Section II Criteria for Evaluating P3 Projects

7/29/2019 Section II Criteria for Evaluating P3 Projects

1/38

PublicPrivatePartnershipsinCalifornia

PhaseIIReport

SectionII:CriteriaforEvaluatingP3Projects

January2012

ResearchTeam

Dr.GenevieveGiuliano,PrincipalInvestigator

Dr.LisaSchweitzer,Co-PrincipalInvestigator

KevinHolliday,ProjectAdministrator

TheodoreMinch,ResearchAssistant

SchoolofPolicy,Planning,andDevelopmentUniversityofSouthernCaliforniaLosAngeles,CA90089-0626


2/38

-ii-

Disclaimer

Thecontentsofthisreportreflecttheviewsoftheauthorswhoareresponsibleforthe

factsandtheaccuracyoftheinformationpresentedherein.Thisdocumentisdisseminated

underthesponsorshipoftheDepartmentofTransportation,UniversityTransportationCenters

Program,andCaliforniaDepartmentofTransportationintheinterestofinformationexchange.

TheUSGovernmentandCaliforniaDepartmentofTransportationassumenoliabilityforthe

contentsorusethereof.Thecontentsdonotnecessarilyreflecttheofficialviewsorpoliciesof

theStateofCaliforniaortheDepartmentofTransportation.Thisreportdoesnotconstitutea

standard,specification,orregulation.


3/38

-iii-

TableofContentsDisclaimer.....................................................................................................................................................iiTableofContents........................................................................................................................................iii TableofFigures...........................................................................................................................................iv ListofTables.................................................................................................................................................v

1.Introduction.............................................................................................................................................1 2.LiteratureReview.....................................................................................................................................23.Backgroundanddefinitions.....................................................................................................................5

3.1.DefinitionofSuccessfulP3s..............................................................................................................5 3.1.1&3.1.2.Theprojectiscompletedontimeandwithinbudgetataminimum............................63.1.3.Theprojecthasneverenteredbankruptcyorsoughtbankruptcyprotection..........................7 3.1.4.Thereisameasurablefinancialbenefit/costsavingsrealizedbythepublicsponsor.............7 3.1.5.Theprojecthasmetinitialdemandprojections........................................................................8

3.2.Pre-ImplementationAttributesforIdentifyingSuccessfulP3s.........................................................8 3.2.1.a)Alt.Finance(F)/b)Alt.Ops(O)/c)AltMaint.(M):P3containssomeformof

alternativefinancing,operations,and/ormaintenance..................................................................10 3.2.2.d)ExistingCapacityConstraints:Presenceofadequateprojectdemand............................10

3.2.3.e)TotalCost=>$500mil:P3totalcostinexcessof$500million........................................103.2.4.f)FewExistingSubstitutes:Nodirectcompetitionwithothernearbyfacilities..................11 3.2.5.g)GovtAvailabilityPayments:P3reliesonshadowtollsoravailabilitypayments.............11 3.2.6.h)GovtFunding:GovernmentfundingsupportsP3operations.........................................12 3.2.7.i)ContractLength:P3contractlength.................................................................................13

4.TheSample............................................................................................................................................13 5.Discussionofresults..............................................................................................................................16

5.1.BreakdownacrossAttributes..........................................................................................................165.2.BreakdownAcrossDefinitionofSuccessRules...........................................................................19 6.Conclusion..........................................................................................................................................20

References.................................................................................................................................................22

AppendixA:ListofSuccessfulProjects......................................................................................................25AppendixB:ListofUnsuccessfulProjects.................................................................................................30


4/38

-iv-

TableofFiguresFigure1:AttributeComparisons(A-H)AcrossSuccessfulandUnsuccessfulP3s......................................16

Figure2:AttributeComparison(I)AcrossSuccessfulandUnsuccessfulP3s.............................................16

Figure3:AverageLarge(>$500million)ProjectCostAcrossSuccessfulandUnsuccessfulP3s............17

Figure4:ComparisonofSuccessfulandUnsuccessfulP3sRule1..........................................................18

Figure5:ComparisonofSuccessfulandUnsuccessfulP3sRules2-5.....................................................19


5/38

-v-

ListofTablesTable1:Expectedeffectofeachmetric(attribute)onsuccessorfailure.................................................13

Table2:Successvariables..........................................................................................................................15


6/38

-1-

1.IntroductionInthissectionofourreportwedevelopcriteriaforevaluatingthepotentialforaprojecttobe

deliveredasaP3.WestartedbyresearchingpastattemptsatP3evaluation.Wefoundnopublished

researchthatoffersalistofcriteriaforpredictingthesuccessofaproposedP3.Therefore,wereviewed

studiesofP3sand,developedaframeworkforevaluatingP3spotentialforsuccess.Usingdatafrom

100P3projects,weapplyourframeworktoidentifytheattributespresentinsuccessfulP3projects.

WhileweattempttoteaseoutthecommonattributesofsuccessfulP3s,thepresenceofsaidattributes

inplannedP3swillnotnecessarilyinducenorpredictsuccess.Wehopethatourresearchwillbecome

partofabroadertoolkitthatpublicsponsorsandprivatepartnerscanusetoevaluatepotential

projectssuitabilityasP3s.

GivensignificantP3experienceabroad,andagenerallackofinstitutionalfamiliaritywithP3sin

theUnitedStates,wesawbothanopportunityandneedtolearnfrompriorexperiencewithP3sacross

alltransportationsectors.Specifically,wesawanopportunitytoconverttheselessonslearnedand

bestpracticesintoaseriesofsuccessindicators.ByidentifyingwherepastP3shavesucceeded(or

goneastray),andbytargetingparticularsourcesofP3success(orfailure),werealizedwecould

generateasetofsuccessfactorsfortransportationsectorP3s.Suchfactors,giventheir ex-ante

identification,willenableP3sponsorstoidentifyareasofrisk,aswellasprojectstrengths,pre-

implementation.Assuch,wewill,inthispaper,a)defineasuccessfulP3,b)developalistofattributes

thatweexpectwillpredictthesuccessorfailureoftheproject,andc)collectadatasampleofP3sthat

bothmeetandfailourdefinitionwhilecomparingtheattributesofsuccessfulprojectstothe

unsuccessfulones.Ouraimistoprovidedecisionmakerswithasetofpre-implementationproject

attributesthatmayhelpidentifyprojectsintheplanningstagesforsuccessfulimplementationasP3s.

Byidentifyingtheseattributes,andverifyingtheirpresenceorlackthereof,decisionmakerscanmore

effectivelyevaluateaP3spotentialforsuccess.Furthermore,muchoftheperceivedrisksurrounding


7/38

-2-

P3sstemsfromalackofUSinstitutionalfamiliaritywithP3delivery.Webelievetheabilitytoidentify

pre-implementationsuccessattributesshouldhelptomitigatesomeoftheseperceivedrisks,

particularlywithinthecontextofapplyinggloballessons-learned,andtheresultingpre-implementation

attributes,toUSP3implementation(FHWA2009,p.5).

Thestructureofthereportisasfollows.Inthesecondsubsectionwereviewtheapplicable

literature.InthethirdsubsectionwedescribeourdefinitionofasuccessfulP3andthefacilityattributes

westudied.InthefourthsubsectionwediscussoursampleofP3facilities.Inthefifthsectionwe

outlineourresults.Inthefinalsectionweofferabriefconclusion.

2.LiteratureReviewPublic-privatepartnerships(P3s)arewidelypromotedasanalternativetotraditional

procurementmethodsfortransportationfacilities.ManydecisionmakersseeP3saswaytobuild

neededtransportationinfrastructurewithoutraisingrevenues(ViningandBoardman2006,p.6;PwC

2010,p.2;NCHRP2009,p.5;ACT2007a,p.3).ButnotallprojectsaresuitableasP3s;someP3shave

failedspectacularlywhilestillagreatnumberofothershavefallenshortofhopesandexpectations.

NooneP3modelorprincipalframeworkexists.Ratherthananinfrastructureprocurement

techniquethatcanbeeasilyreplicatedfromtheoutset,P3srequireasignificantamountof

specializationandadaptationtoeachindividualproject,aswellasinstitutionalfamiliaritywiththe

processes(FHWA2009,p.1;NCHRP2009,p.2).GettingagivenP3right,inshort,isnoeasytask..

