Difference between revisions of "Public private partnership"
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==Introduction== | ==Introduction== | ||
| − | Most transit agencies engage in some form of public-private | + | Most transit agencies engage in some form of public-private partnerships. An agency that engages with a private-sector firm to design or construct a transit plaza is engaging in a simple public-private partnership that distributes risk and responsibility between itself and private sectors to accomplish a project with a public benefit. Recently, as government has tightened its fiscal belt, transit agencies and other stakeholders have become interested in public-private partnerships as a means of attracting additional funding or accelerating project completion. However, public private-partnerships are often misunderstood. A public-private partnership must confer some benefit (usually a rate of return on capital) to the private sector partner. |
===Risk transfer=== | ===Risk transfer=== | ||
| − | One argument in favor of a public-private partnership is that allows the public sector to offload some related to project design, finance, construction, operations, and maintenance. Design-build contracts are popular because the structure allows a single party to manage risks related to designing and constructing an infrastructure project. Risks related to costs of constructing a specific design element or certain design flaws can be reduced. A design-build-operate-maintain contract can allow a single party to manage design and construction elements that may impact operation or maintenance costs, rather than allowing parties to transfer risk and costs to other parties. | + | One argument in favor of a public-private partnership is that the arrangement allows the public sector to offload some related to project design, finance, construction, operations, and maintenance. Design-build contracts are popular because the structure allows a single party to manage risks related to designing and constructing an infrastructure project. Risks related to costs of constructing a specific design element or certain design flaws can be reduced. A design-build-operate-maintain contract can allow a single party to manage design and construction elements that may impact operation or maintenance costs, rather than allowing parties to transfer risk and costs to other parties. |
===Additionality=== | ===Additionality=== | ||
| − | Public private partnerships can lead to investments in infrastructure that would have otherwise been delayed or not made at all. In these cases, the partnership provides an additional investment that would not be possible if the public sector were to rely solely on its own support. Engaging in a public private partnership that produces additional investment is not a choice between public support and a partnership with private support, but rather pursuing the investment under a private-sector partnership and not pursuing the investment at all. | + | Public private partnerships can lead to investments in infrastructure that would have otherwise been delayed or not made at all. In these cases, the partnership provides an additional investment that would not be possible if the public sector were to rely solely on its own support. Engaging in a public private partnership that produces additional investment is not a choice between exclusive public support and a partnership with private support, but rather a choice between pursuing the investment under a private-sector partnership and not pursuing the investment at all. |
===Flexibility=== | ===Flexibility=== | ||
| − | Certain contracting arrangements better accommodate necessary adaptations to deal with unforeseen circumstances. Multi-year projects can face conditions that were not expected during the project planning and onset phases. | + | Certain contracting arrangements better accommodate necessary adaptations to deal with unforeseen circumstances. Multi-year projects can face conditions that were not expected during the project planning and onset phases. For example, a multi-year subway construction project using a public-private partnership may be better able to take advantage of new tunnel boring technology than a contract in which the builder is restricted by certain design criteria. |
==Public-private partnership structures== | ==Public-private partnership structures== | ||
Revision as of 00:30, 25 July 2012
Introduction
Most transit agencies engage in some form of public-private partnerships. An agency that engages with a private-sector firm to design or construct a transit plaza is engaging in a simple public-private partnership that distributes risk and responsibility between itself and private sectors to accomplish a project with a public benefit. Recently, as government has tightened its fiscal belt, transit agencies and other stakeholders have become interested in public-private partnerships as a means of attracting additional funding or accelerating project completion. However, public private-partnerships are often misunderstood. A public-private partnership must confer some benefit (usually a rate of return on capital) to the private sector partner.
Risk transfer
One argument in favor of a public-private partnership is that the arrangement allows the public sector to offload some related to project design, finance, construction, operations, and maintenance. Design-build contracts are popular because the structure allows a single party to manage risks related to designing and constructing an infrastructure project. Risks related to costs of constructing a specific design element or certain design flaws can be reduced. A design-build-operate-maintain contract can allow a single party to manage design and construction elements that may impact operation or maintenance costs, rather than allowing parties to transfer risk and costs to other parties.
Additionality
Public private partnerships can lead to investments in infrastructure that would have otherwise been delayed or not made at all. In these cases, the partnership provides an additional investment that would not be possible if the public sector were to rely solely on its own support. Engaging in a public private partnership that produces additional investment is not a choice between exclusive public support and a partnership with private support, but rather a choice between pursuing the investment under a private-sector partnership and not pursuing the investment at all.
Flexibility
Certain contracting arrangements better accommodate necessary adaptations to deal with unforeseen circumstances. Multi-year projects can face conditions that were not expected during the project planning and onset phases. For example, a multi-year subway construction project using a public-private partnership may be better able to take advantage of new tunnel boring technology than a contract in which the builder is restricted by certain design criteria.
Public-private partnership structures
Several permutations are possible to transfer tasks, responsibilities, risks, and ownership from the public to the private sector. These include:
- BOT - Build Operate Transfer
- BOOT - Build Own Operate Transfer
- BOO - Build Own Operate
- BLT - Build Lease Transfer
- DB - Design Build
- DBB - Design Bid Build
- DBFO - Design Build Finance Operate
- DCMF - Design Construct Manage Finance
Types of PPPs for Transit Agencies
In transportation, a Public-Private Partnership "involves one or more aspects of the funding, financing, planning, design, construction, operation and maintenance of a transportation facility" [1] In practice, this can take several forms.
Contracting
Agencies use private sector contractors to provide some or all ancillary and core services. Contracting may range from purchasing (using an external printing company to print schedules), to contracting ancillary services (outside payroll), to contracting transit operations - their core service. Agencies must evaluate ancillary and core service outsourcing on a case-by-case basis to understand what may gained and what may be lost.
Tolling
Although transit already levies a toll-for-service, many automobile facilities do not. Imposing a toll on a previously free facility used by automobiles can both generate revenues and demand for transit. Tolling is typically not politically popular, though providing something new in return for the toll can reduce opposition. Tolling can be used in a BOT, BOOT, DBFO, or DCMF arrangement to provide payments to a private-sector partner which contributed capital and expertise to develop the transportation facility.
Real Estate
Real estate developers can support transit indirectly through development projects that are supportive of transit. Such transit-oriented development bring not only additional ridership, but also additional political support for the transit system. Under a joint-development scenario, a transit agency works with the private sector to develop a publicly-owned parcel. See more information on joint-development and related strategies at the article on value-capture finance
Public Perception of Public-Private Partnerships
(giving away profits)
References
Additional Reading
American Public Transportation Association Task Force on Public Private Partnerships. "Public-Private Partnerships in Public Transportation: Policies and Principles for the Transit Industry." 2008.