New Jersey needs to join the ranks of more than 30 other states with broad legislation permitting public-private partnerships (P3s) for transportation projects.
There are many models out there to choose from- including Virginia and Florida and Pennsylvania.
A Public and Private Partnerships for Transportation Act should minimally allow for the Department of Transportation DOT and other public transportation entities to partner with private companies to finance, deliver, operate and maintain transportation-related projects. P3s may receive all or a portion of the revenue generated (such as via tolls or user fees) in exchange for providing services or facilities. The law should apply to the construction of new transportation facilities and the improvement of existing facilities.
Under the law, the state would, for instance, retain ownership of a busy roadway while a private firm in a P3 would build new express lanes along that roadway. Following construction, the private firm would receive a return through tolling drivers who use the express lanes.
The law should create an independent Public-Private Transportation Partnership Board, to review and approve P3 projects. Private investors ought to be able to pitch their ideas to the board, in a manner prescribed in approved guidelines for considering both solicited and unsolicited proposals. If the board determines that a state operation would be administered more efficiently by a private company, the private company will be authorized to submit a proposal and enter into a contract to either completely or partially take over that operation for a defined period of time.
Proposals for P3s will be evaluated on the basis of pre-established criteria with assigned weights, including: cost; financial commitment; innovative financing; technical, scientific, or socioeconomic merit; public reputation, qualifications and financial capacity of the private entity; ability of the project to improve economic growth, improve public safety, reduce congestion, increase capacity or rehabilitate, reconstruct or expand an existing transportation facility; and other factors deemed appropriate by the public entity.
For unsolicited proposals, private entities are encouraged to request one-on-one meetings with DOT’s P3 office and/or a public transportation entity to discuss potential proposals before submission. As part of such one-on-one meetings, the P3 office and/or public entity may provide informal feedback. A formal review of an unsolicited proposal will only be undertaken once a private firm makes a formal submission.
An unsolicited proposal must contain information that is sufficient for the P3 office and/or public entity to evaluate the merits of the proposed project. Such information includes the capability of the private entity to deliver the project, the financial viability of the project and the benefits to the state of New Jersey and the public entity of a P3 delivery method over a conventional method. The board would need to promulgate an implementation manual identifying any additional categories of information that all unsolicited proposals must contain.
It would seems prudent that the board and the P3 office established limited times- say, May and October as the only two months the state will receive unsolicited proposals.
In addition, New Jersey should seek sponsorship proposals for the state’s welcome centers and rest areas, environmental and engineering services, including project management services.
The law provides unique opportunities for private companies in various industries, including construction and communications. P3s should stimulate private investment in public highways, bridges and other facilities, where governments confront funding restraints.
Summary of Benefits and Limitations of Public-Private Partnerships
- Transfer project risks to private partner.
- Greater price and schedule certainty.
- More innovative design and construction techniques.
- “Free up” public funds for other purposes.
- Quicker access to financing for projects.
- Higher lever of maintenance.
- Keep project debt off government’s books.
- Increased financing costs.
- Greater possibility for unforeseen challenges.
- Limits government’s flexibility.
- New risks from complex procurement process.
- Fewer bidders.
Major Risks Transferred in Public-Private Partnership Agreements
- Changes in financing costs.
- Estimated and actual inflation.
Design and Construction Risks
- Interface between design and construction.
- Discovery of endangered species.
- Discovery of archeological, paleontological, or cultural resources.
- Discovery of hazardous materials.
- Unknown utility lines.
- Delays in getting permits approved.
Operation and Maintenance Risks
- Facility requires more maintenance than planned.
- Facility is more costly to operate than planned.
- Standards or requirements imposed in the future.
- Usage of the facility is lower than predicted.
- Public less willing to pay user fees than projected.
Tough times often lead to a new way of viewing common problems: how to create jobs, for example, and how to keep the economic machine moving. The American Recovery and Reinvestment Act of 2009 is just one of several indicators suggesting that the U.S. government is seriously considering the need to look to novel programs to both update crumbling infrastructure and stimulate the economy. These alternatives may be all the more attractive when the public sector is faced with more and more debt and competing priorities for borrowing capacity.