want to go and why. A better physical indicator of mobility and our need to respond is people miles travelled and the purpose for which they travel, and how they choose their mobility choices⁹. This transportation focus provides transportation managers with vision to look anew at our transportation system and integrate the changes in demographics, the economy, technology discussed and the public’s efforts to manage their transportation system and land use. The new matrix will raise serious questions about the use of tolls as viable financing ways of funding new capacity. Transportation is a great deal more than traffic. Traffic is two-dimensional and wheeled-vehicle based. Even traffic is changing, with the rise of autonomous vehicles.

In recent years, there has been a shift in highway projects undertaken by the Texas Department of Transportation (TxDOT) towards public private partnerships (PPPs). These PPPs generally take the form of comprehensive development agreements (CDAs) and design-build agreements (DBAs). In a typical CDA, a developer finances a portion of the project and receives toll revenue from facility users for a defined duration. In a DBA, TxDOT provides full funding for the project and the design-build contractor has no right to toll revenue (should it exist). For both CDA and DBA projects, and unlike design-bid-build, the contractor is required to develop the project’s traffic control plans. For TxDOT to ensure that the mobility needs of the public are met during construction, CDAs and DBAs must contain language that effectively communicates limitations on capacity reductions during construction. This may include limitations on the number of freeway lanes that may be closed at any given time, restrictions related to consecutive ramp closures, and using origin-destination pairs at different ends of the project limits to define required movements to be maintained during construction. This paper describes the various types of lane closure restrictions seen on TxDOT CDA and DBA projects.

In public-private-partnership (PPP) projects, contracts signing and executing are becoming more complex because of the complicated relationship between the parties and the long duration. In particular, due to the original contract design flaws, instability of institutions, and impact of emergencies, renegotiations of PPP often occur. Usually, it is assumed that renegotiations would lead to the low efficiency of social resources allocation and PPP projects management, which has become the subject of much attention. However, according to amount of literature research and cases analysis, it is found that not all renegotiations are harmful to project efficiency and social surplus. As an initial study, this paper aims to underline the necessity and positivity of renegotiations in some cases, describe the evolution routine and determinants of renegotiation. A notion of positive renegotiation is proposed as well as the conditions on which these positive renegotiations may happen. Combined with the features of PPP contract, a theoretic framework is then offered to establish a positive renegotiation mechanism based on contract dynamics. The study is hoped to provide an alternate view on the problem of PPP renegotiations, that is a positive view, and offer a theoretic understanding on the renegotiations as a useful tool for the parties to cooperate and adapt to the changing environment.

A contribution to the 1^st International Conference on public-private partnerships in Dalian, China by Haas, Cowe Falls and Quieroz demonstrated the applicability of long term warranty and sustainability requirements in network PPPs. This paper builds on the earlier contribution by describing an integrated life cycle asset management framework which addresses the interests of the agency and the concessionaire. It recognizes that the concessionaire has interests such as return on investment while the agency is concerned with long term sustainability and good environmental stewardship plus social and economic responsibility. More specifically, the paper first identifies the scope of long term PPPs and the assets normally included. It then identifies the joint benefits that should accrue to both the agency and the concessionaire and the performance measures or indicators that can be directly tied to the benefits. The paper describes how the performance indicators should be tied to or based on policy objectives and in turn linked to operating targets, with examples. A classification of quality of service to users, safety, preservation, and sustainability forms the basis and recommendations for realizing long term sustainability are put forward.

As a practice of public-private partnership and also as an alternative to traditional contracting for pavement construction and maintenance, pavement warranty has been adopted by many state highway agencies to enhance pavement performance, reduce agency costs, and preserve pavement construction investment. A questionnaire survey was conducted to collect information on the state of practice of pavement warranty programs in the US and Canada. This paper highlights the findings of the survey with an emphasis on warranty specifications for distress thresholds. The survey results show some common characteristics of pavement warranty practice shared by different states, such as warranty types, warranty items, and warranty enforcement. Meanwhile, pavement warranty specifications varied among different states especially in distress threshold values. Although pavement warranty has been applied in the US for almost 20 years, there are still major issues concerning state agencies with respect to the determination of warranty items, the appropriateness of distress thresholds, and the cost-effectiveness of the pavement warranty programs.

