Guidebook for P3 Projects’ Arrangements and Performance Metrics

The infrastructure in the United States, as in many other countries, is aging and limited public funds are available to maintain the current infrastructure and foster future growth. A potential mechanism to finance a portion of the ongoing transportation infrastructure needs is public-private partnerships (P3). A P3 is defined as a contract between the public and private sectors for the delivery of a project or service in which the private partner provides the majority of the necessary financing. There are many examples of successful P3s in the United States and in other parts of the world. In recent years, establishment of the USDOT Build America Bureau and enabling legislation in many states have facilitated implementation of P3 projects in the transportation sector. However, the selection of P3 implementation, just like any other project delivery methods is driven primarily by the goals and objectives of the DOT and the specific project. DOTs are still faced with many challenges in aligning these goals and objective to the delivery methods of choice. In addition, once a project delivery selection is made, monitoring project performance over the length of the project, given this decision becomes vital for assessing and improving future projects’ performance and delivery decisions.

Performance metrics in P3 projects should address the public client’s overall strategic plan and mission objectives, as well as overall quality and performance of a given asset. These performance metrics should include key indicators of travel time reliability, safety, overall project physical condition, as well as other project elements. Despite the importance of performance metrics, knowledge is relatively limited about the most effective practices for selecting metrics, setting metrics performance levels, and reasonable approaches to deductions and/or point systems for failure of the Concessionaire to meet contract requirements, that ultimately align with the DOT’s goals and objectives. The objective of this project is, thus, to develop a structured decision-making model for DOTs on implementing an effective P3 project from inception to operations, that is driven by the DOT goals and priorities, and assessed by performance metrics pertinent to the selected P3 arrangement (from availability payments, to sharing revenue, to full privatization, among others). The decision-making model should take into consideration factors such as various P3 arrangements and financing options and resources and time constraints._ Based on the results of this study, a guidebook will then be developed to provide information on practices that may assist in selecting various P3 arrangements, as well as assessing the project using key performance metrics that align with the project goals and objectives._

The proposed research should address the following questions:

· What are the different arrangements of P3s used in the transportation industry? What are the key selection parameters for each, in light of DOTs’ project goals and objectives?

· What are the key performance metrics for P3 projects? How can they be measured? How effective are they?

· What are effective ways to tie performance metrics to payment mechanisms (i.e. lane availability, route performance, condition criteria, safety performance, unplanned events, etc.) to the P3 contractor?

· If the P3 concessionaire does not comply with performance standards, what actions (e.g., nonconformance reports, penalty point notices, etc.) should be taken?

· If the P3 concessionaire maintains or exceeds the level of performance specified for the majority of the contract term, what incentives, if any, should be provided?

· What techniques have been used to avoid and resolve disputes? Which have been most effective and which have been less effective?

The purpose of this project is to (1) investigate the different P3s arrangements used in the transportation industry, and link them to DOTs’ project goals and objectives, (2) examine performance metrics for P3 projects used by DOTs, as well as other countries in the delivery of transportation infrastructure; (2) document lessons learned; and (3) make implementation recommendations that will improve U.S. policy and practice. This project will produce an empirical guide based on effective practices regarding selection of performance measures for P3 projects, and provide guidance on selecting different P3 arrangements/structures given DOT goals and objectives, as well as effective practices for implementing performance measures.

Specific tasks of the research to accomplish the main objective include:

· – Conduct comprehensive literature review of studies related to P3 arrangements, how they are linked to DOTs and projects' goals and objectives, as well as to performance measurement.

· – Benchmark the state-of-the-practice, across the various transportation agencies, related to P3 selection choices and establishing project performance metrics for P3 projects.

· – Prepare a research work plan that describes the details of the research methodology and methods for identifying effective practices and developing conclusions.

· – Conduct representative detailed case studies on current and completed P3 projects to identify selection mechanisms and constraints, as well as effective performance measurement practices and lessons learned.

· - Execute the research work plan and prepare an interim research report that articulates the data collection and analysis, as well as emerging conclusions, effective practices, lessons learned; develop a proposed outline for the guidebook, the case study report and draft language.

· - Publish the guidebook to assist DOTs in implementing an effective P3 project from inception to operations, that is driven by the DOT goals and priorities, and assessed by performance metrics pertinent to the selected P3 framework and based on proven effective practices.

· - Prepare a final research report detailing the complete results of the research.

During the development and operation phases of a project, performance metrics will be compared with established performance objectives that serve as a baseline, to determine how successful organizations (and the private sector partner) have been in attaining project objectives. The payoff of this research will be improved decision making for DOT on various P3 arrangements, as well as administration and control of P3 projects, which ultimately will result in higher public satisfaction. The guidelines will become available to transportation agencies through the traditional NCHRP distribution processes.