PreviousattemptstoevaluateP3shavecomparedattributesofsuccessfulandunsuccessfulP3s

inaglobalcontext.Furthermore,pastP3researchhasgenerallybeenverytargetedandspecific,

limitingpotentialglobalapplicabilityanduse.ViningandBoardman(2006and2008)havefocusedon

issuesofpublicsponsorinstitutionalcapacity,exclusivelywithintheCanadiancontext.Viningand

Boardman2006wasacross-sectoralevaluationofCanadianP3sintransportation,education,and

healthcare,amongotherfields.Theanalysisitselfdidntgenerateattributesorattempttogeneralize


8/38

-3-

thelessonslearnedintoindicatorsapplicableoutsideoftheimmediatecontextofthoseP3s.Generally,

theanalysisalsocenteredontheefficacyofeachprojectsalternativefinancing,assessingwhetherthe

publicsponsorcapturedanetfinancialbenefit(orincurredanetcost)byprocuringeachprojectasaP3.

ViningandBoardman2008didseektogeneralizepastlessonslearnedfrompublicsponsor

implementationofP3s,butframedtheanalysisexclusivelywithinthecontextofpublicsponsor

institutionalcapacityandgeneralP3policyandmanagementitems.Theanalysisalsofocusedonlarger

issuesofP3-relatedbenefitstransferandtheefficacyoftheP3arrangementasawhole.Bycontrast,

weseektodevelopaspecificsetofsuccessattributesforonlytransportationP3satargetedanalysis

forpublicandprivatesponsorsalike.FHWA2009alsofocusedonissuesofpublicsponsorinstitutional

capacity,howeveritdealtmoreorlessexclusivelywithinstitutionallearningandtookmostlyacase-

study/P3surveyapproach.

OxfordUniversityprojectfinanceandmanagementexpertBentFlyvbjerg(2004,2005,and

2009)hasconductedextensiveresearchonmajorcapitalprojectoutcomes.However,hisanalysisis

generallyfocusedsolelyondelivery/costoutcomes.Inaddition,hisresearchhasnotfocusedon

alternatively-procuredprojectsperse.SomeofthesampledprojectswereindeedP3sandotherforms

ofalternatively-procuredprojects(concessions,DBOM,etc.),butthefocuswasnotexclusivelyonthese

sortsofprojects.Flyvbjerg2004focusedexclusivelyondemandshortfallsandcostoverrunsincurredby

aglobalsampleoffixed-railtransportationprojects,centeringontheCopenhagenMetroprojectasa

casestudy.Flyvjerg2004isadescriptionofpastoutcomesratherthananexplicitprescriptionforfuture

projects,beyondemphasizingtheriskofoverrunsanddemandshortfallsassociatedwithmajorcapital

projects,andsuggestingsuchpastperformancebeincorporatedintoprojectplanning.

Flyvbjerg2005assessedthemethodologiesandtechniquesusedfordemandforecastingin

transportationprojects,comparingmethodsemployedinacross-sectoralsampleofprojectsand

correspondinguseperformance.Flyvbjerg2009,muchlikeViningandBoardman2008,focusedon


9/38

-4-

publicsponsorinstitutionalcapacity,andanalyzedtheincentivestructuresunderlyingthecapitalproject

vettingprocesswithingovernmentagencies.Theseconclusionswerebroad,generalizedfindingsfor

publicsponsorsofallcapitalprojectsnotjustP3sand,assuch,dealtwithmanagementand

oversightpoliciesmorethanspecificstrategiesfortheprojectsthemselves.

OtherresearchhasfocusedexclusivelyonP3casestudies,bothofoverseasprojectsaswellas

whatP3shaveoccurredintheUS.ACT(2007a,2007b,and2007c)publishedaseriesofcasestudieson

P3sACT2007bincludescasestudiesofseveralUSP3s,ACT2007cincludescasestudiesof

internationalP3s,andACT2007acombinesthecorelessonsfromboth2007band2007c,applyingthem

totheUSinstitutionalcontext.TheprescriptivevolumeofACTsresearch(2007a)givesgeneral

guidelinesforP3publicsponsorsnotunlikeViningandBoardman2008.Itdoesnotgiveguidanceon

specificprojectsuccessfactors,oranyofthesortofattributeswhichweprovide.

Theonlypriorresearchsimilartoourownthatistosay,researchwhichdrawskeysuccess

factorsandattributesfromasampleofP3sweretwoindependentinitiatives,thefirstdoneby

VirtuosityConsultingsDavidStambrook(2005)andthesecondbyUniversityofSouthernCaliforniaPhD

studentYinWang(2010).Stambrooktookasmallsampleoftentransportationprojectsandsoughtto

identifycommonalitiesamongeachprojectscoredescriptivestatistics(cost,contracttype,etc.).This

researchwasextremelylimitedinscopefivesuccessfulprojectsandfivefailedprojectsanddidnot

attemptextendorapplyfindingsbeyondthescopeoftheincludedsampleofprojects.Theanalysiswas

descriptiveinnatureratherthanbothdescriptiveandprescriptive,orevenpredictive.

Wang(2010)developedadecision-makingmodelfortheinvolvementofprivatefinanceintoll

roaddevelopmenttheresearchdidnotaddressP3sbeyondtollroads.Wangconcludedthatproject

initiationyear,statedebtlimits,andthestatespoliticalclimatealldictatetheextenttowhichprivate

investorsdeploycapital(orwithholdit)fortollroaddevelopment.Weknowofnootherresearchwhich

attemptstocomparetheattributesofsuccessfulP3stothoseoffailedfacilitiesinaglobalcontext.


10/38

-5-

3.Backgroundanddefinitions Asfueltaxrevenuesdeclinedprecipitouslyduringthe1980s,governmentswereleftstruggling

tofillagrowinggapbetweeninfrastructurespendingneedsandfundingcapacity(NHCRP2009,p.9;

ACT2007a,p.3).VirginiawasthefirststatetoauthorizeP3-enablinglegislationin1988,followed

shortlythereafterbyCaliforniain1989.Bothsetsoflegislationservedasmodelsforotherstatesand

collectivelyledtotheimplementationoftheDullesGreenway,PocahontasParkway,Southern

Connector,SR-91,andSR-125P3s(NCHRP2009,p.9).

GovernmentshavebeenattractedtoP3sasawaytobridgethegapbetweeninfrastructure

financingcapacityandneedsforfourprincipalreasons:

1) minimizeon-budgetproject-relatedgovernmentexpendituresand/orformalgovernmentdebt;2) provideinfrastructureatalowercostbyleveragingthescaleefficienciesoflargefirmsandthe

presenceofcost-minimizationincentivesoftheprivatesector;

3) reducethepublicsectorsriskexposuretoconstructionandmaintenancecosts,aswellasdemanddownsidethroughtransferringthoseriskstotheprivatepartner;and

4) createapoliticalclimatemoreamenabletollingthantraditionalprocurementorgovernmenttolls(ViningandBoardman2006,p.6).

P3sthemselvesrangefromquasi-traditionalprocurementsuchasdesign-build(DB)1deliveryto

outrightconcessionsandtotalassetprivatization.ThechoiceofwhichformofP3topursueislargely

contingentuponthepublicsponsors2desiredlevelofanticipatedcostsavings,withgovernmentsin

needofmajorsavingsleaningtowardstotalprivatizationandbuild-operate-transferarrangements

(NCHRP2009,p.8).

3.1.DefinitionofSuccessfulP3sSinceeachindividualP3istailoredspecificallytothatprojectsinstitutionalcontextand

environment,weexperiencedsomedifficultyinformingageneraldefinitionofasuccessfulP3.As

such,wehavesoughttodefinewhatconstitutesasuccessfulP3byidentifyingfivecriteriaofP3sthat

transcenddifferencesofprojectcontexts/environmentsandthatarehallmarksofsuccessfulP3s,as

observedbyexistingP3literature.


11/38

-6-

WeconsideraP3successfulifitmeetsallfiveofthefollowingcriteria:

1) theprojectiscompletedataminimumofontime;

2) theprojectiscompletedataminimumofonbudget;

3) theprojecthasneverenteredbankruptcyorsoughtbankruptcyprotection;

4) thereisameasurablefinancialbenefit/costsavingsrealizedbythepublicsponsor;

5) theP3hasmetinitialdemandprojections.