In this paper, we analyze the successes and failures of PPPs and concession contracts for delivering and operating infrastructure in Spain from the award of the first toll highway concession program to the present and assess the impact that PPPs have had in infrastructure investment levels in Spain. To that end, we define the risk allocation principles used in Spain, and explore the evolution of the contracting approaches over the years. We found that the performance of PPPs is Spain was reasonably good until the arrival of the economic recession in 2008. Taking advantage of that, we make a trans-sector review of PPPs and study in-depth the impact that the economic recession has had on the business performance of PPPs in Spain and on the capacity of the central and regional governments to fulfill its commitments with the private sector. This analysis proved to be useful to assess to what extent PPP contracts were well designed and risks were correctly allocated. On the basis of the impact of the recession on PPP contracts, we were able to identify measures that, if had been applied, would have improved the present performance of PPPs.

As public private partnerships (PPPs) around the world are gaining in its popularity as a way to finance needed infrastructure, rushing to implement PPP infrastructure projects without careful study may, however, result in projects being distressed or cancelled in later stages. This may be because, unlike traditional infrastructure projects delivered using public finance, PPP projects usually have a more complex setting in which several parties are involved in managing the projects. Moreover, these parties often have diverging goals, which may lead to conflict of interests when faced with operating difficulty. The sponsors of those distressed PPP projects have no choice but to seek renegotiation in their contracts with the host government and lenders so that the projects could continue operating. Accordingly, relevant laws play a vital role in either helping the recovery of distressed PPP projects or exacerbating them. This paper examines the impact of laws on the distressed PPP infrastructure projects in Thailand. The paper focuses the study on two main contracts commonly found in PPP projects: one is between the sponsors and the host government, and the other between the sponsors and the secured lenders.

With the continued increase of demand on Texas highways and the decrease in available funding for highway infrastructure maintenance and rehabilitation (M&R), the deterioration of highway infrastructure will accelerate. Given the extent of the Texas highway network, ports, and the border it shares with Mexico, the deteriorated condition of roads can become a major challenge to the nation’s economy if they are not properly maintained. Yet various studies have indicated that the revenue is insufficient to pay for the M&R work required to keep the overall condition of the state-maintained highway system at its current condition level. Texas Department of Transportation (TxDOT) must develop new and innovative ways to ensure that our highways fulfill their role in helping Texas maintain its economic competiveness with a safe, reliable, and economical highway transportation system. Managed lanes are becoming accepted more and more by public agencies all over the world as an alternative approach to bridging the budget gap; it can serve as an innovative and cost-effective financing mechanism. This study proposes an integrated approach based on a tiered highway system of managed lanes where the finance, maintenance, and operation of the system are considered simultaneously. Each tier would provide a different level of service depending on its importance. The most important tier will be maintained and operated through the utilization of managed lanes, leaving more state appropriated funding for the remaining tiers. Various tolling strategies were evaluated in terms of obtaining preliminary revenue estimates along with the projected M&R needs. Preliminary analysis results indicate that the proposed funding mechanism is promising and could help maintain the state’s economic competitiveness, leading to sustainable economic growth in Texas.

The long-term leasing of toll roads, a type of public-private partnership (PPP), has been attracting the attention of state governments since the two landmark cases of the Chicago Skyway and the Indiana Toll Road in 2005 and 2006, respectively. In order to assist public agencies in making appropriate decisions to enter PPP agreements that are in the best interest of taxpayers, a general framework is established in this paper for evaluating the long-term leasing of toll roads. Value for money (VfM) analysis, which takes into account transferred risks and retained risks through probabilistic techniques, is used as a main criterion for measuring the economic efficiency from the public sector perspective. User benefits and user costs are incorporated with VfM through multiple-criteria techniques. The evaluation framework is demonstrated using a case study of the lease of the Indiana Toll Road. The analysis shows that over the lease period, there is little likelihood that the Indiana public agency, if it had continued in-house management of the toll road, could have earned at least the same financial return as the upfront payment lease amount paid by the lessee. The multiple-criteria approach also confirmed the results.

