Public Private It’s not Rocket Science! or Don’t Walk Away Renée or Process  Profit  Paradox Partnerships

2 Public Private Partnerships What are they? … contractual agreements formed between a public agency and a private sector entity that allow for greater private sector participation in the delivery and financing of transportation projects. (FHWA) Why are they important? Each entity brings different strengths to the partnership which, when combined, can lead to more successful projects delivered in a more timely fashion.

3 Types (Involvement Levels) of PPPs Private contract fee services Operating and/or maintenance agreements Joint Development Includes property owned by public entity Alternative project delivery approaches Design-build Design-build-operate-maintain (DBOM) Design-build-finance-operate-maintain (DBFOM) Long-term lease or concession agreements Most intensive private sector involvement

4 Trends Public sector interest in PPPs is increasing Agencies are gaining more experience Outcomes will improve as agencies: Refine procurement process Reduce private sector risk Increase private sector participation rates But there are problems, more on the horizon Optimum PPP results are rarely approached Leverage shifting toward the private sector PPPs will NEVER be a silver bullet; they are oversold

5 Public Sector Strengths: Responds to competing political constituencies Enjoys powers not available to private companies Legal authority to operate on public property Eminent domain Weaknesses: Slow and often inefficient procedures Insufficient financial resources Rail experience often limited

6 Private Sector Strengths: Responds well to marketplace incentives Can react more quickly to changing conditions More focused on ‘finishing the job’ Weaknesses: Profit motive may conflict with the ‘public interest’ Impatient with lengthy, public involvement process

7 Pitfalls The public sector often promotes PPPs as the best way to deal with declining resources: Declining staff levels Declining financial resources Little or no in-house expertise left However … A successful PPP still requires significant agency staff time and attention to detail

8 Pitfalls (Continued) The public sector often sees PPPs as a way to push decision-making onto the private partner Lack of detail in RFPs Unclear objectives Limited or no performance measures in many Too many measures in others However … A well-defined RFP reduces risk to the private party: Encouraging more firms to bid Bringing down overall cost Increasing benefits

9 Pitfalls (Concluded) The private sector often sees PPPs as a way to make a ‘fast buck’ Uncompromising attitude: Scope Methods Fees Schedule However … Flexibility promotes successful outcomes

10 PPP Success A successful partnership requires that: Each partner acknowledge the needs of the other Accommodate in some fashion its own needs Agencies Recognize need for continuous, meaningful progress Private partners Recognize the need to support political process Consultant support can help ‘bridge the gap’

11 Consultant Role (Agency Side) Fills gaps in agency staff Expertise in specific areas (e.g. rail) Experience from similar projects Better understanding of private sector Help with procurement process Do 1,000 page RFPs result in better projects ?

12 Consultant Role (Private Sector) Brings understanding of agency perspective Importance of process Avoidance of critical relationship errors Help navigate the public planning process Boutique technical expertise: Railroad negotiations Railroad operations planning Other

13 A Good Consultant (Agency Side) Possesses an in-depth understanding of: The private railroad industry High-speed passenger service Public transit Provides specialized expertise in: Engineering Operations Economics Passenger perspective Market Analysis Proven ability to negotiate with railroads

14 A Good Consultant (Private Sector) Understands the public planning process: FRA procedures and regulations FTA planning process NEPA requirements Is experienced working with public agencies: Wide variety of projects Projects in many areas of the country Different types of public agencies

15 Consultant Role Agency benefits: Help agency understand private sector needs Represent agency interests Private partner benefits: Understands the agency perspective Represent private party’s interests

16 Summary PPPs likely will continue to be important Project partners will often: Have conflicting interests Misunderstand each other’s priorities Not recognize the other party’s limitations An experienced consultant can: Provide specialized expertise Provide perspective Keep the project moving forward Improve chances of attaining public objectives without sacrificing private sector returns