Transportation Public-Private Partnerships: Challenges of Transparency and Accountability
Many recent studies and reports identify a huge backlog of infrastructure projects that need to be completed in the United States. One example of this backlog is estimated by the American Civil Engineering Society who projects that three trillion dollars per year will be needed to fix all of the bridges and roadways, as well as build new, needed infrastructure to lessen traffic congestion and ease the movement of goods and people. The issue facing public policymakers is how to pay for these needs, especially at a time when the total debt of U.S. state and local governments is estimated at $7.3 trillion. Compounding the challenges is the still widely accepted feeling that “roads are free,” along with public recognition that congestion is a problem, but no alternative revenue source—e.g. gasoline tax, vehicle miles traveled tax, or tolls—to pay for solving this problem is widely accepted.
One answer that is gathering more serious consideration is the use of public-private partnerships (P3s). Although there are a range of options that can be considered P3s, one likely scenario is that private sector investors fund the construction of new roadways or bridge repairs and private partners operate and maintain the roadway or bridge for a 30-50 year period. Then, tolls and/or payments from governments repay the debt and operating expenses during this time period, as well as generate a profit. The hugely complex nature of this arrangement raises issues of transparency and accountability that have yet to be resolved. As several worldwide examples have shown, without public support, the P3 arrangement risks failure or at the very least, perceptions of mistrust and claims of public interest are not fulfilled. Additional efforts are needed to improve the transparency of relevant information, both before and after the P3 contract is signed.
In order to adequately assess whether information is sufficiently transparent, issues of content, process and impact must be considered. Past efforts have demonstrated deliberate decisions to conceal appropriate documents. The error of the Canadian Government in 1997 to exclude P3 documents concerning the E-470 roadway extension from the public view simply because the documents were “too complex” has long been recognized. The decision in 2009 of the Victorian Transport Minister to “lock away” all documents related to the troubled Melbourne Southern Cross Station project until 2058 led to reaction denouncing “cronyism.” More recently, however, many documents have been posted on project websites by more recent P3s, such as those relevant to the Florida I-595 and Port of Miami Tunnel projects.
Process issues have arisen in recent cases, however, as illustrated by two recently completed reports. Regimal’s analysis of the present processes and procedures currently implemented under the Virginia Public Private Transportation Act (PPTA) indicates:
- Cost benefit or value for money (VFM) analysis performed as part of the PPTA are not disclosed before a P3 agreement is signed.
- There is no formal role for the Virginia General Assembly legislators to play in approving such agreements.
This situation may have further lead to public and legislative outcry over the Hampton Roads tunnel P3 agreement, occurring more than a year after the agreement had been signed. Similar concerns were voiced about the viable public input into the potential privatization of the Hampton Port in Virginia.
An analysis of the recent P3 contract for the Presidio Parkway and the Long Beach Courthouse issued several months after the P3 agreements had been signed, suggests that key assumptions made by the VFM analysis were inaccurate, resulting in biases toward engaging in a P3 contract. A relatively high discount rate of 8.5 percent was chosen, higher than the 5 percent recommended by the California Legislative Analyst’s Office and higher than the current borrowing rate for California governments, currently at less than 5 percent.
To improve transparency and accountability, all efforts must assume first that the complexity of document content should not be viewed as a deterrent for keeping information confidential and/or not releasing it in a timely fashion to allow for sufficient stakeholder input before and after P3 contracts have been signed. Perhaps more important, withholding documents from the public view provides the appearance—if not the reality—of impropriety.
Steps to Improve Transparency: Content and Process
To ensure the greatest possible transparency, the following steps are suggested. Many are already implemented in a number of states, but more consistent adoption would be beneficial.
- A potential P3 project should be vetted through existing transportation planning review, e.g., those processes usually associated with Metropolitan Planning Organizations, placing the project in the 5 to 20-year plan.
- Analysis such as cost/benefit, value for money, and/or business case should be completed and made public prior to the P3 contract signing. If not, there will be claims made that the project should have been completed via means other than a P3.
- There should be a structured, formal effort to educate the public on the value of P3s and accompanying tolling mechanisms. The creation of a PPTA working group in June 2012 by the Virginia Secretary of Transportation to solicit additional ideas to improve public involvement in P3 projects is one example.