There is now a better way to determine the quantitative probability of revenue forecasts being achieved or exceeded. Called “quantified probability analysis” (QPA), it is a practical approach permitting both debt and equity participants in a deal, and developer and other interests, to be satisfied that their (possibly differing) revenue forecast needs are properly addressed. Traffic and revenue forecasts have always been subject to some level of uncertainty. Historically, financial analysts have been given them somewhat arbitrary “haircuts” or reductions to reflect this uncertainty, sometimes considering the results of sensitivity tests of major input variables such as population growth and competitive facilities. But sensitivity tests are not intended to address the probability of a particular input variance actually occurring. The “QPA” requires both expert transportation planning and sophisticated statistical capabilities. It first recognizes and quantifies inherent uncertainties in the modeling and forecasting process. The QPA methodology relies on sensitivities of project revenues to variations in each of the significant inputs. The preferred source for this are successive model runs which permit the sensitivity of traffic or ridership to individual input variations to be ascertained. Next distribution functions for significant input variables are developed or estimated. (i.e., population growth, value of time, land use trends, etc.) The development of the combined probability distribution can employ simplified forms of the traffic and revenue forecasting models developed using response surface analysis. Monte Carlo methods can then be used to compute the full traffic and revenue probability distributions. The resulting matrix of overall annual revenue levels versus estimated probabilities of attainment or exceedance for selected years is the information of interest to project participants. Typically, the calculated values can be for: a 90% probability of attainment, or investment grade; a 50% probability, often considered to be a “central” or “most likely” case; or other values requested by project participants for their risk assessments and financial pro formas.

With the budget pressures that state departments of transportation (DOTs) are facing, slow revenue growth, congestion resulting in a need for new highway capacity, increasing costs of aging infrastructure maintenance and construction, in addition to, traditional project delivery methods falling behind on meeting those complex challenges, there is a crucial need to employ new innovative project delivery methods, such as, public-private partnerships (PPPs). However, the additional risks associated with PPPs due to the integration of the operation and maintenance phases need attention during the procurement stage. With 55% of PPP projects being renegotiated between the public and private sectors after 3 years of project award, the effect of operation and maintenance risks clearly emerges. On the other side, lean application has been proven to achieve sustainability through enhancing value and eliminating waste offering potential benefits to PPP projects. The objective of this study was to investigate the importance of lean assessment during the procurement phase in PPP projects from the DOTs’ perspectives. To achieve this objective, surveys were sent to the 33 DOTs that have PPP legislation, to investigate if lean was considered as one of the evaluation criteria in their bid documents. Results of the survey showed that 37% of state DOTs were not familiar with lean definition. In addition, none of the state DOTs reported considering lean applications as one of the evaluation criteria in their bid documents. These results indicated that developing a consistent definition for lean in RFP/RFQ documents that includes all the aspects of lean principles is the first step for successful lean implementation on PPP projects. If state DOTs are to start requesting lean qualifications in their bidding documents, it becomes important to also investigate the weight placed on lean principles as an evaluation criteria in the bid documents.

Traffic and revenue (T&R) forecasts are based on travel demand models and inputs with associated uncertainties and imperfections. Forecasters must guard against overstating a proposed project’s T&R potential while avoiding being too conservative. Performing sophisticated risk assessment and sensitivity tests on key input parameters is a prudent solution to this forecasting dichotomy, thus reducing the risk in planning, designing, and financing the toll facilities. This paper presents a risk analysis process and shows two case studies, one for a traditional toll road (where all of the facility’s mainlanes are tolled) and one for a managed lane facility (where some of the mainlanes are tolled and some of the mainlanes, called general purpose lanes, are non-tolled), where the process is applied. In addition, impacts of select extreme events are estimated and presented.

PPP can provide a variety of benefits to the government. At its heart, however, it remains the risk-management problem due to the high degree risks affecting PPP projects. Even if the topic of risk management in PPP has been widely discussed, the analysis of the literature reveals that risks must be analyzed and managed on a context-specific approach and that there is a lack of a comprehensive study on the more suitable risk mitigation strategies for each risk embedded in PPP projects. Focusing on a specific PPP sector, namely the transport sector, based on the results of a Delphi survey conducted with two panels of experts, the paper provides a guideline for both public and private parties in defining a list of significant risks in PPP motorway projects, preparing a practical risk allocation framework and identifying the most suitable mitigation strategies. Furthermore, results of the Delphi survey have been validated on a set of eight cases of road and motorway PPP projects.

