Public–private partnerships: a review of economic considerations with particular reference to transportation projects

The paper sets in context some of the more recent work that has been conducted on public–private partnerships (PPPs) in the provision and operation of infrastructure. PPPs essentially involve a government or its agent signing an agreement with a private company or consortium to supply it with services with the private sector actor involved in major elements of designing, building, temporarily ‘owning’, and running the physical assets; basically they are long-term development and service contracts between government and a private partner. The paper outlines the development of economic thinking regarding the rationale behind PPPs, the extent to which unbundling is optimal and the forms that it may take, the nature of the contracts that are enacted and their renegotiation, the awarding of contracts, and matters of possible corruption. By way of focus, it also provides some indication of what empirical studies in the transportation have thrown up regarding the outcomes of PPPs.     

The effect of institutional factors on public–private partnership success in ports

Port public–private partnerships (PPPs) are considered to be an important emerging mechanism for port development and improvement in port performance especially for developing countries. This paper empirically investigates the effect of institutional factors in the success of port’s PPPs; the latter defined as the attractiveness of the PPP project for private bidders and the market competitiveness of the facility. The empirical investigation of a large sample of ports finds that ‘regulatory quality’, ‘market openness’, ‘ease to start a business’ and ‘enforcing contracts’ are important institutional determinants of port PPP success and may ultimately contribute to port development and economic growth. The results are consistent with and add to the theoretical literature whereas practical implications for port authorities, managers and investors are discussed.     

Quality of institutions and private participation in transport infrastructure investment: Evidence from developing countries

In recent decades, owing to a series of public debt crises and constraints on government expenditure, infrastructure investment has dropped significantly in both developed and developing countries. To counterbalance this trend, Public–Private Partnerships (PPPs) schemes have been increasingly adopted. In this paper, we explore the determinants of the degree of private participation in transport infrastructure projects in a large sample of developing countries. By using a large sample of transport projects included in the World Bank Private Participation in Infrastructure Projects database, we document that greater participation by private parties in PPP contracts is associated with better institutions in terms of lower corruption, civil freedom, and a better regulatory framework.     

The economics of road safety

In this paper we present a theoretical framework for the analysis of road safety in different contexts characterized by the following factors: the presence or the absence of externalities, moral hazard, taxes (subsidies), government regulation, liability insurance and multi-period insurance contracts. The main results are the following: (i) A Pareto optimal solution for insurance coverage and road safety is characterized by full insurance and a level of prevention which takes into account externalities between drivers. (ii) Without asymmetrical information, such a Pareto optimal solution can be obtained with or without a fault system for negligence if an adequate rating system is set up in order to induce individuals to take into account externalities. Taxes and subsidies can also be efficient. Government regulation of road safety is another way to reduce inefficies due to externalities. However, these interventions will not generally lead to a socially optimal level of road safety under asymmetrical information. (iii) Under asymmetrical information, two mechanisms are examined in some detail: fault for negligence and multi-period insurance contracts. It is shown that one-period liability insurance contracts (assuming that the legal system can observe the individual's level of road safety activities when accidents occur) or multi-period no-fault insurance contracts (assuming an infinite horizon with no discounting) based in part on the individual's past driving record can give individually rational self-protection activity levels which are socially efficient in presence of both moral hazard and externalities. Under less stringent assumptions, these contracts can give second-best solutions.     

Transaction Costs in Transport Public–Private Partnerships: Comparing Procurement Procedures

Abstract

In recent years, concern has grown over good practices in the procurement process in public–private partnerships (PPPs). The consensus view is that PPPs are prone to higher transaction costs than traditional public provision. In this paper, we contrast the hypothesis that transaction costs in transport PPPs depend, to a large extent, on the procurement mechanism used in each case, comparing the Negotiated and the Open procedures. Given that PPPs may offer considerable benefits and significant savings over the entire life cycle of the project, it is essential for PPPs to minimize those costs that undermine efficiency gains and that deter private involvement. The quantitative analysis undertaken in this paper highlights that there is room for important savings in the tendering of PPP transport infrastructure projects, using an Open procedure.     

Contractual PPPs for Transport Infrastructure in Spain: Lessons from the Economic Recession

In this paper, we analyse the successes and failures of contractual public-private partnerships (PPPs) for delivering and operating transport infrastructure in Spain from the award of the first toll highway concession programme to the present. To that end, we show the risk allocation principles used in Spain and explore the evolution of the contracting approaches over the years. We found that the performance was reasonably good until the arrival of the economic crisis in 2008. Taking advantage of that, we make a review of contractual PPPs for different transport modes and assess the impact that the economic crisis has had on their business performance and the capacity of the central and regional governments to fulfil their commitments with the private sector. This analysis enabled us to identify measures that, if had been applied, would have improved the resilience of these contract during the economic crisis.     

