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Public Private

Public Private. Partnerships. It’s not Rocket Science! or Don’t Walk Away Ren é e or Process  Profit  Paradox. Public Private Partnerships. What are they?

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Public Private

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  1. Public Private Partnerships It’s not Rocket Science! or Don’t Walk Away Renée or ProcessProfitParadox

  2. Public Private Partnerships • What are they? • … contractual agreements formed between a public agency and a private sector entity that allow for greater private sector participation in the delivery and financing of transportation projects. (FHWA) • Why are they important? • Each entity brings different strengths to the partnership which, when combined, can lead to more successful projects delivered in a more timely fashion.

  3. Types (Involvement Levels) of PPPs • Private contract fee services • Operating and/or maintenance agreements • Joint Development • Includes property owned by public entity • Alternative project delivery approaches • Design-build • Design-build-operate-maintain (DBOM) • Design-build-finance-operate-maintain (DBFOM) • Long-term lease or concession agreements • Most intensive private sector involvement

  4. Trends • Public sector interest in PPPs is increasing • Agencies are gaining more experience • Outcomes will improve as agencies: • Refine procurement process • Reduce private sector risk • Increase private sector participation rates • But there are problems, more on the horizon • Optimum PPP results are rarely approached • Leverage shifting toward the private sector • PPPs will NEVER be a silver bullet; they are oversold

  5. Public Sector • Strengths: • Responds to competing political constituencies • Enjoys powers not available to private companies • Legal authority to operate on public property • Eminent domain • Weaknesses: • Slow and often inefficient procedures • Insufficient financial resources • Rail experience often limited

  6. Private Sector • Strengths: • Responds well to marketplace incentives • Can react more quickly to changing conditions • More focused on ‘finishing the job’ • Weaknesses: • Profit motive may conflict with the ‘public interest’ • Impatient with lengthy, public involvement process

  7. Pitfalls • The public sector often promotes PPPs as the best way to deal with declining resources: • Declining staff levels • Declining financial resources • Little or no in-house expertise left • However … • A successful PPP still requires significant agency staff time and attention to detail

  8. Pitfalls (Continued) • The public sector often sees PPPs as a way to push decision-making onto the private partner • Lack of detail in RFPs • Unclear objectives • Limited or no performance measures in many • Too many measures in others • However … • A well-defined RFP reduces risk to the private party: • Encouraging more firms to bid • Bringing down overall cost • Increasing benefits

  9. Pitfalls (Concluded) • The private sector often sees PPPs as a way to make a ‘fast buck’ • Uncompromising attitude: • Scope • Methods • Fees • Schedule • However … • Flexibility promotes successful outcomes

  10. PPP Success • A successful partnership requires that: • Each partner acknowledge the needs of the other • Accommodate in some fashion its own needs • Agencies • Recognize need for continuous, meaningful progress • Private partners • Recognize the need to support political process • Consultant support can help ‘bridge the gap’

  11. Consultant Role (Agency Side) • Fills gaps in agency staff • Expertise in specific areas (e.g. rail) • Experience from similar projects • Better understanding of private sector • Help with procurement process • Do 1,000 page RFPs result in better projects ?

  12. Consultant Role (Private Sector) • Brings understanding of agency perspective • Importance of process • Avoidance of critical relationship errors • Help navigate the public planning process • Boutique technical expertise: • Railroad negotiations • Railroad operations planning • Other

  13. A Good Consultant (Agency Side) • Possesses an in-depth understanding of: • The private railroad industry • High-speed passenger service • Public transit • Provides specialized expertise in: • Engineering • Operations • Economics • Passenger perspective • Market Analysis • Proven ability to negotiate with railroads

  14. A Good Consultant (Private Sector) • Understands the public planning process: • FRA procedures and regulations • FTA planning process • NEPA requirements • Is experienced working with public agencies: • Wide variety of projects • Projects in many areas of the country • Different types of public agencies

  15. Consultant Role • Agency benefits: • Help agency understand private sector needs • Represent agency interests • Private partner benefits: • Understands the agency perspective • Represent private party’s interests

  16. Summary • PPPs likely will continue to be important • Project partners will often: • Have conflicting interests • Misunderstand each other’s priorities • Not recognize the other party’s limitations • An experienced consultant can: • Provide specialized expertise • Provide perspective • Keep the project moving forward • Improve chances of attaining public objectives without sacrificing private sector returns

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