COMPARATIVE EVALUATION OF PUBLIC-PRIVATE PARTNERSHIPS IN ROADWAY PRESERVATION Panagiotis Ch. Anastasopoulos, Ph.D. Mouyid Bin Islam, Ph.D. Candidate Matthew Volovski, Ph.D. Candidate Jarrett Powell, MSCE Samuel Labi, Ph.D. 97 th Annual Purdue Road School March 8-10, 2011, West Lafayette, Indiana

2 Introduction Global changes in Roadway Preservation Global changes in Roadway Preservation Seeking new contracting methods: Seeking new contracting methods: – Reduce overall costs – Manage risks – Improve level of service Problem: Problem: – Should an agency adopt a PPP? – If so, which PPP approach? – How to implement the PPP? Objective/Scope of this Study: Objective/Scope of this Study: – Performance comparison of different contracting approaches Cost savings likelihood and intensity Cost savings likelihood and intensity – Framework for PPP evaluation Comparative Evaluation of Public-Private Partnerships in Roadway Preservation 97 th Annual Purdue Road School, March 8-10, 2011, West Lafayette, Indiana

3 PPP Approaches PPPs in transportation PPPs in transportation: – contractual agreements between public agencies and private sector to allow for greater private participation in delivery of transportation projects Project Delivery Approaches: Project Delivery Approaches: – In-house – Traditional (Design-Bid-Build) – Design-Build (-Operate-Maintain-Warrant-etc.) – Warranties – Cost-plus-Time (A+B Bidding) and Incentives/Disincentives (I/D) – Lane Rentals – Performance-Based Contracting (PBC) Comparative Evaluation of Public-Private Partnerships in Roadway Preservation 97 th Annual Purdue Road School, March 8-10, 2011, West Lafayette, Indiana

4 Some Pros & Cons  Traditional -Design-Bid-Build -Most Popular Method -Contractors are paid for what they “do” Advantages :  “This is how we‘ve been doing it !”  Cost savings  Better Quality Limitations :  Sluggish mechanism  Risk managed by the Agencies  Dispute on produced quality Design Contractor 1 Construct Contractor 2 Comparative Evaluation of Public-Private Partnerships in Roadway Preservation 97 th Annual Purdue Road School, March 8-10, 2011, West Lafayette, Indiana

5 Some Pros & Cons (cont.)  Design-Build (-Operate-Maintain-Warrant) D-B Advantage/Limitation :  Reduction in the overall project duration DesignConstruct Same Contractor Maintain Lower Quality Comparative Evaluation of Public-Private Partnerships in Roadway Preservation 97 th Annual Purdue Road School, March 8-10, 2011, West Lafayette, Indiana

6 Some Pros & Cons (cont.)  Warranties -If the product fails, the contractor has to repair and/or replace the product  Lane Rental - - Agency charges the Contractor with a fee (hourly, daily, etc.) for lane closure Warranties Advantages :  High Quality to reduce future maintenance and repair costs Warranties Limitations :  Contractors refuse to use Warranties because of high risk Lane Rental Advantages :  Very high CMO* time reduction Lane Rental Limitations :  Lack of experience *CMO = Construction/Maintenance/Operation Comparative Evaluation of Public-Private Partnerships in Roadway Preservation 97 th Annual Purdue Road School, March 8-10, 2011, West Lafayette, Indiana

7 Some Pros & Cons (cont.)  Cost-Plus-Time (A+B Bidding) A+B Bidding Advantages :  Overall completion time reduction (due to I/D) A+B Bidding Limitations :  Because of the time dimension, few contractors bid I/D *CMO = Construction/Maintenance/Operation Comparative Evaluation of Public-Private Partnerships in Roadway Preservation 97 th Annual Purdue Road School, March 8-10, 2011, West Lafayette, Indiana Bid Time Cost Initial CMO* Cost

