FHWA Research And Technology Evaluation: Public-Private Partnership Capacity Building Program

1. Introduction

1.1 Evaluation Purpose

The Federal Highway Administration (FHWA) has initiated an effort to evaluate their Research and Technology (R&T) Development Program. Leaders of governmental transportation R&T programs need to be able to effectively communicate the impacts of their programs. The R&T evaluation program helps FHWA assess how effectively it is meeting its goals and objectives and provides useful data to inform future project selections. For each evaluation, the FHWA’s R&T Evaluation Program evaluation team (referred to as the “evaluation team” throughout this report) is made up of non-FHWA, third-party evaluators not involved in the research programs and projects being evaluated. The FHWA Center for Innovative Finance Support (formerly the Strategic Delivery Team in the Office of Innovative Program Delivery (IPD)) identified the Public-Private Partnership (P3) Capacity Building Program (P3 Program) as one of its efforts to be evaluated. The purpose of this evaluation is to understand how the P3 Program helps transportation practitioners build knowledge and technical expertise on P3s that inform decisions related to the consideration, development, and implementation of P3 projects.

The Center for Innovative Finance Support’s P3 Program addresses the FHWA R&T Agenda through the following three objectives:⁽⁵⁾

1. Conduct research in the areas of financial stewardship and innovative program delivery.
2. Develop innovative procurement and revenue generation tools and technical resources.
3. Build technical expertise at the Federal, State, and local levels in the use and stewardship of innovative program delivery methods and programs.

Through these objectives, the P3 Program seeks to improve the state of the practice regarding the consideration and use of P3s. The P3 Program researches and reports on P3 methods, develops tools and technical resources to guide P3 consideration and use, and helps the transportation community build expertise through education programs and technical assistance in support of these objectives.

The evaluation team identified four hypotheses for the P3 Program evaluation through initial discussions with members of the R&T Evaluation Team and P3 Program staff. An iterative series of discussions led to the development of the P3 Program logic model (see section 2.1), which identifies the inputs, activities, and outputs from the program that produce short-term outcomes and long-term impacts. These hypotheses are detailed in table 1 below.

1.2 Report Structure

Section 1 provides an overview of the purpose of the evaluation and a high-level description of the P3 Program.

Section 2 describes the evaluation methodology, including data sources, data collection methods, and data analysis methods.

Section 3 summarizes the depth and breadth of the P3 Program’s usage.

Section 4 summarizes the findings of the evaluation. This section is broken down into four sections based on the evaluation hypotheses.

Section 5 describes the evaluation team’s recommendations for the P3 Program based on the findings of the evaluation. The recommendations are proposals that the evaluation team developed to address certain findings about the program.

Section 6 contains general conclusions that the evaluation team drew from the evaluation.

1.3 P3 Program Background

Origins of the P3 Program

FHWA established the IPD in October 2008 and restructured it in May 2016. Under its prior structure, the mission of IPD was to expand State and local government capacity to consider, evaluate, and exercise appropriate stewardship in implementing alternative strategies for funding and financing transportation infrastructure.⁽²⁾ IPD promoted innovative financing strategies to help overcome resource constraints, address energy and environmental considerations, and promote efficiencies in transportation project delivery.⁽²⁾ P3s are one of the innovative strategies supported.

P3s differ from traditional methods of procuring and financing highway projects where the public sector maintains responsibility for each project phase. In P3s, a private entity assumes responsibility for some combination of the design, construction, financing, operations, and maintenance of an infrastructure project. Proponents claim that the private entity’s financial stake increases motivation for effective management of costs, schedule, and risks.⁽⁴⁾

To improve the transportation community’s understanding of the structure, development, and implementation of P3s, IPD launched the P3 Toolkit in June 2013. The P3 Toolkit is an educational resource consisting of analytical tools and guidance documents that assist those exploring, developing, and implementing P3s. The P3 Toolkit addresses Federal requirements related to P3s and covers four key phases in P3 development and implementation: legislation and policy, planning and evaluation, procurement, and monitoring and oversight. The toolkit forms the base of a broader P3 Program, which includes a curriculum of training courses and webinars.