Wediscusseachoftheseindividualcriteriainthefivesubsectionsthatfollow.

3.1.1&3.1.2.Theprojectiscompletedontimeandwithinbudgetataminimum.

Forouranalysis,ontimeandonbudgetdeliveryaretwodistinctcomponentsofourdefinition;

however,thefollowingdiscussionappliestoboth.AsuccessfulP3mustbecompletedatleaston-time

andwithintheprojectsallottedbudget.SuccessfulP3arrangementswillhavedemonstratedanability

tomaintainconsistentprogressionofprojectconstructionandtoachieveon-timeandon-budget

delivery.Completingaprojectontimeandwithinbudgetareindicatorsofeffectiveproject

management,goodex-anticostestimation,andsuitablecontractmechanism.Whilechangesinplans

and/orimplementationareinevitableaftertheprojecthasbegun,thepublicsponsorandprivate

investormustworktogethertomitigatetheimpactsofthosechangesonboththeprojectsbottomline

anditsdeliveryschedule(ViningandBoardman2008,p.157).Flyvbjergetal.citeasignificantannual

percentageincreaseinoverallprojectcostforeachyearofprojectconstructiondelay;adelayedproject

willcostmoreandthreatenprojectviability(2004,p.16).InaP3,thepublicsponsorandtheprivate

investorenterintoacontracttoguaranteethedeliveryofafacilitybyacertaindateandwithincertain

budgetaryconstraints.Ifthoseconditionsarenotmetthenthecoretenetsofthecontracthavenot

beenmet.


12/38

-7-

3.1.3.Theprojecthasneverenteredbankruptcyorsoughtbankruptcyprotection.

AsuccessfulP3willhaveneverenteredbankruptcyorsoughtbankruptcyprotection,as

successfulprojectsarefinanciallyviableprojects(ACT2007c,p.36).Financialviabilityisabasic

requirementofsuccess.Lackoffinancialviabilityaddstopublicsponsorfinancialriskandoftenresults

inadditionalpubliccosts.(ULI2005,p.13).Secondly,forthoseprojectsfundedbyuserfees,ifafacility

entersbankruptcyitpresumablysufferedfromless-than-anticipateddemand.Suchanoccurrence

raisesquestionsabouttheeffectivenessofmanycomponentsofthepublicsponsorsandtheprivate

investorsduediligenceandplanningelements(Giuliano,etal.2010a,p.37).Finally,anassetthatgoes

bankruptisapublicrelations,andpolitical,challengeonamultitudeoflevels,damagingtheacceptance

oftheP3model.

3.1.4.Thereisameasurablefinancialbenefit/costsavingsrealizedbythepublicsponsor.

OneofthechiefpurposesofaP3istoleveragestrengthsfromboththepublicsponsorand

privateinvestori.e.,tominimizecostswhilemaximizingconstructionspeedandoverallasset

productivity(ACT2007a,p.18;PWC2010,p.7;FHWA2009,p.2).Ifthepublicsponsorfindsitself

exposedtoincreasedfinancialriskduringaP3(whencomparedtotraditionalprocurement)theproject

cannotbeconsideredasuccess.Thisincreasedriskexposureincludesbothoutrightfinancialrisk(e.g.,

long-termavailabilitypaymentorassethand-backschedules)andresidualfinancialriskaswell;ifthe

assetgoesbankrupt,thestatemustassumecontroltokeeptheassetoperational(ACT2007b,c.3p.61;

Guilianoetat.2010b,p.36).

Assuch,P3sshouldworkconstructivelytowardsachievingpublicsectorfinancialsavings.Some

potentialsourcesoffinancialsavingsfromP3sare,

decreasedprojectfinancingcosts; generalreductioninpublicsectorfinancialriskthroughtransfertoprivatesector; reduction/eliminationofpublicsectorfundingcommitments; expediteddeliverythatdecreasesconstructioncosts; economiesofscaleintheprivatesectorduringprojectdesignandconstruction; cost-reductionincentivesintheprivatesector;and potentially-reducedprivatesectorlaborcosts(ViningandBoardman2006,p.5).


13/38

-8-

Intheabsenceofcomprehensive,perfectinformationonmostofthesourceslistedabove,wechoseto

measuretheoverallpercentageofprivatesponsorfinancinginaprojectasaproxyforthelevelofpublic

sectorfinancialbenefitfromdeliveringaprojectasaP3.GiventhatamajorpurposeofP3sisto

minimizebothgovernmentspendinganddebtfromprojects,measuringthelevelofprivatesponsor

financingseemsthemostappropriate,andpractical,meansofaccountingforpublicsectorfinancial

benefitsresultingfromP3delivery(ViningandBoardman2008,p.153).

3.1.5.Theprojecthasmetinitialdemandprojections

Flyvbjerg(2005and2009)highlightedsignificantshortfallsindemandprojectionestimates

acrossvirtuallyalltypesoftransportationinfrastructureprojects.Perhapsmostalarmingly,demand

projectionaccuracyhasnotincreasedoverthecourseofthepastthreedecades(Flyvbjerg2009,p.347).

Demandforecastingisinherentlycomplexandpronetoavarietyofquantitativeerrorsand

mathematicalmistakes/misspecifications(Pickrell1990,p.22;Wachs1990,p.148;Nijland2010,p.4).

However,evidenceexiststhatthetrendofconsistentdemandoverestimationhasmoretodowith

planningfallacy,optimismbias,andintra-governmentalincentiveperversiontoover-inflatethe

attractivenessofprojectstogivetheprojectanedgeinsecuringfunding(Flyvbjerg2009,p.350).

Assuch,thefifthandfinalcomponentofourdefinitionofsuccessisthatprojectsmusthavemet

initialdemandprojectionsor,phraseddifferently,thatinitialdemandforecastswereaccurate.The

success(orfailure)ofinfrastructureprojects,especiallyP3swhichare,onaverage,morerelianton

trafficvolumetodriverevenuethantraditionalprojects,isverymuchdependentonaccuratedemand

forecasting(Pickrell1990,p.ix;Richmond2001,pp.172-3).

3.2.Pre-ImplementationAttributesforIdentifyingSuccessfulP3s DespitetherationalesforsupportingP3s,andthetheoryunderpinningthepurportedstrengths

oftheP3model,researchonprioroutcomeshasindicatedalessthanstellartrackrecord.Viningand


14/38

-9-

Boardman(2006)pinpointedfourmajorshortcomingsoftheP3modelasithasbeenimplementedby

publicsponsorsinCanada,highlightinghow:

1) governmentshavenoteffectivelyreducedtheirfinancialriskexposurethroughdeliveryofprojectsasP3s;

2) privatepartnershavenotcapturedadequatereturns-on-investmenttojustifyinvolvementinprojects;

3) P3contractswereregularlyterminatedmuchearlierthananticipated,beitbypublicsponsorbuy-out,privatepartnerbankruptcy,orforotherreasons;and

4) protractedconflict,withhighcontractingcostsbornebyonepartyorboth(p.4).

Inshort,ViningandBoardman(2006)indicatethatP3shavegeneratedsignificantlymorelongterm

transactioncoststhanpublicsponsorshadanticipated.

Moregenerally,priorresearchhasalsofocusedonestablishingthelinkbetweenproject

outcomesandsuccessfulrisktransfer.PastanalysisofprojectoutcomeshasfoundthatP3shave

generallynotledtotheanticipatedpublicsponsorriskallocationandtransfer,andthatinordertobe

trulysuccessfulP3smustdistributeatleastamodicumofthatriskfinancial,delivery,anduseriskto

variouspartiesinvolved(NHCRP2009,p.2;ViningandBoardman2006,p.30;ACT2007a,p.57;FHWA

2009,p.2).Thatanalysishas,however,notprovidedgreatdetailoverwhatanoptimaltransferofrisk

wouldlooklike,generatingasignificantvoidinthefield.

Thepurposeofourresearchistoestablishwhetherornotthepresence(orabsence)ofvarious

attributescontributetoaparticularP3projectssuccess.Wesawaneedtoderive,frompast

experienceandanalysisofpriorP3outcomes,anumberofex-anteindicatorsofP3successattributes

thatwouldindicateincreasedlikelihoodofsuccessifmetbeforeprojectimplementation.Wechose

nineindependentattributesofP3s.Inthesubsectionsbelow,wedescribetheattributes,includinga

rationaleforselectingeachandthehypothesizedrelationshipbetweentheattributeandourdefinition

ofP3success.


