1 / 8

Using Public-Private Partnerships to Carry Out Highway Projects

Using Public-Private Partnerships to Carry Out Highway Projects. Congressional Budget Office January 2012. Approaches to Providing Highways. Traditional Approach: Design-Bid-Build Public Sector Financing/ Operations and Maintenance Public Sector Risk Public-Private Partnership (PPP):

emerald-bryant
Download Presentation

Using Public-Private Partnerships to Carry Out Highway Projects

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Using Public-Private Partnerships to Carry Out Highway Projects Congressional Budget Office January 2012

  2. Approaches to Providing Highways • Traditional Approach: • Design-Bid-Build • Public Sector Financing/ Operations and Maintenance • Public Sector Risk • Public-Private Partnership (PPP): • Variety of Contractual Arrangements • Transfers Greater Risk to Private Sector • Can Include Private Sector Financing/Operations and Maintenance

  3. Public-Private Partnership (PPP) • States Increasingly Authorize PPP • 31 States as of Sept. 2011 (NCSL) • PPP are not common, and PPP with significant risk transfer even less common • 76 projects as of June 2011 • 11 Design-Build-Finance • 10 Design-Build-Finance-Operate-Maintain

  4. Public Sector Goal: • Infrastructure Provided Faster and at Lower Cost by turning project tasks over to private sector • Many PPP studies conclude: • Financing appears more expensive for PPP, as private-sector borrowing rates are higher • Delivery appears slightly less expensive and faster for PPP, primarily due to better risk allocation. • Those conclusions are somewhat accurate but there is more to the story.

  5. Caveats to Private Financing • PPP: Borrowing Cost Reflects Project Risk • The project’s ability to repay that capital determines interest rate • Traditional Approach: Borrowing Cost Reflects Taxpayer Subsidy • The ability of the government to charge taxpayers determines the interest rate, regardless of what happens to the project—taxpayers are on the hook.

  6. Caveats to Private Delivery • Well-written Contracts are Crucial to any PPP. • Some PPP are much more expensive that traditional approach as risk and costs were not well allocated. • PPP grants less control to the public sector. • PPP may not have to adhere to same procedures/processes. • PPP performance varies depending on project size and complexity. • PPP performance had by far highest added value for very large projects (>$100m)

  7. Public-Private Partnerships • PPP are not: • free money (it can provide only financing, not funding) • a magic bullet (many projects are a poor fit) • PPP are: • A useful option for providing some projects. • Dependent on well written contracts

  8. Questions? • Using Public-Private Partnerships to Carry Out Highway Projects • http://www.cbo.gov/sites/default/files/cbofiles/attachments/01-09-PublicPrivatePartnerships.pdf

More Related