Pricing techniques are crucial to value embedded flexibilities in PPP projects. These flexibilities can be seen as options, which can add significant value to PPP contracts. Even when PPP contract is clearly understood by the parties, uncertainties are commonly not well measured. We developed a real option model to value the flexibility of sequential investments associated with an imbedded option to abandon the project. The capital expenditure of the PPP project is the main uncertainty of the model, which follows a geometric Brownian motion process. In intuition behind the model is based on recently unsuccessful PPP projects in Brazil, in which set the abandonment fees too high and its scare private investors away; set them too low and private investors may abandon the project more often than desired. We apply the model to a broadband infrastructure project conducted by the state government of Rio de Janeiro, Brazil, to attract private partners to the bidding process. We calculated the value of the real option to be US$9.09 million, which represents up to a 31% increase over the value of the baseline project obtained by the DCF analysis. We also simulated the probability to abandon the project as a function of the penalty fee and CAPEX volatility. The project risk perception were simulated considering the probability of project abandonment, which achieved 12.5% in the first year and it decreases substantially in the next four years of the construction phase; it is less than 0.5% in the 2^nd year and less than 0.7% in the 3^rd year. The probability to abandon the project at years 4 and 5 are virtually zero. This model can allows governmental policy-makers to design PPP projects with the most appropriate penalty fee schedule and provides a quantitative tool to disincentive the abandonment of the concessionaire in PPP projects.

The growing gap between a global infrastructure deficit and the availability of public funding sources suggests private participation in the provisioning of public infrastructure will persist and even expand in the coming decades. However, the outcomes of these public–private partnerships (PPPs) and their value for society, are discussed by many. The complicated governance arrangements of PPPs are at the heart of unpredictable outcomes. These complexities propagate uncertainties and risks for multiple stakeholders, which constrains supportive actions over a PPP’s lifecycle. Much of the scholarship addressing PPP governance identifies critical success factors (CSFs) and key performance indicators (KPI)s from a private focal actor’s perspective (and generally in a narrow time frame), but little attention has been paid to the fundamental challenge of dynamic stakeholder networks surrounding and encompassing PPPs. This paper empirically unpacks the project lifecycle into phases, and illustrates how stakeholder networks change with these phases. This paper provides an analysis of an in-depth PPP highway transportation case within the US. Using retrospective primary and secondary data, the results from a phase-based network analysis demonstrate changing organizational arrangements within the PPP stakeholder network. This research uses stakeholder theory as a conceptual framework for identifying and analyzing actors and perspectives, and suggests that PPP governance is a challenge in dynamic network governance. Its contributions are at the intersection of public administration, business management, and project management, supporting a larger undertaking by scholars to propose integrated theory for the governance of complex PPPs.

The main objective in using PPPs is to provide public infrastructure services to citizens as many governments struggle to provide more and better services due to limited budgets. Although the lack of public infrastructure to provide public services is seen as a problem by many governments, it presents an opportunity for the development of a sustainable SME sector for both developed and developing countries. The bigger the infrastructure backlog, the bigger the opportunity for countries to develop a viable SME sector that has the potential to create jobs and alleviate poverty while at the same time, addressing the challenge of inadequate infrastructure. Many PPP models for developed and developing countries do not mention the use of SMEs as potential suppliers of PPP goods and services and they do not embed SMEs into the PPP project structure. Most debates in the PPP arena are about finding the best way of using the private sector to deliver public infrastructure, but little has been said about using PPPs to develop SMEs and creating jobs for the unemployed. This model has overlooked the potential that PPP projects can have in developing a sustainable SME sector that can create jobs for the unemployed and generate income for the poor while at the same time, addressing the challenge of infrastructure backlog. This paper therefore proposes a PPP model that will help develop a sustainable SME sector in South Africa.

The Brazilian Public-Private Partnerships Law (Federal Law No. 11.079/2004) introduced a new type of partnership between the Government and private enterprises in Brazil. It aimed to create a continuous relationship between the contracting parties (public and private), within a public-interest project that requires mutual cooperation and sharing of responsibilities and risks, once the growth of private investors’ interest in PPP is worth noting when there is a lack of public investment. In this sense, the aforementioned law introduced a system of guarantees in order to impose to both contracting parties the following commitments to be undertaken: (i) the state guarantees the fulfillment of its financial obligations before the private partner, and (ii) the private partner provides performance bonds. Such impositions intended to improve the PPP system and make it more appealing to both public and private parties. This apparent balance, however, is flawed. Once it demands contribution from a Government that does not own enough resources to perform projects itself, it is difficult to understand how the offered guarantees will, in fact, honour all commitments settled with many different partners and projects. Notwithstanding, this article pursues to bring forward foreign-legal-systems groundings to present solutions to such problems, especially when considering the importance of PPP’s in social infrastructure projects. Also, it intends to present different solutions introduced in Brazil, making projects feasible, and others successful or unsuccessful methods chosen by the project sponsors.