15/38

-10-

3.2.1.a)Alt.Finance(F)/b)Alt.Ops(O)/c)AltMaint.(M):P3containssomeformof

alternativefinancing,operations,and/ormaintenance

Failuretoincorporatesomeformofalternativefinance,operations,and/ormaintenance

provisions,is,ultimately,apublicsponsorfailuretoleveragethekeystrengthoftheP3model.Ifa

projectissimplydesign-build(DB),thegovernmentismerelycontractingoutaprojectand,insodoing,

incurringallofthenegativeexternalitiesandcostsofP3swhilegainingbutafewminorbenefitsfrom

theP3model(ViningandBoardman2008,p.151).ThepresenceofalternativeF/O/Malsosignifies

theprivatesectorhassignificantskininthegame,increasingincentivesforon-timeandon-budget

delivery(ViningandBoardman2008,p.152).Thepresenceofanyprivatecapitalintheprojects

financingagreementisourmeasureofalternativefinancing(alternativeF).AlternativeOand

alternativeMwouldbeconstitutedbytheinclusionofaseparateO&McontractwithinthelargerP3

contract,orwhereaprivatefirmassumesresponsibilityforoperationsand/ormaintenance.

3.2.2.d)ExistingCapacityConstraints:Presenceofadequateprojectdemand

Deliveryoftransportinfrastructureprojectsandimprovements,howeversignificanttheymay

beontheirownmerits,takeonanentirelynewimportanceandcriticalitywhenthetransportation

networkofwhichtheyareapartissufferingfromcapacityconstraints.P3scanexpeditedeliveryof

suchcriticalinfrastructureprojectsandoftentimesallowfordeliveryofthosefacilitieswellaheadof

whatwasconsideredpossiblethroughtraditionalprocurement(ACT2007a,p.12;PwC2010,p.8;

Iacobacci2010,p.2;USDOT2007,p.4;Duffield2008,p.4).Furthermore,existingcapacityconstraints

indicatealargedemandfortravel,increasingthepotentialforsignificantincorporationoftolls/userfees

intotheprojectslong-termfunding,reducingtheneedforpublicsponsorfundingcommitments.We

useexistingcapacityconstraintsasaproxyforthepresenceofdemandrequisiteforP3success.

3.2.3.e)TotalCost=>$500mil:P3totalcostinexcessof$500million

FHWA(2009,p.3)andPwC(2010,p.11)bothindicatedthatinordertobesuccessful,transport

P3srequirerequisitecomplexityandscale.GiventhatP3sincursignificanttransactioncosts,this


16/38

-11-

argumentisintuitivethelargertheoverallcostoftheproject,thesmaller,bypercentageshare,the

transactioncosts.Furthermore,themoreexpensiveaproject,thegreatertheincentiveofthepublic

sponsortoseeksomeformofalternativeprocurement,allelseequal,decreasingitsrisks.Thisisnotto

saythatonlylargerprojectsshouldbeconsideredasP3s,butratherthatonlylargerprojectswillachieve

sufficienteconomiesofscaletojustifyalternativeprocurementinthefirstplace.Weestimatedthe

quantitativedefinitionofalargeprojecttobeatleast$500million;ourestimateisconsistentwith

otherprojectfinanceresearchconductedbytheHarvardBusinessSchool(Esty2004,p.218).

3.2.4.f)FewExistingSubstitutes:Nodirectcompetitionwithothernearbyfacilities

Bridges,tunnels,mountainhighways,andotherformsofspecializedinfrastructureassetsare,

bytheirnature,non-substitutableanddonotcompetewithotherfacilities.Suchassetsareripetobe

tolledortolevyuserfeesinsomeothercapacityandareveryattractiveaspotentialP3s(perhaps

moreforconcessionthaninitialconstruction)asaresultoftheirprofitpotential.Assetswithfew

substitutes,wehypothesize,aremorelikelytodrawincreasedtrafficthanthosewithalargenumberof

freealternatives.Weconsiderasubstitutetobeaparallelorreadily-accessiblefacility,allowingfor

consumerchoiceafreeroadnexttoatolled,higher-speedinterstate,forexample.Whilesimilarto

existingcapacityconstraints,fewexistingsubstitutesisquiteseparateanddistinct.Existingcapacity

constraintsrelatestodemand-sidefactors(theextenttowhichdemandisevidentforagivenproject)

whereasfewexistingsubstitutesrelatesdirectlytosupply-sideprojectfactors,andhowmuch

competitionagivenprojectstandstoface.

3.2.5.g)GovtAvailabilityPayments:P3reliesonshadowtollsoravailabilitypayments

Shadowtolls,availabilitypayments,andpublicsubsidiesingeneralforP3sindicatebytheir

verynaturethattheprojectsarenotfinanciallyself-sustaining.Availabilitypayment-basedP3sare

attractivetogovernmentsponsors,however,asthepaymentswillcome aftertheprojectisconstructed

andopenforbusiness.Availabilitypayment-basedP3s(andshadowtollsandothersubsidy-basedP3as


17/38

-12-

well)arepopularbecausetheyenablegovernmentstodefermajorcapitalexpenditure,aprimary

considerationinhowtodeliverinfrastructure(ViningandBoardman2008,p.153).Inthelong-term,

availabilitypayments,shadowtolls,and/orsubsidiesdonotdecreasepublicsponsorfinancialriskor

fundingresponsibilitiessomuchastheymaintainorevenincreaserisk(citeneeded).Thusavailability

paymentsinasensecrowdoutothergovernmentexpenditures,aslong-termfinancialriskisnot

transferredfrompublictoprivatesponsor,becausenonewfundingsourcesareinvolved.Whenpaid

overtimetoaprivateinvestor,availabilitypaymentsmaywindupbeingahighcostmethodoffinancing

(ViningandBoardman2006,p.29).Withthesefinancingmechanisms,theonlypotentialsavingstothe

publicsponsorisreducedcostsfromusingprivateproviders.Thesesavingsmayormaynotoffsetthe

transactionscostsassociatedwiththeproject.

3.2.6.h)GovtFunding:GovernmentfundingsupportsP3operations

Whileavailabilitypaymentsareeffectivelyanoperatingsubsidy,governmentfundingconsists

ofthepublicsponsorexplicitlyexpendingcapitalforconstructionofthefacilityand(potentially)

operationofitaswell.ThisfundingmayoccurevenwiththepresenceofalternativefinanceorO&M;

smallportionsofgovernmentfundingmaybeusedevenforprojectswithminimalpublicfinancing.In

suchcases,thefundingwouldbeexpectedtocomeintheformofdebtservice(inarrangementslike

GARVEE3financing)orotherregulatory/mitigation-relatedpayments.Governmentfundingisused

largelyinconjunctionwithDBcontracts,whereprimaryrisksinvolvingprojectcapitalareretainedby

thepublicsponsorandsecondaryandtertiaryrisksaretransferredtotheprivatepartner(s)(FHWA

2008).Ifthepublicsponsorisresponsibleforprojectfunding,thenpublicsponsorfinancialriskremains

significant.Furthermore,maximalpublicsponsorcost-savingsthroughtheP3arrangementhavenot

beenachieved.


18/38

-13-

3.2.7.i)ContractLength:P3contractlength

PastresearchonP3shasshownincreasedcontractlengthcausesaninherentdecreasein

contractflexibility,lockingallstakeholdersintoacontracthighlyvulnerabletomacroeconomicshifts

andcapitalmarketsfluctuations(Iossaetal.2007,p.75).Giventhetravailsoflong-termP3slikethe

ChicagoSkyway,theNorthwestParkwayinColorado,andeventheVirginiatollroadsinFairfaxand

LoudonCounties,lengthycontractsindicateaninvestmentwhichrequiresalong-terminvestment

vision;i.e.positivereturnoninvestment(ROI)isfarfromimminent.Ashortercontractwillcreatean

incentivefortheprivatestakeholdertoincreaseequityintheprojectand,assuch,increasethe

incentivetooptimizeassetperformanceto,inturn,optimizeROI(ViningandBoardman2008,p.156).

Table1belowsummarizeseachofournineex-antemetricsandourexpectationofhowthe

presenceorabsenceofeachmetricwillinfluencesuccessorfailureoftheP3.

