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

Abstract

There has been greater emphasis in recent times on using public-private partnerships (PPPs or P3s) to provide and deliver transportation infrastructure and services. These public-private partnerships differ from contracting out, being applicable to a broader range of projects and requiring different contract management and accountability. 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. This report serves as a primer on public-private partnerships for the delivery of transportation infrastructure and services. It provides an overview of the concept of public-private partnerships, presenting a broad definition of the privatization approach, comparing it to contracting out, and discussing a theoretical framework for understanding why, when and how partnerships are appropriate as a privatization strategy. The report also 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 – (1) the decision to privatize via a public-private partnership; and (2) the decision on which partnership model to adopt – which are also addressed. This report also discusses key issues and factors necessary for successful transportation public-private partnerships and provides a glossary of terms as a reference for understanding the terminology and language of privatization and public-private partnerships.