8 Some Pros & Cons (cont.)  Performance-Based Contracting (PBC) -Minimum conditions of road assets have to be met by the contractor -Payments (uniform, per year) are based on the level that the contractor meets the performance standards (PS)  PBC Advantages -Life Cycle Cost reduction -Quality improvement  PBC Limitations -Lack of experience -Not adequate PS => No desired results Comparative Evaluation of Public-Private Partnerships in Roadway Preservation 97 th Annual Purdue Road School, March 8-10, 2011, West Lafayette, Indiana

9 Criterion for Evaluation - Cost Savings Cost Savings  How do we determine Cost Savings ? where, – %C S is the percent cost savings of the PPP contracting approach under consideration, relative to the corresponding in-house approach – C A is the cost of project carried out using a PPP contracting approach – C B is the cost of a similar project carried out in-house Comparative Evaluation of Public-Private Partnerships in Roadway Preservation 97 th Annual Purdue Road School, March 8-10, 2011, West Lafayette, Indiana

10 Data and Estimation Issues Comparative Evaluation of Public-Private Partnerships in Roadway Preservation 97 th Annual Purdue Road School, March 8-10, 2011, West Lafayette, Indiana  Data  Data from 570 contracts let or completed in US and abroad: – in Africa, Asia, Europe, North and South America, and the Pacific – between 1996 and 2007 (inclusive)  The data were collected from internet resources and a number of transportation agencies in the US and abroad  Project costs  Project costs were converted and expressed in 2006 USD prices (Price Trends for Federal-Aid Highway Construction)  Spatial transferability YES  Spatial transferability between US and international contracts ? YES (using likelihood ratio tests)

11 Model Results 14 Models 14 Models – 7 Binary Probit Models predicting the Likelihood of Cost Savings (1 for each PPP approach) – 7 Linear Regression Models predicting the Intensity of Cost Savings calculated as a percentage (1 for each PPP approach) Comparative Evaluation of Public-Private Partnerships in Roadway Preservation 97 th Annual Purdue Road School, March 8-10, 2011, West Lafayette, Indiana

12 Significant Factors Affecting Cost Savings Likelihoods and Amounts: Significant Factors Affecting Cost Savings Likelihoods and Amounts: – Contract duration – Contract length – In-house cost – Activities: Model Results Illumination/Electrical system maintenance Illumination/Electrical system maintenance Landscape or vegetation/ control Landscape or vegetation/ control Litter removal Litter removal Rest areas maintenance Rest areas maintenance Mowing Mowing Emergency facilities maint. Emergency facilities maint. Bridge-Tunnel Bridge-Tunnel Culvert-Gutters-Drainage Culvert-Gutters-Drainage Pavement repair Pavement repair Crack sealing Crack sealing Pothole repair Pothole repair Shoulder repair Shoulder repair Guardrail repair Guardrail repair Comparative Evaluation of Public-Private Partnerships in Roadway Preservation 97 th Annual Purdue Road School, March 8-10, 2011, West Lafayette, Indiana

13 Paradigms Contract Characteristics: Contract Duration (in years)1year Contract Length (in lane-miles)10la-mi In-house Cost (in USD)100,000USD Activities: Drainage Included Pavement repair Included Shoulder repair Included Guardrail repair Included Trad. Maint. Trad. Rehab. Design- Build- … PBC Lane Rentals War- ranties A+B+I/D Predicted Likelihood of Cost Savings Predicted Intensity of Cost Savings 3.4%1.2%5.6%9.4%3.8%-3.2%7.1% Comparative Evaluation of Public-Private Partnerships in Roadway Preservation 97 th Annual Purdue Road School, March 8-10, 2011, West Lafayette, Indiana

