Managing Transportation Facilities in Design–Build–Finance–Operate Partnerships

Abstract

In recent years, transportation planning has been challenged by an increasing need for infrastructure development, a shortfall of revenue from the public sector, and political trending toward deregulation of transportation infrastructure development. These factors have led to increased interest in privatization of transportation infrastructure and the development of public–private partnerships, such as design–build–finance–operate. Although the overall goal of a transportation infrastructure project is to provide safe, reliable transportation systems for the public, parties involved in public–private partnerships take different roles and responsibilities. The public sector leads in laying out the terms and standards to regulate the obligations between the state departments of transportation and private entities. The private sector makes capital investment to provide agreed-upon services as well as to assume various investment risks, including project operational and financial risks. Toll-pricing strategies are a key component for the public sector in regulating the operation of a public–private partnership facility and for the private sector in controlling investment risks. This study investigated the applicability of deterministic dynamic optimization models for determining toll-pricing strategies that can help improve mobility, secure the public interest, and attract investment from the private sector. A case study of a design–build–finance–operate project was completed. Results showed that the proposed model provides a useful tool to assist both the public and private sectors in making more informed decisions, including study of optimal strategies to seek investment return and determination of the predefined contract regulations.