This paper focuses on the challenges that public-private partnership (PPP) projects and infrastructure development companies in Spain are facing in view of the financial crisis. Despite the financial crisis, there still has been interest in financing infrastructure, through concessions under a PPP agreement, as an adequate approach to tackle infrastructure deficit and promote sustainability in the road sector. However, when different models are analyzed in several countries and regions, successful stories are not always found. In order to build a successful story, several steps are needed, including political commitment and clear policy, competent public administration, a legislative framework to enable PPP, availability of both public and private capital, and willingness to invest by the private sector. This paper reviews the required legal framework that supports the concept of PPP, such as a suitable procurement law promoting a competitive selection of concessionaires, the transfer of risks to the private sector, and the use of minimum revenue guarantees to mitigate risks, focusing on the case of Spain. Spain has a dense road network of more than 165,000 kilometers in an area of approximately 500,000 square kilometers. Out of that figure, highways and high capacity corridors represent more than 15,000 kilometers and many of them are managed through a PPP scheme. A review of basic PPP concepts under the Spanish PPP law is presented, pointing out the main responsibilities of the public and private stakeholders in the process. Furthermore, the paper describes the PPP bidding process emphasizing the different steps of the process and how the stakeholders interact. The paper also describes good governance recommendations to ensure that the private sector’s involvement yields the maximum benefit for the public.

There is a consensus among specialists, both economists and policymakers, that an adequate supply of infrastructure services is a key element for economic development. Under budgetary constraints, many countries have launched public private partnership (PPP) programs to help cope with the need to improve their infrastructure. This paper discusses a stakeholders’ survey on the performance of the Brazilian PPP program. A survey instrument, especially designed for this study, was answered by internal and external stakeholders in Brazil. A rating system was established to quantify most of the answers provided. The resulting scores were used to develop an overall PPP perception indicator, which this study has denominated PPP perception index (PPPPI), expressed on a scale of zero (worst) to 100 (best). The resulting PPPPI for Brazil was 66, computed by analysing 58 quantifiable answers provided by each one of the 50 respondents (stakeholders), thus using a 58×50 data matrix (or 2,900 data points). The survey indicated several positive aspects of the Brazilian PPP program, as well as some areas of possible improvement. Aspects highly rated by all stakeholders, indicating general agreement on the high level of PPP effectiveness and optimism, include: (a) the performance of common (or traditional) concessions; (b) the performance of the PPP Unit of Minas Gerais State; and (c) risks are viewed to be relatively minor regarding demand, credit availability, and foreign exchange. Issues relatively poorly rated by all categories of stakeholders, indicating areas where stakeholders generally agree that more needs to be done to strengthen the prospects of successful PPPs, include: (a) poor effectiveness in the use of traditional procurement procedures for the transparent, competitive selection of the private partner in PPP/concession projects and (b) poor prospects of further PPP investments in education and health infrastructure.

The availability payments have been used in the payment mechanisms of public-private partnership (P3) transportation projects in the United States. These payments have been used to emphasize the performance-based contracts and to achieve government objectives in using P3 as a delivery system. This research looks at the implementation of the availability payment in the USA transportation projects and compares it to the Canadian P3 experience. The research investigates the structure of the payment mechanism and whether other payments have been used in the mechanism, the share percentage of the availability payment in the mechanism structure, the economic/financial factors used in the payment structure, future adjustments, penalty/performance-deduction structure, the public agency objectives in using availability payment, and the public agency oversight and accounting. The work utilizes a document and content analysis approach to a detailed study of the selected P3 projects in the USA and Canada. The output of the research should explain the pros and cons of using availability payments in the USA and the areas that need improvement in the payment structure.

This study updates and improves the model previously developed by Carbonara et al. by developing a real option-based model that supports the decision maker in finding both the level of minimum revenue guaranteed by government and the upper level of revenue that ensures a win–win condition for both parties, in the sense that these levels should be able to protect the interests of the private investor and the government simultaneously and to assure that the interest of the two parties are satisfied in a balanced way. The model uses the Monte Carlo simulation in order to take into account the uncertainty. The model is a useful tool in supporting (a) the government’s decision making process on assessing values of public subsidies needed to make the project attractive to private investors and (b) both public and private parties during the negotiation in finding the fair values of the revenue cap and ceiling.

