Privatizing Transportation through Public-Private Partnerships: Definitions, Models, and Issues

While contracting out has been the predominant method of privatization, there has been greater emphasis in recent times on using public-private partnerships (sometimes referred to as PPPs or P3s) instead. These public-private partnerships differ from contracting out, as they are characterized more by a commitment between public and private actors ... in which partners develop products together and share risks, costs, and revenues (Klijn & Teisman 2000, p. 85). In the transportation arena the focus on public-private partnerships has resulted from both the need for greater reliance on private capital to fund critical infrastructure and services and the need to tap private sector expertise to ensure delivery of high quality infrastructure and services on time and on budget. Public-private partnerships have been increasingly used to expand private sector involvement in the provision and delivery of transportation projects. Privately-operated, and sometimes privately-built and privately owned, airport and rail terminals, toll roads, and bridges or tunnels have become more and more common. This report serves as a primer on public-private partnerships for the delivery of transportation infrastructure and services. Chapter 2 provides an overview of the concept of PPPs, providing a broad definition of the concepts, comparing it to contracting out, and discussing a theoretical framework for understanding why, when and how public private partnerships are appropriate as a privatization strategy. Chapter 3 reviews six public-private partnership models - design bid build, private contract fee services, design build, design build operate maintain or build operate transfer, design build finance operate, and build own operate - identified by the Federal Highway Administration as available for use by transportation agencies considering privatizing transportation projects. Adopting a public-private partnership involves two important decisions which are addressed in Chapter 4. These decisions are: (1) the decision to privatize via a public private partnership; and (2) the decision on which partnership model to adopt. Chapter 5 concludes by discussing key issues and factors necessary for successful transportation public-private partnerships. This report also provides a glossary of terms (Appendix A) as a reference for understanding the terminology and language of privatization and public private partnerships