...were private toll roads. Now, after a long time in the shadows of publicly financed and built projects, private sector involvement in highway construction and financing is making a comeback through public-private partnerships (PPPs). Many transportation officials think PPPs will be increasingly important in the future since traditional funding sources are not keeping pace with infrastructure investment needs and continuously growing public demand for travel.

In its December 2004 Report to Congress on Public-Private Partnerships, the U.S. Department of transportation (USDOT) broadly defines a PPP as "a contractual agreement formed between public and private sector partners, which allows more private sector participation than is traditional." the agreements usually involve a government agency contracting with a private company to renovate, construct, operate, maintain, and/or manage a facility or system.

Traditional transportation projects financed from fuel taxes and other highway user fees normally include a major role for the public sector and little involvement by the private sector. On the other end of the spectrum, the private sector may build, own, and operate a transportation facility, often a very complicated and technical project, through a PPP with minimal public involvement. PPPs cover the gamut between those extremes.

"Highways are traditionally government planned, government funded, and government maintained-not the typical American approach to industry," Mary E. Peters, former administrator of the Federal Highway Administration (FHWA), told a conference of the National Council for Public-Private Partnerships (NCPPP) in 2004. "In a time of funding shortages at all levels of government, it is particularly important that we allow-unleash-the private sector to participate in all elements of infrastructure improvements."

FHWA Administrator J. Richard Capka noted renewed interest in PPPs a year later, when speaking at a conference of the American Road & transportation Builders Association (ARTBA). "your conference coordinator tells me that 5 years ago there were [fewer than] 100 people at this annual conference -this year, nearly 00," Capka said. Attendees at the conference included government officials, transportation planners, designers, builders, system operators, and the financial experts who back them.

As State highway funding becomes more constrained, and as the need for highly efficient surface transportation systems continues to grow, many transportation professionals believe the role of the private sector will increase. transportation officials across the Nation are seeking ways to capture the efficiency and value that the private sector can provide. And as USDOT officials said in their comprehensive 2004 survey of the PPP landscape, Report to Congress on Public-Private Partnerships, USDOT "is committed to providing a greater role for the private sector in transportation services and infrastructure investment to supplement Federal, State, and local spending for capital investment in our Nation's infrastructure. Coupling private capital and private initiatives with public transportation efforts produces more and better facilities for the traveling public."

Recent History of PPPs

In the late 1980s, some States began exploring the potential for the private sector to augment highway construction programs. Under FHWA's Special Experimental Project No. 14 (SEP-14), created in 1990, States began to evaluate contracting options, including cost-plus-time bidding, lane rentals, and warranties for specific project features. States also studied design-build contracting, especially for the more complex projects under construction today, to realize the efficiencies of having the same contractors both design and construct these facilities and to shift some of the risks of construction delays to the private sector contractor.

In 1991, the Intermodal Surface transportation Efficiency Act (ISTEA) established a new vision for surface transportation in the United States. ISTEA permitted the use of tolls to a much greater degree on Federal-aid facilities. For the first time, private entities were allowed to operate toll facilities, and States were allowed to loan the Federal share of a project's cost to another public agency or private entity constructing the project. This trend in giving States greater flexibility in utilizing innovative financing and operating methods continued with subsequent surface transportation acts, including the Safe, Accountable, Flexible, Efficient transportation Equity Act: A Legacy for Users (SAFETEA-LU).

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Benefits of PPPs

In January 2006, FHWA Administrator Capka explained to an audience at the annual meeting of the transportation Research Board that the PPP message is taking hold. "We're showing State and local governments how PPPs can turn their highway infrastructure from liabilities into assets."

PPPs confer benefits by allocating project responsibilities to the party- public, private, or a combination of the two-best positioned to produce the desired results. This objective is accomplished by specifying the roles, risks, responsibilities, and rewards contractually to provide incentives for maximum performance and the flexibility necessary to achieve goals.

The primary benefits of using PPPs to deliver transportation projects include expedited completion compared to conventional project delivery methods, project cost savings, improved quality and system performance from the use of innovative materials and management techniques, substitution of private resources and personnel for constrained public resources, and access to new sources of private capital.

According to Jim March, leader of the Industry and Economic Analysis team in FHWA's Office of Policy and governmental Affairs, PPPs can include both innovative contracting and innovative financing. The former has limited private investment but significant private sector involvement in design, construction, and operation, while the latter involves the private sector bringing money to the table, accepting...

NOTE: All illustrations and photos have been removed from this article.



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