Table1:Expectedeffectofeachmetric(attribute)onsuccessorfailure

Alt.

Finance(F)-

A

Alt.

Operations(O)-B

Alt.

Maintenance(M)

-C

ExistingCapacityConstraints-

D

TotalCost=>$500million-

E

FewExistingSubstitutes-

F

GovtAvailabilityPay

ments-

G

GovernmentFunding

-H

ContractLengthJ

+ + + + + + - - -

+:presenceofmetricpre-implementationwillincreaselikelihoodofprojectsuccess

-:presenceofmetricpre-implementationwilldecreaselikelihoodofprojectsuccess

4.TheSampleWereviewed100casestudiesoftransportP3sworldwide.Thereisnosignificancetothe

number100;weweremerelyabletofind100P3swithenoughqualityinformationfromwhichto

comparetotherestofoursample.Ofthose100projects,wefound55successfulprojects.Thisdoes


19/38

-14-

notmeanthatonly55successfultransportP3sexistintheworld,justthat55percentofoursamplemet

allfivecriteriainourdefinition.Wereviewedall100casestudiestoidentify,ineachP3project,the

presenceorlackthereofofthenineex-antesuccessmetricstotestourhypothesis.Thesuccessful

projectsarelistedinandtheunsuccessfulprojectsarelistedinAppendixB.Figure1isagraphical

representationofthedata.

Wegatheredourdatabasedlargelyonavailabilityofcomprehensiveandconsistentinformation

pertainingtooursetofpre-implementationmetrics.Thisinformationcamefromanarrayofsources

including:ameta-analysisofexistingacademicliterature;previousP3casestudies;local,regional,state,

andmultinationalgovernmentalagencies;privateandnonprofitconsultingandresearchinstitutions;

andextra/non-governmentalorganizationssuchastheWorldBank.Thismethodmayhaveledtoan

upwardbiasinprojectcosts,aswefounddatamuchmorereadilyavailableformulti-milliondollarP3s

ascomparedtomuchsmallerandmore-localscaleprojects.

Inordertobeincludedinthesample,projectsmusthavebeencompletelyconstructedand

opentousers.The100projectsinoursamplewereallcompletedandopenedoverthecourseof

roughlythelastquarter-century,from1986to2009.Theprojectsweredistributedacross29nations,

withthebulkoftheprojectsoccurringintheUS,UK,Canada,andAustralia;suchageographicbiasisto

beexpectedgivenhowtheBritish,Australians,andCanadianswereamongthefirsttopioneerand

institutionalizealternativeprojectfinancing.

Allattributedatainourmatrices(AppendicesAandB)arebinarywiththeexceptionofTotal

Cost(E)andContractLength(I);anaffirmativevalueof1isindicatedbyanXandgraycellshading

whileavalueofzeroisindicatedbyablankspace.Ourfive-pointdefinitionofsuccessincludes

continuousandbinaryvariablesasshowninTable2.


20/38

-15-

Table2:Successvariables

Variable Units SampleMin SampleMax

OnTimeDelivery Days((early)orlate) (630) 2555

On-BudgetDelivery %Escalation 0% 306%

NoBankruptcy Binary 0(false) 1(true)PrivateFinancing %PrivateFinancing 0% 100%

NoDemandShortfall Binary 0(false) 1(true)

Beforewecontinueandfullyreportourresults,wefeelitisnecessarytoclarifytheclassification

oftwoparticularprojects,SR-91ExpressLanes4(SR-91)andtheChicagoSkyway.Theproblemscreated

bySR-91snon-competeclauseresultedinOCTA(OrangeCounty,CaliforniaTransportationAuthority)

buyingthefacilityfollowinganeffortbyCaltranstowidentheadjacentroad.Thisbuybackpotentially

violatesthethirdcriterioninourfive-pointsuccessdefinition(thereisameasurablefinancialbenefit/

costsavingsrealizedbythepublicsponsor).Nevertheless,wecountedSR-91asasuccessfulP3because

itincludedtheremainingfouritemsinourfive-pointlist.WhileOCTAisnowexposedtosomeusage

risk,theconstructionandinitialoperatingrisksweresuccessfullytransferredtotheprivatefirm.

Moreover,OCTAhadthebenefitofknowingactualhistoricaloperatingandmaintenancecostand

demonstratedrevenuebeforeitmadeitspurchase.

Conversely,theChicagoSkywayleasecamecloseenoughtobankruptcyforustoconsideritin

violationofoursecondcriterion(theprojecthasneverenteredbankruptcyorsoughtbankruptcy

protection)(Peterson2009).TheprivatizationoftheChicagoSkywaydoesnotmaketheoverall

transportationsystemmoreefficientsomuchasitre-allocatesrevenuesandtollingproceeds.Itdoes

notcreateaviablelong-termfinancialbenefitforthepublicsponsorsomuchasaone-timecash

infusion.Inaddition,thereislong-termriskassociatedwiththefinancialinstabilityandexcessivelyhigh

debtloadoftheSkywaydeal.Ultimately,thefacilitysrevenuepotentialislimited,callingintoquestion

theviabilityofthe99-yearleaseandwhetherornotthepublicstakeholderstrulygotthemostutility


21/38

-16-

outofsuchalong-termdealintheformofalarge,up-frontlumpsumpayment.Thereforeweclassified

theChicagoSkywayasafailure.

5.Discussionofresults

5.1.BreakdownacrossAttributes

Figure1comparesthepercentageshareofeachoftheattributesA-Hinthesuccessfulgroup

(showninyellow)andtheunsuccessfulgroup(showninred);Figure2showsthesamebreakdownfor

attributeI.Figure3showstheaveragecostoflargesuccessfulandunsuccessfulprojects,withtotal

costsinexcessof$500million.

Figure1:AttributeComparisons(A-H)AcrossSuccessfulandUnsuccessfulP3s

Figure2:AttributeComparison(I)AcrossSuccessfulandUnsuccessfulP3s

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

A)Alternavefinancing

B)Alternaveoperaons

C)Alternavemaintenance

D)Exisngcapacity

constraints

E)Projectvalue>$500million

F)Fewsubstutes

G)Governmentavailability

payments

H)Governmentfunding

Successful

Unsuccessful

0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00

Successful

Unsuccessful


22/38

-17-

Figure3:AverageLarge(>$500million)ProjectCostAcrossSuccessfulandUnsuccessfulP3s

ThebreakdownofsuccessfulandunsuccessfulP3sacrossoursetofattributeswassurprisingly

consistentbothprojectgroupsgenerallytrackedoneanotherclosely.Averysimilarproportionof

successfulandunsuccessfulprojects(successful%/unsuccessfull%):

1) incorporatedalternativefinancing(86%/87%);2) incorporatedalternativeoperationsand/ormaintenance(86%/87%foroperations,78%/84%for

maintenance);

3) werelargeprojectscostinginexcessof$500million(49%/53%);and4) reliedongovernmentavailabilitypaymentsand/orgovernmentfunding(30%/40%for

availabilitypayments,36%/44%forgovernmentfunding).

However,fourmajordifferencesbetweensuccessfulandunsuccessfulprojectsemergedintermsof:d)

existingcapacityconstraints;f)fewsubstitutes;i)contractlength;andtheaveragecostoflarge

projects(projectscostinginexcessof$500million).Eachofthesefourkeydifferencesisdiscussedin

detailbelow.

D)Existingcapacityconstraints: Whileeight-in-tenofthesuccessfulprojectsfaceexisting

capacityconstraints,lessthan30%ofunsuccessfulP3sdo.Whetherornotaprojectisbuiltdue

toexistingcapacityproblemsisitselfameasureofmarketdemandforthenewfacility.Demand

fornewinfrastructurewherecapacityissuesexistisclear;demandwherenocapacity

constraintsexistislessclearandrequiresmorejustification.Existingcapacityconstraintswould

indicateanideallocationfortolls,ashightrafficvolumeswillbetravellingthroughthefacility;

existingcapacityconstraintsmayultimatelysignifylong-termpotentialfortheP3tosupport

itselfontollrevenuesratherthanpublicsponsorfunding.Giventhesignificanceofthepresence

ofexistingcapacityconstraints,wecanextrapolatethatwhereexistingcapacityconstraintsis

lacking,consistentlyhighdemandislackingaswell.Assuch,facilityrevenueandP3success

bothtrackcloselytotheextentofthepresence(orlack)ofexistingcapacityconstraints.

