Public Private Partnerships in Transport Infrastructure

Exactly a year ago, Transport Reviews devoted a special issue to this theme. Boosting private investment in the provision, operation and maintenance of infrastructure has been a key objective for many governments. The transport infrastructure sector has been one of the primary sectors of interest given the well-acknowledged infrastructure gap (cf. European Commission, 2011) combined with constrained public budgets and policies to reduce and contain the public debt (cf. European Commission, 2009). Therefore, the continuing interest of transport infrastructure policy and decision-makers, practitioners and academia alike in Public Private Partnerships (PPPs) is of no surprise. Here we present four additional papers that are directed at issues related to implementation and the means by which successful performance can be achieved.

The first paper focuses on Sub-Saharan Africa, where there is less experience in the adoption of infrastructure delivery schemes involving the private sector. Osei-Kyei and Chan present us with three examples: the Lekki toll road in Nigeria; the N4 toll road, a cross-border road connecting South Africa to the Port of Maputo in Mozambique, which is itself the third case discussed. Notably, examples like the N4 toll road are limited in regions with a longer experience of PPPs (EU Reg. 1316/2013). Their analysis concludes with a number of overarching lessons learned, including the need for effective and efficient stakeholder management; a transparent and competitive tendering process; and strong government commitment and regulatory framework (see also Verhoest, Petersen, Scherrer, & Soecipto, 2015). Other important conditions identified included reasonable user charges, the participation of local investors and a stable macro-economic environment.

Unstable macro-economic conditions formed the focus of the second paper from Ortega, Baeza and Vassallo. Spain has over 50 years' experience in the delivery of transport infrastructure through PPP-type approaches, with local investors and contractors being involved. Today, leading the international PPP development market are firms of Spanish origin (Suarez-Aleman, Roumboutsos, & Carbonara, 2015). PPPs are awarded through an ‘open procedure' and use standard contracts. This is evidence of a transparent and competitive process, with reduced procurement transaction costs, which, however, leads to incomplete contracts. The preferred remuneration scheme has been user toll charges. Hence, demand/revenue risk has mostly been allocated to the private partner. This paper recognises the deficiency of transferring more risk than is manageable to the concessionaire, as Roumboutsos and Pantelias (2015) also concluded. It also highlights the negative impact on society (public sector) of mitigation measures (see also Carbonara, Costantino, Gunnigan, & Pellegrino, 2015). These shortcomings are more apparent during periods of recession, as more pressure is placed on constrained public budgets when addressing concessioner compensation claims, high transaction costs and the need to continue without disruption transportation services. Monitoring mechanisms are important in the re-negotiation process, and the paper ends by proposing monitoring mechanisms during re-negotiations to safeguard the public interest (see also Domingues & Zlatkovic 2015; Macário, Costa, & Ribeiro, 2015) and also placing a ceiling to public budgetary commitments associated with PPPs. This suggests that PPPs cannot be used to cover the entire infrastructure gap (see also Meaney & Hope, 2012; Roumboutsos & Saussier, 2014).

Portugal is also a country with rich PPP experience. Shadow tolls for road concessions were the prominent model of remuneration allowing the government to implement its development policy. The Portuguese Court of Auditors plays a significant role in monitoring PPP contracts and safeguarding public interest. Through the PPP model, Portugal has managed to address its historical deficit in infrastructure. In the third paper, Fernandes, Ferreira and Moura show that this has been at a cost. They study seven shadow toll PPPs and compare their financing costs with those that could have been incurred should the projects had been delivered through the public sector by issuing bonds. They identify far higher financing costs than could be justified, recognising that the selection of the PPP model had been on the basis of restricted alternatives. However, one should not disregard the fact that through the PPP model, Portugal grew from 24% to 52% of the per capita average value of the ‘Government Net Capital Stock Index' among OECD countries (Kamps, 2006, p. 133 as cited by the Fernades, Ferreira and Moura). This suggests that an overall assessment should include other factors (Liyanage & Villalba-Romero, 2015), which may out-weight these less favourable outcomes. It is concluded that ‘investments made by concessionaires should be accounted for in the same way as other public investments implemented through traditional procurement'. This implies the disclosure of project data that is often considered to be confidential.

The need of project-level data to further the research and understanding of the PPP transport infrastructure delivery model is the key conclusion of the final paper from Chen, Daito and Gifford. Their meta-analysis of research reports was triggered by the need to demonstrate that the limited understanding of PPP performance can be attributed to the limited availability of project data. Their analysis found statistical associations between research themes and data types. This is restrictive for both research and its potential exploitation. The recommendation made stresses the need for balanced information, especially with respect to PPP performance. Benchmarking performance and identifying the most suitable structure will remain a formidable challenge, as long as performance data with respect to PPPs and traditional delivery are not made publically available. However, this has always been the challenge in the study of PPPs (cf. Hodge, 2010; Shaoul, Stafford, & Stapleton, 2006).

The key question linking all four contributions in Transport Review 36 (2) is performance. Researchers have tried to identify what can be learned from the different case studies, and how past experience can be best used in the future. However, what is interesting especially when comparing these experiences is the different needs and how they are changing over time. In the first paper, a set of conditions were set based on the Sub-Saharan experience. All of these were present in the case of Spain, where it was concluded that the applied institutional and legal framework was a limiting factor when addressing the impact of the economic crisis. This second paper proposes a monitoring mechanism. In Portugal, the use of shadow tolls allowed the government to pursue its development policy by subsidising PPPs, while the Court of Auditors monitored projects. However, renegotiations were not avoided (Macário et al., 2015) nor were excessive financing costs as shown by the third paper. These contradictions are related to the contextual nature of PPPs. PPPs will perform (or not) in different settings and will be considered successful (or not) by different stakeholders. In summary, this suggests that PPPs might be described as ecosystems requiring a study that cuts across the thematic aspects of the PPP model. This leads to two unresolved issues, one relates to the type and minimum amount of data that would be needed to monitor and assess the performance of PPPs in an independent way, and the other builds on the ecosystem concept to suggest that a systems approach could be an alternative way to progress the analysis of PPPs in transport infrastructure.