How Do Governments Support the Development of Public Private Partnerships? Measuring and Comparing PPP Governmental Support in 20 European Countries

Abstract

Taking an institutional perspective, in this article we develop an index of the governmental support for public private partnership (PPP) — a ‘PPP Governmental Support Index’ (GSI) — which aims to measure the extent to which national governments provide an institutional framework that is either conducive or preventive for the introduction and diffusion of PPPs within transport infrastructure and other sectors. First, based on a substantive review of the literature, we define the elements of the PPP GSI, including the policy and political commitment regarding PPPs, the legal and regulatory framework, and the presence/absence of dedicated PPP-supporting arrangements. Second, we calculate the PPP GSI for 20 European countries, cluster them and compare similarities and differences in national governmental support of infrastructure PPPs. Third, we explore the potential link between national institutional index scores and infrastructure PPP activity in the 20 countries. Lastly, we discuss the potential and usefulness of the presented PPP GSI, as well as methodological limitations, and elaborate on how this index might be utilised to strengthen future comparative research on PPP in transport and other sectors.     

Comparison of road freight transport trends in Europe. Coupling and decoupling factors from an Input–Output structural decomposition analysis

Decoupling road freight transport from economic growth has been acknowledged by the European Union as a key means to improving sustainability. It is therefore important to identify both the coupling and decoupling drivers of road freight transport demand in order to determine possible factors that may contribute to reduce road transport in the future without curbing economic development. This research proposes an Input–Output (IO) structural decomposition analysis (SDA) to explain road freight transport in terms of a set of key factors that have strongly influenced road freight demand in recent decades in European countries—such as economic growth, economic structure and the evolution of road transport intensity (including improvements in both supply and transport systems). This methodological approach allows us to quantify and compare their contribution in different European countries to either increase or decrease road freight transport demand. The empirical basis for this analysis is a dataset of nine European countries which have IO tables and road transport data available from 2000 to 2007, comprising data on domestic production, imports and exports as well as tonne-kms for 11 types of commodity classes. The results show that, as a whole, aggregate road transport demand has grown—driven mainly by economic activity—but this growth has been strongly curbed in some countries by changes in road freight transport intensity and moderately by the dematerialization of the economy. International transport has been also proven to be a key factor driving road freight transport volumes. Moreover, the increased penetration of foreign operators in national haulage markets appears to have reinforced the final decoupling levels observed in some cases.     

Highway pricing and capacity choice in a road network under a build–operate–transfer scheme

It is often argued lately that the private sector should be allowed to build and operate roads in a transportation network at its own expense, in return it should receive the revenue from road toll charge within some years, and then these roads will be transferred to the government. This type of build–operate–transfer (B–O–T) projects is currently fashionable worldwide, especially for developing countries short of funds for road construction. One of the important issues concerning a highway B–O–T project is the selection of the capacity and toll charge of the new road and the evaluation of the relevant benefits to the private investor, the road users and the whole society under various market conditions. This paper deals with the selection and evaluation of a highway project under such a B–O–T scheme. For a given road network with elastic demand, mathematical models are proposed to investigate the feasibility of a candidate project and ascertain the optimal capacity and level of toll charge of the new highway. The response of road users to the new B–O–T project is explicitly considered. The characteristic of the problem is illustrated graphically with a numerical example.     

Measuring Success of PPP Transport Projects: A Cross-Case Analysis of Toll Roads

Abstract

The aim of this paper is to measure ‘overall’ success of a public private partnership (PPP) transport projects using four case studies. All four case studies are PPP toll roads from four different EU countries (UK, Spain, Portugal and Greece). The case studies have been analysed using a manual Qualitative Comparative Analysis approach. According to the paper, three different perspectives have been used to measure the success of a project, that is, project management perspective, stakeholder perspective and contract management perspective. The ‘overall’ success has then been deduced by bringing these three perspectives together as a holistic approach. The findings are presented in the form of a matrix and the final outcome of the paper shows a simple methodological approach that can be used to measure success of a PPP transport project. Since the study takes more of a qualitative approach, researcher bias and perceptions have a major role to play in the final outcome. However, to reduce ‘biasness’, quantitative measures have also been used to quantify the Key Performance Indicators and performance measures in the case studies. It is hoped that the study makes a valid contribution to the areas of transport PPPs and performance measurement.     