$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000

Successful

Unsuccessful


23/38

-18-

F)Fewexistingsubstitutes: While53%ofsuccessfulprojectshadfewsubstitutes,onlyabouta

thirdofunsuccessfulprojectsdid.IfaP3facesdirectcompetitionfromanumberofsubstitutes,

demandisessentiallywatered-down,distributedacrossthevariousinfrastructureassets.

Unsuccessfulprojects,onaverage,wereinitiatedwithinareasnotfacingcapacityconstraints

andinareasthatalsohadanumberofsubstitutesfortheproposedfacility.Whatlittledemand

existedfortheassetswasdiluted;atthesametime,however,theroleofprivatefinance(as

mentionedearlier)wasassignificantinunsuccessfulP3sasitwasinsuccessfulones.

I)Contractlength: Intermsofcontractlength,ourinitialhypothesiswasprovencorrectwhen

comparingthelengthofcontractsbetweensuccessfulandunsuccessfulP3s.Theaverage

successfulP3hadacontractlengthof23.8yearswhiletheaverageunsuccessfulP3hada

contractlengthof37.8years.Suchadifferenceislargelyaccountedforbytheinclusionoftwo

unsuccessfulP3stheChicagoSkywayandHighway407Express(Toronto)bothleasedfor99

years.Furthermore,thedifferencemayalsobeaccountedforbythefactthatmany

unsuccessfulP3sareforcedtorefinanceorare,infact,soldatalowerpricetoanother

stakeholder.EithercourseofactionwouldgenerallyrequirealengtheningoftheP3contractinordertoallowenoughtimefortheprivatepartnertoreapanadequatereturnoninvestment.

Averagelargeprojectcost:Whileasimilarproportionofsuccessfulandunsuccessfulprojects

costinexcessof$500million(49%and53%respectively),theaveragecostofunsuccessfullarge

projects($3.66billion)wasmorethandoublethesizeofsuccessfullargeprojects($1.45billion).

Theseresultssuggestthatwhile,toadegree,projectsdoattaineconomiesofscaleassize

increases,atacertainpointprojectsbecometoolargeandbegintosufferfromdiseconomiesof

scale.Increasedcapitalforlargerprojectsrequireincreasedrevenuestogeneratesufficient

returnandthusincreasedrelianceondemandforecastsaccuracyandalonger-timehorizon

inwhichtodoso.Inshort,asprojectcostrises,anarrayofprojectrisksseemtoriseinstep.

Wenowturntohowourtwogroupsofprojectsscoreonourfivepointdefinitionofsuccess.Figure4

comparesthepercentageofprojectswhichmetanddidnotmeetrule1ofourfive-pointdefinition;

Figure5showsthesamebreakdownforrules2-5.

Figure4:ComparisonofSuccessfulandUnsuccessfulP3sRule1

(75.00) (25.00) 25.00 75.00 125.00 175.00 225.00

Successful

Unsuccessful


24/38

-19-

Figure5:ComparisonofSuccessfulandUnsuccessfulP3sRules2-5

5.2.BreakdownAcrossDefinitionofSuccessRules

OursampleofsuccessfulP3swasdelivered,onaverage,twoweeksaheadofschedulewith

noneofthesuccessfulprojectsinthesampleeitherenteringbankruptcyorsuccumbingtodemand

downside/userisk.ThisstandsinstarkcontrasttooursampleofunsuccessfulP3swhichwere

delivered,onaverage,aboutsixmonthsbehindschedulewith27%ofprojectsenteringbankruptcy

and53%experiencingademandshortfall.Intermsofpublicsponsorprojectbenefits,successful

projectsincorporatedprivatefinancingupto56%oftotalprojectcostonaverageincontrasttoan

averageofnearly80%forunsuccessfulprojects.

Thisbreakdownsuggeststhatsuccessfulprojectsincorporatelessprivatefinancing,butleverage

adiversesetoffinancingsources,distributingriskmoreevenlythanprojectsthatrelyheavilyonprivate

financing.Adiversityoffundingsourcesmayincreasethescrutinyofthedemandforecastsandthe

financialplan;thisisapotentialtopicforfurtherresearch.Asdiscussedearlier,thisincreasedreliance

solelyonprivatefinancing,inconjunctionwithincreasedlikelihoodofdemandshortfallsandfinancial

underperformance,isapotentiallylethalmixforP3s,andwasaverycommontrendthroughoutour

sampleofunsuccessfulP3s.

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%70.00%

80.00%

90.00%

100.00%

2.On-budget

delivery

3.Neverentered

bankruptcy

4.%Private

financing

5.Accurate

demand

forecasngSuccessful

Unsuccessful


25/38

-20-

Finally,successfulprojectswere,onaverage,deliveredwithnooverrunasperourdefinitionof

successwhileunsuccessfulprojectsincurred,onaverage,a35%overrun.Unsuccessfulprojectsinthis

sample,then,areprojectsthatrelyheavilyonprivatefinancing,arehighlysusceptibletodemand/use

downsiderisk,andexperiencebothsignificantdeliverydelaysaswellascostoverruns.

6.ConclusionWedefinedwhatconstitutesasuccessfulP3facilityandthenfoundapoolof100facilitiesto

study.Wesurveyedninepre-implementationmetricsinoursample,seekingtrendsintheirdistribution

amongbothsuccessfulandunsuccessfulP3s.Indeed,wefoundfourpre-implementationsuccess

indicatorsforP3s.Theyare:1)existingcapacityconstraints,2)fewexistingfacilitysubstitutes,3)

contractlength,and4)averagelargeprojectcost.Weconcludethatpotentialprojectsthatface

existingcapacityconstraints,havefewexistingsubstituteswithwhichtheycompete,haveacontract

termofapproximately24yearsorlessinlength,andshouldtotalcostexceed$500millioncostless

thanapproximately$1.45billionwillbemoreaptforsuccessasaP3thanthosethatdonot.Projects

thatmeetthesecriteria(contractlengthroundedupto25yearsorlessforeaseofidentificationin

sample)areinredtextinAppendixA.

WefoundtheearlyindicatorsofP3troubletobe:1)highlevelsofprivatefinancing,2)few

existingcapacityconstraints,3)manyfacilitysubstitutes,4)anaveragecontractlengthinexcessof38

years,and5)averageprojectcostinexcessof$3.65billion,shouldtheprojectcostmorethan$500

million.Ineffect,unsuccessfulprojectsareaccordingtoourfindingsfromthissampleonaverage

largerincostandscopethansuccessfulprojects,occurwherelittledemandisexhibited,andrelyheavily

onprivatefinancing.Inordertogenerateadequatereturnoninvestment,contracttermsmustbe

longer,creatingproblemsinaccuratelyforecastingdemandfurtheroutintothefuture.

Oursampleofsuccessfulprojectsrelyonaveragelessonprivatefinancingthanunsuccessful

projects,indicatingadiversityoffinancingsourcesandmoreevendistributionofriskthanunsuccessful


26/38

-21-

projects.Additionally,wefoundthatsuccessfulprojectsminimizedeliverytimewithanaverage

deliveryofsuccessfulprojectstwoweeksaheadofschedulewhilealsoeliminatingcostoverruns.

Ourfindingsare,however,onlysuggestiveinnature.Publicsponsorsshouldcarefullyconsider

whetherP3deliveryisappropriateonaproject-by-projectbasis.PublicsponsorsshouldevaluateP3

deliveryforproposedprojectswiththosemetricscommontosuccessfulP3s.

1Contracttypeinwhichoneprivatefirmisresponsibleforbothdesignandconstructionoffacility,insteadofonefirmforeachindividualphase.2Asusedinthisreport,publicsponsorreferstoanypublicagencythatmightpropose,build,and/ormaintainatransportationfacility,e.g.,San

FranciscoMunicipalTransportationAgency,CaliforniaDepartmentofTransportation,ortheGoldLinePhaseIIConstructionAuthority.3GrantAnticipationRevenueVehicle.Aformofdebtfinancinginwhichmoregrantsareallocatedtostate/localgovernmentthanitcanpay

foratpresent,withdebtservicerepaidwithfutureformulagrantsand/orsalestaxrevenues.(e.g.,LosAngeles30/10initiative).4AtolledfacilitylocatedinthemedianofCaliforniaStateRoad91.


