Aligning Public-Private Partnership Contracts with Public Objectives for Transportation Infrastructure

With its central role in the development of public-private partnership (PPP) contracts, procurement structure has a significant influence on the economic and policy success of privately-financed toll roads throughout their lifecycle. Following a review of PPP fundamentals and the public-policy differentiation between public interest and public objectives, several approaches for establishing the key contract strategies of toll pricing, concession length, and risk mitigation are explored. These underpinnings motivate the central research question: Given specific policy objectives for road pricing, how should public owners select PPP contract strategies which support these outcomes?

Through qualitative comparative analysis (QCA), a recently-developed method for evaluating qualitative data quantitatively, patterns of PPP contract strategies which correspond to three common policy objectives--achieving a specific toll rate, managing congestion, and minimizing state subsidy/maximizing revenue--are identified through evaluation of 18 domestic and international projects. Three practical decision-making tools resulting from this work are illustrated through application to current PPP procurements: (1) a traffic-risk worksheet, which provides a rapid estimate of a toll-financed project's viability; (2) analytical QCA results, which offer guidance for structuring PPP contracts based on the desired pricing objectives; and (3) case-library comparisons, which enable drawing parallels between proposed procurements and established PPP projects. Additional insights explore the nature of risk in this study, which concludes with thoughts on the appropriate role of PPPs in infrastructure delivery.