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Panel offers guidance on private involvement in infrastructure

Sept. 17, 2014

A special panel established by the U.S. House Transportation & Infrastructure Committee on Wednesday released a report recommending numerous steps to improve the effectiveness of public-private partnerships (P3s) in improving transportation infrastructure in the United States. The panel’s recommendations could be incorporated into the next transportation bill, which could be enacted next year. The current transportation program authorization expires at the end of May 2015.

Headed by Rep. John Duncan (R-TN), the special panel emphasized that while P3s can play an important role in infrastructure development, they are not a substitute for adequate federal investment and are best suited to “certain high-cost, technically complex projects” that are difficult to execute through traditional procurement and financing mechanisms.

The panel, which was created in January, conducted two hearings and held seven policy roundtable discussions centering on the use of P3s in various modes of transportation, including highways. Its report focuses on three central themes: Using P3s to pursue public sector capacity; breaking down barriers to considering P3s and ensuring transparency and accountability in P3s.

To improve public sector capacity, the panel recommends that:

  • DOT establish a Transportation Procurement Office to work with the modal agencies, states and other grant recipients on implementing design-bid-build, design-build, and P3 procurement best practices, including P3 model contracts
  • The Transportation Procurement Office develop and institute project delivery performance standards for design-bid-build, design-build, and P3 procurements of infrastructure projects
  • State departments of transportation be required to compile and submit annual reports on project procurement performance for projects receiving federal funds
  • DOT encourage the simplification and standardization of P3 contracts
  • DOT work with other federal agencies and state and local governments to share lessons learned relative to P3s
  • States coordinate with one another to share lessons learned by early adopters and consider establishing stand-alone state P3 offices to look at broader partnerships to achieve common infrastructure objectives
  • P3 partnerships should be established early in the project delivery process to conduct stakeholder outreach to build community consensus

To break down barriers to consideration of P3s, the panel recommends that:

  • The Transportation Infrastructure Finance and Innovation Act (TIFIA) program be continued to provide credit assistance to projects of national and regional significance
  • Congress to review Private Activity Bond (PAB) eligibility to support infrastructure P3s
  • DOT report to Congress on the approval process for innovative financing tools at DOT and recommend ways to achieve efficiencies in the processes without diminishing federal oversight
  • Statutory authority be clarified to allow states to use federal-aid highway funds to ensure robust competition in P3 procurements
  • Budgetary scoring rules for commercially-leased office space be reviewed and modified to enable operating lease treatment of long-term leases and fixed-priced, below market purchase options
  • Existing lease authorities and Office of Management and Budget (OMB) budgetary scoring procedures be used to proceed with long-term ground lease/lease back arrangements where the federal government retains ownership of leasehold improvements at the end of the ground-lease term

And to ensure transparency and accountability in P3s, the panel recommends that:

  • DOT require sponsors of any P3 project that includes federal investment (grants, loans, or tax incentives) to conduct and make publicly available a detailed Value for Money (VfM) or similar comparative analysis prior to deciding to advance the project using P3 procurement
  • The key terms and conditions of a proposed P3 agreement that includes federal investment be made available to the public at an appropriate time in the decision-making process
  • Project sponsors conduct a review (within three years of construction completion or revenue service of the project) of any project procured though a P3 that includes federal investment and make publicly available information regarding whether the private partner is meeting the goals and terms of the P3 agreement for that project
  • Federal agencies provide, at the time of the commitment of federal funds to any project procured as a P3, a detailed summary of the total federal investment (grants, loans, or tax incentives) in the project
About the Author

Avery Vise | Contributing editor

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