27/38

-22-

ReferencesAECOMConsultTeam(ACT).(2007a). UserGuidebookonImplementingPublic-PrivatePartnershipsfor

TransportationInfrastructureProjectsintheUnitedStates.AreportpreparedforOfficeofPolicy

andGovernmentalAffairs,FederalHighwayAdministration.Arlington,VA:July7,2007.

AECOMConsultTeam(ACT).(2007b). CaseStudiesofTransportationPublic-PrivatePartnershipsinthe

UnitedStates.AreportpreparedforOfficeofPolicyandGovernmentalAffairs,FederalHighway

Administration.Arlington,VA:July7,2007.

AECOMConsultTeam(ACT).(2007c). CaseStudiesofTransportationPublic-PrivatePartnershipsaround

theWorld.AreportpreparedforOfficeofPolicyandGovernmentalAffairs,FederalHighway

Administration.Arlington,VA:July7,2007.

Duffield,Colin;Raisbeck,Peter;Xu,Ming.(2008). NationalPPPForum-BenchmarkingStudy,PhaseII.

UniversityofMelbourne,MelbourneEngineeringResearchInstitute(MERIT).RetrievedNovember

4,2010.Availableat:http://www.infrastructureaustralia.gov.au/files/National_PPP_Forum_Benchmarking_Study_Ph2_d

ec08.pdf.

Esty,BenjaminC.(2004).WhyStudyLargeProjects?AnIntroductiontoResearchonProjectFinance.

EuropeanFinancialManagement.Volume10,Number2,pp.213-224.

FederalHighwayAdministration.(2008). ContractAdministration:TechnologyandPracticeinEurope.

RetrievedNovember11,2011.Availableat:

http://international.fhwa.dot.gov/contractadmin/04.cfm .

FederalHighwayAdministration.(2009). Public-PrivatePartnershipsforHighwayInfrastructure:

CapitalizingonInternationalExperience.Washington:AmericanTradeInitiatives.Retrieved

November19,2010.Availableat: http://international.fhwa.dot.gov/pubs/pl09010/pl09010.pdf .

Flyvbjerg,Bent;Skamris,MetteK.;Buhl,SorenL.(2004).WhatCausesCostOverruninTransport

InfrastructureProjects?TransportReviews.Volume24,Number1,pp.3-18.

Flyvbjerg,Bent.(2005).Measuringinaccuracyintraveldemandforecasting:methodological

considerationsregardingrampupandsampling. TransportationResearch.PartA39,pp.522-530.

Flyvbjerg,Bent.(2009).Survivaloftheunfittest:whytheworstinfrastructuregetsbuiltandwhatwe

candoaboutit.OxfordReviewofEconomicPolicy.Volume25,Number3,pp.344-367.

Giuliano,Genevieve,LisaSchweitzer,YinWang,andTheodoreMinch.(2010a). ReportOne:Best

Practices.METRANSTransportationCenter,preparedforCaliforniaDepartmentofTransportation.

September2010.

Giuliano,Genevieve,LisaSchweitzer,KevinHolliday,andTheodoreMinch.(2010b). ReportTwo:

PreliminaryAnalysisof:1)Analyticaltools2)TheCaliforniaPoliticalEnvironmentandChallengesto

P33)StructuringP3Projects.METRANSTransportationCenter,preparedforCaliforniaDepartment

ofTransportation.November2010.


28/38

-23-

Iacobacci,Mario.(2010).DispellingtheMyths:APan-CanadianAssessmentofPublic-Private

PartnershipsforInfrastructureInvestments.TheConferenceBoardofCanada.Ottawa,ON:January

2010.

Iossa,Elisabetta;Spagnolo,Giancarlo;Vellez,Mercedes.(2007). ContractDesigninPublic-

PrivatePartnerships.PreparedfortheWorldBank.September2007.

NationalCooperativeHighwayResearchProgram(NCHRP).(2009). Synthesis391:PublicSectorDecision

MakingforPublic-PrivatePartnerships.TransportationResearchBoard.WashingtonDC:January

2009.

Nijland,Hans.(2010).Whyaretransportprojectionsoftenwrong?CentreforEuropeanPolicyStudies.

RetrievedOctober26,2011.Availableat:http://www.ceps.eu/files/Nijland_PdL_Projections.pdf.

Pickrell,Don.(1990).UrbanRailTransitProjects:ForecastVersusActualRidershipandCosts.US

DepartmentofTransportation.RetrievedOctober26,2011.Availableat:

http://debunkingportland.com/docs/Pickrell%28no_text%29.pdf.

Peterson,Mark.(2009).IndianaTollRoadoperatorsonthevergeofbankruptcy?WNDU.com.South

Bend,IN:July20,2009.Retrieved:January25,2011.Availableat:

http://www.wndu.com/politics/headlines/51254687.html.

PriceWaterhouseCoopers(PwC).(2010).Public-PrivatePartnerships:TheUSPerspective.Retrieved

November19,2010.Availableat:http://www.pwc.com/us/en/capital-projects-

infrastructure/publications/assets/Public_Private_Partnerships.pdf.

Richmond,Jonathan.(2001).Awholesystemapproachtoevaluatingurbantransitinvestments.

TransportReviews.Volume21,Number2,pp.141-179.

Stambrook,David.(2005). SuccessfulExamplesofPublic-PrivatePartnershipsandPrivateSectorInvolvementinTransportInfrastructureDevelopment.VirtuosityConsulting.May28,2005.

RetrievedNovember14,2011.Availableat:

http://www.internationaltransportforum.org/jtrc/infrastructure/Investment/PPPsuccessStories.pdf .

UrbanLandInstitute(ULI).(2005). TenPrinciplesforSuccessfulPublic/PrivatePartnerships.UrbanLand

Institute.WashingtonDC:2005.RetrievedOctober27,2011.Availableat:

http://www.uli.org/ResearchAndPublications/Reports/~/media/Documents/ResearchAndPublicatio

ns/Reports/TenPrinciples/TP_Partnerships.ashx.

USDepartmentofTransportation(USDOT).(2007).ReporttoCongressontheCosts,Benefits,and

EfficienciesofPublic-PrivatePartnershipsforFixedGuidewayCapitalProjects.FederalTransit

Administration.Washington,DC:December2007.RetrievedNovember16,2010.Availableat:

http://www.fta.dot.gov/documents/Costs_Benefits_Efficiencies_of_Public-Private_Partnerships.pdf.

Vining,AidanR,andAnthonyE.Boardman.(2006).Public-PrivatePartnershipsinCanadaTheory

andEvidence. InfrastructureCanada.December5,2006.


29/38

-24-

Vining,AidanR.andAnthonyE.Boardman.(2008).Public-PrivatePartnerships-EightRulesfor

Governments.PublicWorksManagement&Policy.Volume13,Number2,October2008,pp.149-

161.

Wachs,Martin.(1990).EthicsandAdvocacyinForecastingforPublicPolicy. BusinessandProfessional

EthicsJournal.Volume9,Numbers1and2,pp.141-157.

Wang,Yin.(2010).RecentExperienceintheUtilizationofPrivateFinanceforAmericanTollRoad

Development.ADoctoralDissertationofUniversityofSouthernCalifornia.LosAngeles,CA.


30/38

-25-

AppendixA:ListofSuccessfulProjects

ProjectName/Location

Alt.

Financ

e(F)-

A

Alt.

Ops

(O)-

B

Alt.