The P3 Program is part of the newly formed Center for Innovative Finance Support in IPD. The center provides tools, expertise, and support for financing to help the transportation community explore and implement innovative strategies to deliver costly and complex infrastructure projects.FHWA encourages the consideration of P3s in the development of transportation improvements. The increased involvement of the private sector can bring creativity, efficiency, and capital to address complex transportation problems facing State and local governments.

P3 Toolkit Resources

The P3 Toolkit consists of fact sheets, publications, analytical tools and checklists, and outreach and training materials.

Fact sheets are short documents (1–2 pages) presenting a high-level overview of key topics covered in the P3 Toolkit. Fact sheet topics include the following:⁽⁶⁾

• FHWA P3 Toolkit.⁽⁴⁾
• Analytical Studies for Public-Private Partnerships.⁽³⁾
• Risk Valuation and Allocation for Public-Private Partnerships.⁽⁷⁾
• Conducting Procurements for Public-Private Partnerships.⁽⁸⁾
• Value for Money Analysis for Public-Private Partnerships.⁽⁹⁾
• Monitoring and Oversight for Public-Private Partnerships.⁽¹⁰⁾
• Financial Structuring of Public-Private Partnerships.⁽¹¹⁾
• Benefit-Cost Analysis for Public-Private Partnerships.⁽¹²⁾

Publications are a collection of documents that inform P3 consideration, development, and implementation, building on overviews provided in the fact sheets. Publications include the following:

• Primers introduce decisionmakers and practitioners to P3s as a financing alternative for major capital projects, educating them on the development and evaluation activities involved when considering these arrangements. Four of these primers include the following:
  • – Establishing a Public-Private Partnership Program.⁽¹³⁾
  • – Financial Structuring and Assessment for Public-Private Partnerships.⁽¹⁴⁾
  • – Risk Assessment for Public-Private Partnerships: A Primer.⁽¹⁵⁾
  • – Value for Money Assessment for Public-Private Partnerships.⁽¹⁶⁾
• Guidebooks provide advanced information on P3s to practitioners as they undertake the P3 evaluation process. Four of these guidebooks include the following:
  • – Guidebook for Risk Assessment in Public Private Partnerships.⁽¹⁷⁾
  • – Guidebook for Value for Money Assessment.⁽¹⁸⁾
  • – Guidebook on Financing of Highway Public-Private Partnership Projects.⁽¹⁹⁾
  • – Benefit-Cost Analysis for Public-Private Partnership Project Delivery: A Framework.⁽²⁰⁾
• Contract development guides are available to assist practitioners during the P3 procurement process. Four of these contract development guides include the following:
  • – Availability Payment Concessions Public-Private Partnerships Model Contract Guide (Draft).⁽²¹⁾
  • – Model Public-Private Partnership Core Toll Concession Contract Guide—Final (Part 1).⁽²²⁾
  • – Model Public-Private Partnerships Toll Concessions Contract Guide—Draft Addendum (Part 2).⁽²³⁾
  • – Public-Private Partnerships: Labor Best Practices (Draft).⁽²⁴⁾
• Oversight documents provide an overview of Federal-aid stewardship and oversight practices for P3s and include the following:
  • – Public-Private Partnership Oversight: How FHWA Reviews P3s.⁽²⁵⁾
  • – Predevelopment Costs for Public-Private Partnership Projects—Federal-aid Highway Program Eligibilities.⁽²⁶⁾
• There are currently two discussion papers available detailing specific aspects of the P3 process, including the following:
  • – Revenue Risk Sharing for Public-Private Partnerships.⁽²⁷⁾
  • – Use of Performance Requirements for Design and Construction in P3s.⁽²⁸⁾
• There are currently two informational reports available detailing specific aspects of the P3 process, including the following:
  • – Report on Highway Public-Private Partnership Concessions in the United States.⁽²⁹⁾
  • – Successful Practices for P3s.⁽³⁰⁾

