The 2nd International symposium in Freeway and Tollway Operations was held in Honolulu, Hawaii from June 21-24, 2009. More than 200 experts specializing in freeway and tollway operations gathered from around the world to share their research knowledge and experiences. These series of articles summarize some of the major presentations with useful lessons for Hawaii. This is article 4 of 10.
One major hurdle that transportation agencies in the United States face is fiscal challenges caused by the growing gap between the cost of preserving and expanding highway infrastructure and available highway program funding. Due to this, it is essential to find alternate ways to finance and deliver needed transportation infrastructure. Public private partnerships (PPP) are an appropriate option for bridging the existing gap on funding.
The concept of PPP in the US transportation industry emerged as a major financing option in the mid 1990s with the Dulles Toll Road in Virginia, the SR-91 tolled express lanes in California, and Terminal 4 of the JFK Airport. PPP gained more attention from the government, especially with regards to expressways which require large financing for construction, operation and maintenance.
PPPs were the subject of one technical session at the 2nd International Symposium on Freeway and Tollway Operations. Barney Allison from NOSSAMAN LLP, highlighted on the design/bid/build/operate approach which has been applied in the majority of toll road projects within the US.
Some of the advantages are the capturing of innovative ideas from the private sector, early and timely delivery of the project, low risk, and efficient life cycle cost. Allison also mentioned that choosing an approach depends on factors such as the perceptions of investors and the prevailing policies and plans of the federal and state government. This difference is due to variable levels of risk bearing capacity based on different situations or involved groups.
The PPP agreement can also be an important safety tool for sharing risk, rewards and other benefits of the project between all the involved parties. It is also quite important, especially when the relationships among the contracting parties break down. Two common approaches are concession and availability payment.
Concession is a contracting approach where a single or group of parties is given control over multiple aspects of a project, such as operations and maintenance. In this approach, the roles and responsibilities of each individual party must be clearly defined. Usually, the public owner is responsible for the monitoring of the project and the private counterpart is responsible for the execution. North Tarrant Express, I-63, SH 130 and SH 121 in Texas, SR 125 and SR 91 in California, Dulles Greenway and Pocahontas Parkway in Virginia are examples of tollways operating under this contractual approach.
The second approach is the availability payment contract. In this approach, the public sector provides a payment to the private counterpart upon successful delivery and operation of the project. The payment is as agreed to in the contract, though payments can be reduced as a penalty if the private partner fails to maintain performance as specified in the contract. In short, this approach to PPP contracting is based on the performance of work with respect to quality, safety, lane availability, environmental provisions etc.
The I-595 tollway in Florida is an example of a PPP project operating under this approach. A specific formula was developed and used for the calculation of annual and quarterly maximum availability payment, with adjustments for the prevailing inflation rate. A planned maintenance schedule was included as part of the contract. A clear procedure for changing or developing new maintenance schedules was defined in the contract to avoid future conflicts.
Another important component of PPPs is the integration of activities. Many different components of a project, such as the design, construction, maintenance toll/fare collection, operation and maintenance of services can be integrated to fall under the jurisdiction of a single party.
Key technical parameters and performance indicators are also important features in PPP projects. These parameters help monitor activities relating to quality, time frame and other relevant pre-defined standards. Annual or quarterly payment to the concerned party, coordination mechanism, reporting mechanism and other relevant administrative procedures are then based on those parameters and standards. Provisions are also made in case of non-compliance of those pre-set technical standards.
In Hawaii, legislation has not been passed to allow the collection of tolls from users, or to enable a variety of PPPs. Hawaii law has provision allowing design-build contracts but this is an elemental form of PPP that includes no private financing. PPP funded high-occupancy toll or tolled expressway lanes could be good options to accommodate increasing congestion in Honolulu. Allowing the PPPs to utilize dynamic toll pricing (higher tolls during peak periods and lower tolls during the off peak periods) on newly-constructed HOT or express lanes, could help reduce congestion by adding and efficiently utilizing new roadway facilities.
Laxman KC is candidate for the Master’s degree in Civil Engineering at the University of Hawaii at Manoa.
