Introduction
There has been some confusion among the public regarding Public/Private Partnerships (PPP). I have read about these Public Private Partnerships many times as I have studied government agencies. I would like to clarify a few things.
Are Public/Private Partnerships good or bad? It depends on which came first. Is it a private entity being taken over by the government? Or is it a government operation being delegated to a private entity. It is the latter.
Most of the Public Private Partnerships exist to turn over the government's management of a task to a private entity, usually a private company. So in fact the project was a government operation to begin with, which is now delegated to a private company.
People are often complaining how private sector can do things more effectively than the government. This is indeed what the Public/Private Partnerships try to do: let the private sector do some of the jobs of the government. Therefore I say that Public/Private Partnerships are in fact a good thing.
PPPs in Transportation
The classic examples of Public/Private Partnerships are transportation projects, such as building roads or commuter rail. In a PPP the private company might do any one or more of the following functions: planning, financing, designing, construction, operation, and/or maintenance.
There are many, many variations of PPPs in transportation projects. For a good overview, with flow charts and examples, see the FHWA PPP webpage at:
http://www.fhwa.dot.gov/ipd/p3/defined/index.htm
About PPPs from the Federal Highway Administration
The following information on PPPs is from the Federal Highway Administration (FHWA). I have also included this information in my books on the FHWA.
1. About PPPs (FHWA description)
Public-private partnerships (PPP) refer to contractual agreements between a public agency and private sector entity that allow for greater private sector participation in the delivery of transportation projects.
There are many different Public-private partnerships (PPP) options, and the exact combination of services and responsibilities differs from one application to another. FHWA is working with our partners in the public and private sector to further investigate these promising partnerships.
In this website, the term “public-private-partnership” is used for any scenario under which the private sector assumes a greater role in the planning, financing, design, construction, operation, and maintenance of a transportation facility compared to traditional procurement methods.
As Federal and State highway funding becomes more constrained, and as the need for highly efficient surface transportation systems continue to grow, the role of the private sector will continue to reemerge. Transportation officials in the United States have been eager to find new ways to capture the efficiency and value for money that the private sector can provide.
This has led to new forms of partnership in which public owners have transferred responsibility for activities, for which it has traditionally been responsible, to the private sector. These activities range from the maintenance and operations of individual highways or large highway networks to managing the financing and procurement of large highway capital expansion programs.
Typical procurement packages include:
• Private sector operations and maintenance on a performance basis;
• Private sector program management for a fee and/or with program costs and schedule maintenance incentives;
• Design-build for fixed fee on fixed time frame;
• Project build-operate-transfer (BOT);
• Design-build finance-operate-transfer (DBFO); and
• Build-own-operate (BOO)
2. Key Benefits of PPPs (From FHWA description)
PPPs provide benefits by allocating the responsibilities to the party (either public or private) that is best positioned to control the activity that will produce the desired result. With PPPs, this is accomplished by specifying the roles, risks and rewards contractually, so as to provide incentives for maximum performance and the flexibility necessary to achieve the desired results.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.
Some of the primary reasons for public agencies to enter into public-private partnerships include:
• Accelerating the implementation of high priority projects by packaging and procuring services in new ways;
• Turning to the private sector to provide specialized management capacity for large and complex programs;
• Enabling the delivery of new technology developed by private entities;
• Drawing on private sector expertise in accessing and organizing the widest range of private sector financial resources;
• Encouraging private entrepreneurial development, ownership, and operation of highways and/or related assets; and
• Allowing for the reduction in the size of the public agency and the substitution of private sector resources and personnel.
For More Information
For more information read the following:
