Introduction & Background
On September 17, 2014, the Transportation and Infrastructure Committee’s Panel on Public-Private Partnerships, a special panel of the US House of Representatives, issued a report in which it made several findings and recommendations related to the use of public-private partnerships (“P3s”) in the United States. Most significantly, the Panel recommended the creation of a central office to facilitate the use of P3s by federal and state governments by simplifying and standardizing P3 procurement practices and agreements. The Transportation and Infrastructure Committee will use the Panel’s recommendations as a resource when considering future legislation.
The Panel was convened at the beginning of 2014 to examine the current state of P3s in the United States across several sectors, including transportation, economic development, public buildings, water, and maritime infrastructure. The Panel was also tasked with making recommendations for how to balance the needs of the public and private sectors in selecting projects for P3 delivery, and for developing and implementing those projects. Accordingly, the Panel conducted a series of hearings and roundtable policy discussions with public officials and industry representatives to gather information on the state of P3s in the United States.
Findings on Role of P3s
The Panel’s report noted several advantages to a P3 procurement model for public infrastructure development. Overall, the Panel found that P3 procurements have the potential to complete high-cost, complex projects more quickly than traditional procurement and financing mechanisms. In particular, the Panel noted that “the participation of the private sector in financing a project can bring discipline and efficiency to project delivery.” The Panel also found that P3 procurements can help address the tendency of the design-build procurement method to inadequately address long-term sustainability of public assets.
However, the Panel also noted certain problems with the use of P3s. For example, the Panel was careful to state that P3s are not a funding source, and are not a substitute for adequate federal funding of infrastructure. Moreover, P3s can increase financing and consulting costs due to their complex nature.
The Panel made recommendations related to three central goals deemed to be important to encouraging the use of P3s in the United States: (1) improving public sector capacity to negotiate and implement successful P3s; (2) breaking down barriers to consideration of P3s for certain projects; and (3) ensuring transparency and accountability.
Perhaps the most significant recommendation was one primarily directed at improving public sector capacity to negotiate and implement P3s. Specifically, the Panel recommended that the US Department of Transportation 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 Panel also suggested that “the Office should issue best practices on standardizing state P3 authorities and practices.” Such standardization would maximize the opportunities to gain the advantages that P3s can offer.
If implemented, the Panel’s recommendations should significantly encourage the simplification and standardization of P3 contracts. In turn, simplification and standardization will likely enable federal and state authorities to better position themselves to take advantage of the benefits offered by P3 procurement methods.