Public perceptions of the use of dynamic message signs

Intelligent transportation systems have been promoted as a means to improve both the efficiency and safety of the road network. The effectiveness of advanced technologies in improving road safety has been an area of research which has thus far yielded mixed results. In order to ensure that advanced technologies deliver on their intended outcomes, more research has to be devoted to understanding road users' perceptions and reactions to these systems. This study examines drivers' perceptions of the use of dynamic message signs and their self‐reported reactions to the messages displayed. In general, drivers support the use of highway electronic boards for traffic incident reports and weather information which have an impact on traffic delays and level of service. They also think that it is a good idea to display road safety messages and to remind drivers to drive safely and be courteous on the roads. Moreover, most drivers reported that they do read and think about the messages displayed and react positively to some of the road safety messages.     

面向社会主义新农村的交通需求研究

在深入分析农村公路交通现状的基础上,结合社会主义新农村的建设,研究了社会主义新农村在公路等级及里程、客运及货物运输系统、公路养护与管理、道路交通安全防护等方面对交通的需求,提出了适应社会主义新农村建设的道路交通安全保障措施。     

浅析高速公路供配电节能技术

供配电系统是高速公路中的重要组成部分,近年来随着我国高速公路建设的迅速发展,供配电系统的电力支出费用越来越大。高速公路的供配电节能技术既要保证公路电力设施的安全性又要保证其节能性,文章针对我国高速公路供配电系统的运营现状,分析供配电节能技术,希望可以有效促进我国高速公路经济效益的增长。     

Renegotiating PPP Contracts: Reinforcing the ‘P' in Partnership

Abstract

The issue of renegotiation is becoming increasingly important as a tool to address uncertainty of public private partnership (PPP) projects and as a mechanism to restore its economic and financial equilibrium. This paper aims to understand how and why renegotiations occur in long-lasting PPP projects and what are the pros and cons of the renegotiation. We depart from a literature review on contract incompleteness and on the determinant factors for the renegotiation of infrastructure concessions. To illustrate the discussion, the case studies of nine European PPP projects are analysed by examining the specific exogenous and endogenous determinant factors that conduce to renegotiating contracts. The implications of contractual renegotiations are explained and summarized through a comparison of our case studies with literature. Although renegotiation, per se, is not a solution for the successful implementation of PPP projects, our findings reinforce the idea of contractual flexibility as a tool that allows adapting to uncertainty. Moreover, effective communication mechanisms allow a better response to unforeseen events, reinforcing the partners’ commitment to deliver a win–win project.     

A dynamic modeling approach to investigate impacts to protected and low-income populations in highway planning

Environmental justice (EJ) assessment has traditionally focused on identifying distributive effects to protected populations. Federal and State highway improvement programs have been established to stimulate economic development for these populations. While this issue has long been recognized as part of EJ initiatives, no quantitative comparisons of highway construction impacts on protected populations have been reported in the literature. This paper presents a dynamic modeling approach to investigate impacts to protected and low-Income populations in highway planning using an integrated Geographic Information System (GIS) and Genetic Algorithms (GAs) optimization framework. Using census and county level parcel data, the model integrates various socioeconomic factors into a GIS while generating highway alignments using GAs. Examples using county level census data from North Carolina are demonstrated to test the sensitivity of generated highway alignments with constrained distances from protected populations. The results indicate that it is important to consider local social and economic effects, in addition to regional planning objectives when measuring the effectiveness of feasibility studies associated with highway construction. Within the proposed modeling framework attention is directed on various EJ initiatives, such as environmental health and safety laws in minority and low-income areas. The model would help planners, designers, and policy-makers understand the intricate interrelationships among local communities, while facilitating more scientific and economically equitable planning for highway construction projects.     

Risk pricing inefficiency in public–private partnerships*

There is a drive towards delivering and operating public infrastructure through public–private partnership (PPP) rather than traditional public procurement. The assessment of the value for money achieved by the two alternative approaches rests in the cost of financing and their efficiency in delivery and operation. This paper focuses on the cost of financing, in particular the cost associated with transferring risk from the public to private sphere. If capital markets were efficient and complete, the cost of public (government) and private financing should be the same, with the relative delivery and operational efficiency remaining as the primary determinant of value-for-money. Evidence suggests, however, that the risk transfer to a PPP entails an inefficient risk pricing premium which goes beyond the direct cost of financing. We argue that a high price for PPPs results from large risk transfers, risk treatment within the private sector, and uncertainty around the past and future performance of public–private consortia. The corollary is that the efficiency gains from a PPP must be much higher than commonly expected to deliver a greater value for the money than under a traditional approach.     

