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II. Introduction

This report describes the unprecedented use of PPPs by state and local transportation authorities over the last three years and provides an update of USDOT's 2004 Report to Congress on PPPs (the "2004 Report").[15] The primary purposes of this report are: (i) to explore the growing use of PPPs by state and local transportation authorities, and (ii) to identify the advantages and disadvantages of PPPs as an alternative to traditional approaches to transportation funding and procurement.

The substance of this report is set forth in Sections III through VI. Section III defines PPPs and describes their benefits. While the 2004 Report provided a broad definition of PPPs, this report refines and focuses that definition to reflect the increasing utilization in the United States of long-term, concession-based PPPs, a subset of PPPs which have become significantly more prevalent since the 2004 Report was delivered. This section of the report then briefly describes the benefits of PPPs that have been used in the United States and abroad, which were described in greater detail in the 2004 Report.

Section IV explores the unprecedented use of long-term, concession-based PPPs in the United States since the 2004 Report. The increasing utilization of these types of PPPs is demonstrated by (i) the execution of long-term concessions to operate and maintain existing toll facilities, (ii) the procurement of concessions to design, build, finance, operate and/or maintain new highway and transit capacity and capital improvements, and (iii) state and Federal action to remove impediments to PPPs and facilitate their implementation. While PPP structures are being utilized in other industries, this report focuses exclusively on highways and transit, which were the subject of the 2004 Report.

Section V describes the advantages of PPPs as an alternative to the failings of traditional approaches to project funding and delivery. While the benefits of PPPs described in Section III reflect U.S. and international experience generally, this section of the report focuses specifically on how PPPs respond to the increasingly evident failings of traditional approaches to transportation funding and procurement in the United States.

Section VI identifies certain risks commonly attributed to PPPs, explains how prudent public sector authorities manage such risks, and indicates that PPPs and their risks must be evaluated in the context of status quo approaches to transportation funding and procurement.

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