Maint

.(M)-

C

ExistingC

apacity

Constraints-D

TotalCost=

>$500mil

($mil

)-E

FewExstngSu

sttutes

-F

Gov'tFun

ding-

G

Gov'tAva

ilability

Paymen

ts-

H

ContractL

ength-

I

2ndSevern

CrossingBridge:

Bristol,UK

X X X X $1,080 X 30

A25Montreal:

QuebecX X X X $614 X 35

AirportMAXLRT:

Portland,OregonX X DB

AlamedaCorridor,

LosAngeles,CAX X X X $2,400 X X n/a

AntonAnderson

MemorialTunnel:

Whittier,AK

X X X X X 7

AtlanticCiy

Brigantine

Connector:New

Jersey

X X X X DB

AtlanticStation17thStreet

Bridge:Atlanta,

GA

X X 4

Autostrade,Italy X X X X $4,300 X privatized

Avenidade

AmericaIES

(Intermodal

TransitExchange

Station):Madrid,

Spain

X X X 25

BinaInstra

Motorway:

Croatia

X X X X $727 X X 32

BogotaBRT:

Bogota,ColombiaX X X X $3,300 n/a


31/38

-26-

BremenGVZ(Rail

Intermodal

Facility):Germany

X X X X $500 X X BOO

CA-91Express

Lanes:Orange

County,CA

X X X X $537

OCTAbuy

backof

fwy

OCTAbuy

backof

fwy

35

CentralTexas

TurnpikeSystem:

Austin,TX

X X X X $3,300 n/a

Charlottetown

Transit:Prince

EdwardIsland

X X X X 5

CityLink:

Melbourne,

Australia

X X X X $2,000 34

Cochin

International

Airport:Kerala,

India

X X X $3,000 X n/a

CountryPark

Motorway:Hong

Kong,China

X X $930 X FreeROW 30

CuritibaBRT:

Brazil X X X Init.Capex privatized

DCStreets:

WashingtonDCX X X 5

EastCoastRoad:

TamilNadu,IndiaX X X X n/a

EdmontonOrbital

SE:Alberta X X X X X X 30

FoleyBeach

Expressway:

BaldwinCounty,

AL

X X X X X X n/a

GoldenEars

Bridge:

Vancouver,BC

X X X X $746 X X 33.5

Hamburg

International

Airport:Hamburg,

Germany

X X X X $525 X X 4

Heartland

Corridor:Midwest

US

X X X X X X D(B)B


32/38

-27-

Hudson-Bergen

LightRail:New

Jersey

X X $2,200 X 30

I-75Expansion:

Collier/Lee

Counties,FL

X X X X DBF

Isaac'sCanyon

Interchange:

Boise,ID

X X DB

JFKTerminal4:

NewYorkCity,NYX X X X $1,450 n/a

KickingHorse

CanyonPhase2:

BC

X X X X X X 25

M1-A1Link:

Leeds,UKX X X X $544 X 30

M2Motorway:Sydney,Australia

X X X X 45

MaputoPort

Rehabilitation:

Mozambique,

Africa

X X X X X

Retains

49%

ownership

ofport

during

period

15

N4TollRoad:

SouthAfricaand

Mozambique

X X X $660 X 30

NewYorkAve/FloridaAve/

GallaudetUniv.

MetroStation:

WashingtonDC

X X DB

NorthLuzon

Expressway:

NorthLuzon,

Philippines

X X X X X 30

NortheastStoney

TrailFreeway

Extension:Alberta

X X X X $652 X X 32

PenangBridge:

Penang,MalaysiaX X X X X

Builtby

govt,then

leased

25

PortofAqaba

Expansion:Aqaba,

Jordan

X X X X $710 X 25


33/38

-28-

PortofColombo

Expansion:

Colombo,Sri

Lanka

X X X X X 30

PortofGalveston

CruiseTerminal:Galveston,TX

X X X X DB

QueenElizabethII

DartfordBridge:

London,UK

X X X 20

Rosario-Victoria

Bridge:Rosario/

Victoria,

Argentina

X X X X X 15

Sea-to-SkyHwy

Improvements:

Vancouver,BC

X X n/a

Southeast

EdmontonRing

Road:Edmonton,

Alberta

X X X X $510 40

SR44Corridor:

NewMexicoX X X X $537 X n/a

St.Lawrence

Seaway

Management

Corporation:

Quebec

X X X X XGARVEE

financingDB

SydneyHarbor

Tunnel:Sydney,

Australia

X X X $3,000 X X 20

US-1

Improvements:FLX X X $750 X 30

VirginiaRailway

Express:VirginiaX X X X 5

Warsaw

International

Airport:Warsaw,

Poland

X X X X

5

WestlinkM7:

Sydney,AustraliaX X X X X n/a

YitzhakRabin

Highway:TelAviv,

Israel

X X X X $2,300 34


34/38

-29-

YorkBusRapid

TransitPhaseI:

Ontario

X X X $1,300

80%of

residual

ONLYin

caseof

demand

downside

30


35/38

-30-

AppendixB:ListofUnsuccessfulProjects

Project

Name/

Location

Alt.

Finance(F)-

A

Alt.

Ops(O)-

B

Alt.

Maint.(M)-

C

ExistingCapacityConstraint

s-D

TotalCost=>$500mil($mi

l)-E

FewExistingSubstitutes-

F

Gov'tFunding-

G

Gov'tAvailabilityPayments

-H

ContractLength-

I

A2Motorway:

PolandX X X $1,270 40

Arlanda

ExpressRail

Link:Sweeden

X X X $650 40

BeirasLitoral/

AltaToll

Roads:

Portugal

X X X X $1,500 X 35

Brisbane

AirportRail

Link:Australia

X X X 35

Camino

ColombiaToll

Road:TX

X X X X Priv.

Channel

TunnelRail

Link:UK/

France

X X X $9,000 Gov'ttakes

overtnl

Gov't

takes

overtnl

n/a

Chicago

Skyway:

Chicago,IL

X X X $1,830 99

Coimbatore

Bypass:India X X X X X BOT

Confederation

Bridge:NewBrunswick,

Canada

$640 X X X 35

Dulles

Greenway:

Loudon

County,VA

X X X 42.5


36/38

-31-

DutchHigh

SpeedLine:

Netherlands

X X X $3,750 X 30

Gautrain

RapidRail

Link:South

Africa

X X X $3,700 X X 20

Highway104:

NovaScotia,

Canada

X X X X X X 30

Highway407

Express:

Ontario,

Canada

X X $3,100 X 99

I-394MnPass:

Minneapolis,

MN

X X X DB

LandCove

Tunnel:NSW,

Australia

X X X $1,100 X 33

LasVegas

Monorail:Las

Vegas,NV

X X X $650 InitialGov't

DebtIssue Priv.

London

Underground

P3:London,

UK

X X X $25,600

95%Gov't

Grntyon

Invst

X 30

M5

Motorway:

Hungary

X X X Gov'ttakes

overfwy

Gov't

takes

over

fwy

n/a

Madrid

Barajas

Subway

Extension:

Spain

X X Gov'tOps Xnon-

integrtd

MexicanRoad

Concession

Program:

Mexico

X X X $9,900

Gov't

buybackof

23/52

projectsat

$7.6bil

BOT

Montreal

SubwayExtension:

Canada

$745 X X DB

Northwest

Parkway

Lease:CO

X X X $603 99


37/38

-32-

Oresund

Bridgeand

Tunnel:

Denmark/

Sweeden

$5,400 X

DB

Pocahontas

Parkway:Richmond,VA

X X X 30

Randstad

Tunnel:

Netherlands

X X X X 30

RapidTransit

System:

Bangkok,

Thailand

X X X X $2,000 30

Rostock

Tunnel,

Germany

X X X X 50

Route3NorthRehab.:

Burlington,

MA

X X X X DB

SMART:Kuala

Lumpur,

Malaysia

X X X X 25

Southern

Connector:SCX X X 50

SR125:San

DiegoCounty,

CA

X X X X $635 X

35

SydneyAirportRail

Link:Australia

X X X $8,000 $700mil

bailout

$700mil

bailoutDB

Transjamaican

Highway:

Kingston,

Jamaica

X X X X

X X

35

TrenUrbano:

SanJuan,

PuertoRico

X X

$2,250 X

5

YenLenh

Bridge:

Vietnam

X X X X 20

Zambia

Railways

(Freight):

Africa

X X X X X 20


38/38

Zambia

Railways

(PAX):Africa

X X X X X 7

CrossCity

Tunnel:

Syndey,Australia

X X X

$750

Vascoda

GamaBridge:

Portugal

X X X X DBF

Okanagan

Bridge

Replacement:

British

Columbia

X X X X X X 30

M6Tollway:

Birmingham,

UK

X X X X $1,700 53

CanadaLine:

Vancouver,

BC

X X X $2,054 X 35

Route28PhaseII

Expansion:

Fairfaxand

Loudon

Counties,VA

X X X X X X 25

R1

Expressway:

Slovakia

X X X X $895 X X 25

Section II Criteria for Evaluating P3 Projects

Documents

Transcript of Section II Criteria for Evaluating P3 Projects