- At the initial stages of the public procurement process, a project website should be created, identifying the process and providing links to already existing reviews as they occur or have occurred. For example, the Miami MPO approved the Port of Miami Tunnel Project as early as 1984.
- Additional documents relevant to the procurement process should be released in a timely fashion. These include the Request for Qualifications and Request for Proposal documents. Also, after the bid opening, release of competitive bid proposals could occur, without cost or pricing information that may be considered proprietary. Similarly, issues that are the focus on negotiations could be publicized as well, further providing support and assurance that the public interest is being maintained.
- During the operations and maintenance phases of the P3, data collected that represent private partner outputs and outcomes as reflected by key performance indicators should be reported periodically.
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Author: Wendell Carrier Lawther, Ph D is the Coordinator for Masters of Public Administration in the School of Public Administration at the University of Central Florida.
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Transportation Public-Private Partnerships: Challenges of Transparency and Accountability
Many recent studies and reports identify a huge backlog of infrastructure projects that need to be completed in the United States. One example of this backlog is estimated by the American Civil Engineering Society who projects that three trillion dollars per year will be needed to fix all of the bridges and roadways, as well as build new, needed infrastructure to lessen traffic congestion and ease the movement of goods and people. The issue facing public policymakers is how to pay for these needs, especially at a time when the total debt of U.S. state and local governments is estimated at $7.3 trillion. Compounding the challenges is the still widely accepted feeling that “roads are free,” along with public recognition that congestion is a problem, but no alternative revenue source—e.g. gasoline tax, vehicle miles traveled tax, or tolls—to pay for solving this problem is widely accepted.
One answer that is gathering more serious consideration is the use of public-private partnerships (P3s). Although there are a range of options that can be considered P3s, one likely scenario is that private sector investors fund the construction of new roadways or bridge repairs and private partners operate and maintain the roadway or bridge for a 30-50 year period. Then, tolls and/or payments from governments repay the debt and operating expenses during this time period, as well as generate a profit. The hugely complex nature of this arrangement raises issues of transparency and accountability that have yet to be resolved. As several worldwide examples have shown, without public support, the P3 arrangement risks failure or at the very least, perceptions of mistrust and claims of public interest are not fulfilled. Additional efforts are needed to improve the transparency of relevant information, both before and after the P3 contract is signed.
In order to adequately assess whether information is sufficiently transparent, issues of content, process and impact must be considered. Past efforts have demonstrated deliberate decisions to conceal appropriate documents. The error of the Canadian Government in 1997 to exclude P3 documents concerning the E-470 roadway extension from the public view simply because the documents were “too complex” has long been recognized. The decision in 2009 of the Victorian Transport Minister to “lock away” all documents related to the troubled Melbourne Southern Cross Station project until 2058 led to reaction denouncing “cronyism.” More recently, however, many documents have been posted on project websites by more recent P3s, such as those relevant to the Florida I-595 and Port of Miami Tunnel projects.
Process issues have arisen in recent cases, however, as illustrated by two recently completed reports. Regimal’s analysis of the present processes and procedures currently implemented under the Virginia Public Private Transportation Act (PPTA) indicates:
This situation may have further lead to public and legislative outcry over the Hampton Roads tunnel P3 agreement, occurring more than a year after the agreement had been signed. Similar concerns were voiced about the viable public input into the potential privatization of the Hampton Port in Virginia.
An analysis of the recent P3 contract for the Presidio Parkway and the Long Beach Courthouse issued several months after the P3 agreements had been signed, suggests that key assumptions made by the VFM analysis were inaccurate, resulting in biases toward engaging in a P3 contract. A relatively high discount rate of 8.5 percent was chosen, higher than the 5 percent recommended by the California Legislative Analyst’s Office and higher than the current borrowing rate for California governments, currently at less than 5 percent.
To improve transparency and accountability, all efforts must assume first that the complexity of document content should not be viewed as a deterrent for keeping information confidential and/or not releasing it in a timely fashion to allow for sufficient stakeholder input before and after P3 contracts have been signed. Perhaps more important, withholding documents from the public view provides the appearance—if not the reality—of impropriety.
Steps to Improve Transparency: Content and Process
To ensure the greatest possible transparency, the following steps are suggested. Many are already implemented in a number of states, but more consistent adoption would be beneficial.
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