Substantial private sector innovation, through alternative technical concepts or other similar innovation capture processes, often requires a revision of the design with respect to the environmentally approved schematics. These changes usually require an environmental reevaluation of the project to ensure criteria approved during the environmental decision-making process are met. The public administration customarily transfers the liability for these developer-initiated reevaluations to the developer. As such, this transfer of responsibility has in some cases obstructed innovation. The importance of environmental reevaluation liability in PPPs and the potential risks to private developers and contractors cannot be understated. This paper describes the experience of a private developer which, as partner to the Texas Department of Transportation (TxDOT), has successfully conducted several environmental reevaluations at risk during the implementation of comprehensive development agreement (CDA) public-private partnership (PPP) projects in Texas.

The issue of contractual flexibility is becoming increasingly important as a tool to address uncertainty affecting public private partnership (PPP) projects and as a mechanism to ensure its economic and financial viability. Although there is a wide spectrum of ways to assess and implement flexibility in PPP projects, there are also important trade-offs that are not always easily quantifiable. Nonetheless, the idea of contractual flexibility as a tool that allows adapting to uncertainty gains momentum. This paper explores the potential benefits of contractual flexibility with respect to PPP’s critical success factors through the analysis of case studies of European PPPs in the road sector. Our results show the existence of flexible mechanisms in contractual agreements in order to respond more adequately to the uncertain future. Moreover, it is identified that effective communication mechanisms improve respond to unforeseen events and reinforce the partners’ commitment in delivering a win-win project.

Private participation in the delivery of toll road projects has been used worldwide. It is a model which incorporates private sector knowledge and experience in the management of highway projects as well as the mobilization of private capital through public-private partnerships (PPP). One of the most prevailing characteristics of PPP projects is risk sharing between the public and the private partner. Assessment of project’s financial soundness, a crucial factor for the private sector involvement, represents the basic underlying process during the project’s development until the project reaches financial closure. It is important to capture project’s uncertainties even in early phases of financial analysis since this information helps in the identification of potential financial risks and assists all sides to properly structure the deal. Parameters commonly used for the evaluation of project’s financial feasibility are annual debt service cover ratio (ADSCR), internal rate of return (IRR), and return on equity (ROE). This paper presents a methodological framework for an early assessment of toll rates for PPP toll road projects. This approach takes into account predefined financial constraints ADSCR, IRR, and ROE on one side, and project’s uncertainties such as traffic volumes, construction costs, and operation and maintenance costs on the other side. Results provide the range of toll rates covering possible risks scenarios. These results can serve as a basis for a comparative analysis of the socially acceptable toll rate, assuming it is known, and the financially required toll rate. It is anticipated that the early identification of the possible gap between these two values represents valuable information for all parties involved in the project. This gap helps in the identification of the need for additional financial instruments such as guarantees or subsidies in order to implement a project that is acceptable for the private and the public partners, equity investors, lenders, and users.

This paper is aimed at analysing how financing instruments can be effectively utilised in the preparation and implementation of PPP programs in roads. The instruments include risk mitigation instruments offered by international financial institutions and public financial support for infrastructure projects. In PPP projects in roads, it is important to identify risks and allocate responsibility for the identified risks between the public and private sectors. In particular, allocating revenue related risks is critical because it involves uncertainty for future demands. However, not all public sector agencies are capable to take those risks, especially in developing economies, due to their insufficient fiscal condition and limited track record of similar type of projects. In order to attract private sector investment to PPP road projects in those countries, the financial instruments discussed in the paper could be utilised to mitigate the risks.

Based on comparisons between the advantages and disadvantages of the data envelopment analysis (DEA) and stochastic frontier analysis (SFA) mathematical methods, this paper propose a method to calculate the efficiency component of the fare reviews when using the price-cap regulation in infrastructure concessions. At first, some concepts of benchmarking and regulatory methods that include efficiency analysis with a part of the regulation process are presented. Subsequently, the advantages and disadvantages in using DEA or SFA are analyzed in order to identify the benchmarking between infrastructure concessionaries. As a conclusion, a method to evaluate and compare efficiency between companies in the concessions field is proposed.