14 Paradigms (cont.) Contract Characteristics: Contract Duration (in years)10years Contract Length (in lane-miles)100la-mi In-house Cost (in USD)1,000,000USD Activities: Crack Sealing Included Pavement repair Included Shoulder repair Included Culvert-Gutter Included Rest areas maintenance Included Litter removal Included Illumination Included Trad. Maint. Trad. Rehab. Design- Build- … PBC Lane Rentals War- ranties A+B+I/D Predicted Likelihood of Cost Savings Predicted Intensity of Cost Savings 1.9%1.7%0.8%16.7%5%-11.7%7.7% Comparative Evaluation of Public-Private Partnerships in Roadway Preservation 97 th Annual Purdue Road School, March 8-10, 2011, West Lafayette, Indiana

15 Paradigms (cont.) Contract Characteristics: Contract Duration (in years)20years Contract Length (in lane-miles)800la-mi In-house Cost (in USD)20,000,000USD Activities: Pothole repair Included Pavement repair Included Drainage Included Culvert-Gutter Included Guardrail repair Included Rest areas Included Mowing Included Trad. Maint. Trad. Rehab. Design- Build- … PBC Lane Rentals War- ranties A+B+I/D Predicted Likelihood of Cost Savings Predicted Intensity of Cost Savings 3.7%2.3%-3.7%18.3%7.5%-14%11% Comparative Evaluation of Public-Private Partnerships in Roadway Preservation 97 th Annual Purdue Road School, March 8-10, 2011, West Lafayette, Indiana

16 Framework for PPP implementation Comparative Evaluation of Public-Private Partnerships in Roadway Preservation 97 th Annual Purdue Road School, March 8-10, 2011, West Lafayette, Indiana

17 Framework for PPP implementation (cont.) Comparative Evaluation of Public-Private Partnerships in Roadway Preservation 97 th Annual Purdue Road School, March 8-10, 2011, West Lafayette, Indiana

18 Conclusions and Future Work Important to have a plan when going for a PPP Cost Savings can be achieved by some PPP approaches under certain conditions Need for better explanation of the factors affecting the likelihood and amount of PPP cost savings Need to study the level of service under different PPP approaches Comparative Evaluation of Public-Private Partnerships in Roadway Preservation 97 th Annual Purdue Road School, March 8-10, 2011, West Lafayette, Indiana

Thank You! COMPARATIVE EVALUATION OF PUBLIC-PRIVATE PARTNERSHIPS IN ROADWAY PRESERVATION Panagiotis Ch. Anastasopoulos, Ph.D. Mouyid Bin Islam, Ph.D. Candidate Matthew Volovski, Ph.D. Candidate Jarrett Powell, MSCE Samuel Labi, Ph.D. 97 th Annual Purdue Road School March 8-10, 2011, West Lafayette, Indiana ACKNOWLEDGEMENTS This work was supported by the Joint Transportation Research Program administered by the Indiana Department of Transportation (DOT) and Purdue University, and the Nextrans Center. The authors thank the following executives for providing contract data and for useful information: Mike Bowman, Scott Trammel, John Burkhardt, Todd Shields, Scott Newbolds, Joe Lewien, Mark Miller, John Morton, Bill Tompkins and Dennis Belter of INDOT, Frank T. Richards of Alaska DOT, Susan J. Berndt, Hope Jensen, Nancy Worline and Steven Lund of Minnesota DOT, Lance Davis, Audry Reeves and Steve Foskey of Polk County, Florida, Larry Buttler, Tammy Booker Sims, Bob Blackwell and Kerry Hardy of Texas DOT, Diane L. Mitchell, Dick Kiefer, Roy A. Thacker and Robert Prezioso of Virginia DOT, Gary Stebbins from E+B Paving Inc., Ted Lucas from Milestone, Stove Koble from Brooks Construction Co., and Keith Rose from Rieth-Riley. The authors also thank Kumares C. Sinha, Fred L. Mannering, Srinivas Peeta, Bob G. McCullouch, Gunter Zietlow, and Pekka Pakkala for their helpful suggestions and comments. The contents of this paper reflect the views of the authors, who are responsible for the facts and the accuracy of the data presented herein, and do not necessarily constitute a standard, specification, or regulation.