TransNIEMO: economic impact analysis using a model of consistent inter-regional economic and network equilibria

We describe a model that integrates a multiregional input–output (I–O) model of the USA (for 50 States and the District of Columbia) with the national highway network. Inter-state commodity shipments are placed on a congestible highway network. Simulations of major choke-point disruptions redirect traffic which increases the costs of some shipments. Increased costs show up in higher prices which help to determine a new I–O equilibrium. We find economic and network equilibria that are consistent. The simulations show only moderate economic impacts. We ascribe this to the resilience of the highway network. The model provides State-level detail on who bears the costs of the disruptions.     

From ‘Our Air Is Not for Sale’ to ‘Airtrack’: The Part Privatization of the UK's Airspac

Air traffic in the UK has increased rapidly in the past two decades and is forecast to grow at a rate of 4.3% per annum between 1998 and 2020. The failure to develop the air traffic system in order to cope with this growth has had undesirable consequences, e.g. a rise in flight delays and near misses. Given the investment required in air traffic control systems to cater for this growth, the UK government in 2000 part privatized the National Air Traffic Services (NATS), the body in charge of the UK's airspace in a public–private partnership (PPP). The UK Airline Group acquired 46% of NATS and effective operational control, though the government retains a share in NATS and safety regulation is in the public sector. However, serious doubts about safety were raised during the debate on the PPP. Similar moves towards a commercial operation (i.e. corporatization) of air navigation services have been made in New Zealand and Canada over the past decade and these provide useful insights into the results of the corporatization process. This paper analyses the main issues surrounding the part privatization of NATS. First, it highlights the experience from New Zealand and Canada of the major issues involved in corporatized air navigation services in six different categories: funding, new technology and project management, safety, pricing regime, international opportunities, and customer responsiveness. The likely impacts for NATS given the lessons from New Zealand and Canada are considered. The UK government's provisions for the PPP and their implementation in the post‐PPP NATS are then outlined for these six categories. Finally, the 11 September 2001 terrorist attacks have had major impacts on air travel and their consequences for NATS in the six categories are highlighted. This paper concludes with some of the issues that need to be addressed to ensure the success of the PPP for NATS.     

Road Pricing models with maintenance cost

According to the Federal Highway Administration of the United States, maintenance expenditure takes up more than 25% of road revenue disbursement and this percentage has been increasing gradually. The reason for the increment in maintenance cost is that there lacks incentives for road users to take this cost component into their driving behavior. That is, different classes of vehicles should be levied different levels of congestion tax due to the different degrees of damage on the highway if a road pricing policy is implemented. This paper intends to incorporate this concept into road pricing literature by introducing two types of vehicles. After the analysis of the problem, we find that different types of vehicles should be charged different tolls. The toll includes not only the travel delay cost of one's own vehicle and the other types of vehicles, but also the marginal maintenance cost that is dependent on the traffic flow. A set of numerical examples is provided to demonstrate the theoretical analyses. The result shows that both the welfare and cost coverage rate will increase when the road pricing mechanism takes the maintenance cost factor into account.     

Integrated approach to determine highway flooding and critical points of drainage

Among the natural hazards that threaten transportation infrastructure, flooding represents a major hazard to highways as it challenges their design, operation, efficiency and safety. In extreme cases, it may lead to massive obstruction of traffic and direct damages to the road structures themselves and indirect damages to the economic activity and development of the region. To enable the prevention of such consequences, and the proposition of adaptive measures for existing infrastructure, this paper presents an integrated framework to identify the most vulnerable points to flooding along a highway. This is done through the combination of remote sensing information (e.g. LiDAR based Digital Elevation Model, satellite imagery), a high-quality dataset, and a quasi-2D hydrodynamic model. The forcing condition is defined using a hyetograph associated to a storm with duration of 1 day and return period of 100 years. The selected highway is located in the Mexican state of Tabasco, where extreme precipitation events and floods are frequent. Results demonstrate the ability of the methodology to identify critical water levels along the road (h > 1.50 m) at those locations where flooding has been experienced, as well as points of inspection for the highway drainage. These locations were visited in the field and maintenance problems were detected that do increase its level of exposure. We show that this framework is useful for the generation of a flood management strategy to the analyzed highway, which includes an optimum location of adaptive measures to an anticipated more intense future climate.