Analytical Tools and Checklists

Analytical tools, such as the P3-VALUE 2.0 Analytical Tool, and checklists are available for practitioners to aid in understanding the process and concepts of procuring and conducting P3s:

• Checklists identify the different factors and analytical processes involved in making key decisions regarding potential P3 procurements (e.g., P3-Screen Supporting Guide).⁽³¹⁾
• The P3-VALUE 2.0 Analytical Tool is a Microsoft® Excel-based tool that helps practitioners better understand the concepts, inputs, key assumptions, and outputs of P3 evaluations that are used to compare the aggregate financial benefits and costs of a P3 alternative with those of traditional procurement.

The original P3-VALUE Tool presented a simplified example of the P3 evaluation process to help practitioners understand what goes into this complex activity. Version 2.0 of the P3-VALUE Analytical Tool presents an updated process with enhanced P3 evaluation modules, including benefit–cost analysis. The current version was released in January 2016 and includes the following modules:⁽³²⁾

• The Risk Assessment component assists the user in understanding the process used for identifying, defining, valuing, and allocating risks. The outputs from this component are used as inputs into the Value for Money, Benefit–Cost, and Financial Viability components.
• The Value for Money Analysis component assists the user in understanding the process used for conducting an evaluation of the financial impacts of P3 delivery in comparison with conventional delivery.
• The Benefit–Cost Analysis component assists the user in understanding the process used for conducting an evaluation of the societal impacts of P3 delivery in comparison with conventional delivery.
• The Financial Viability Analysis component assists the user in understanding the process used for conducting an evaluation of the affordability to the public agency of P3 delivery option and the conventional delivery option.

The P3-VALUE 2.0 Analytical Tool is supported by a guide that provides information on the concepts behind the tool modules as well as a Quick Start Guide and Frequently Asked Questions (FAQs).^(33,34)

Outreach and training activities bring the resources of the P3 Program directly to transportation practitioners. Outreach and trainings were designed to educate the transportation community on P3s and support the use of the P3 Toolkit.

The following series of webinars was developed to help practitioners understand the P3 evaluation process and the application of the P3-VALUE tool to this process:

• “Introduction to Public-Private Partnerships.”⁽³⁵⁾
• “Evaluating P3 Options: An Overview.”⁽³⁶⁾
• “P3 Project Risk Assessment.”⁽³⁷⁾
• “Value for Money Analysis.”⁽³⁸⁾
• “Financial Viability Assessment.”⁽³⁹⁾
• “Project Delivery Benefit-Cost Analysis.”⁽⁴⁰⁾

The P3-VALUE 1.0 webinar series was conducted twice, once in 2013 and once in 2014, and an updated series for P3-VALUE 2.0 was delivered in early 2016. A brief description of the webinar series offered is described as follows:

• The P3 Program team developed a series of training sessions for interested State, regional, and local governments. The trainings provide information and tools to government officials and agencies looking to better understand how to develop and evaluate P3 proposals. The trainings are tailored to meet the needs of each requesting agency and can include any of the following six modules:⁽⁴¹⁾
  • – Module 1: P3 Evaluation Overview.
  • – Module 2: Risk Assessment and Valuation.
  • – Module 3: Value for Money Analysis.
  • – Module 4: Financial Viability Analysis.
  • – Module 5: P3 Benefit–Cost Analysis
  • – Module 6: P3 Evaluation Case-Study Using P3-VALUE.
• As of January 2016, the training has been delivered in Louisiana, Maryland, North Carolina, and the District of Columbia. In addition to the webinars and training, the Center for Innovative Finance Support presents P3 materials at industry meetings and conferences, holds peer exchange events, and provides technical assistance on a case-by-case basis.