Engineering Inc. - September/October 2007 - (Page 22) t here also are questions about who is keeping an eye on public interests and how the fee structures and profits will work. ray Messer Walter P. Moore and associates firm must answer to its shareholders, who expect a return on their investment. Critics say this situation puts the focus on the private firm recouping its investment and pushes the needs of the public aside. Others argue that PPPs might shift government funding to special-purpose entities immune to legislative structures and procurement codes. Similarly, if a private company defaults or attempts to renegotiate an agreement, critics caution that public agencies might lose flexibility in making policy decisions. There also are issues surrounding the length of the lease, tolling policies, profit sharing and windfall revenues. Without a thorough and accurate up-front analysis, experts say, profitability and viability could suffer. Many government agencies have learned the hard way that PPPs do not always guarantee success. Take the SR-91 express lane in Southern California as an example. Initially, the state signed a noncompete clause for the four-lane toll highway. A private firm reportedly built the road, erected in the median of an existing eight-lane freeway, for $130 million. But when state transportation officials realized the infrastructure was not adequate and that the freeway would have to be widened, the state was forced to buy back the road at a cost of $207.5 million. In Texas, the state legislature authorized PPP arrangements in 2003. Officials have approved and contracted for one such project, with several more currently in the procurement phase, says CEC’s Stagner. The process appeared to be moving along until earlier this year, when state lawmakers imposed a moratorium on new projects and enacted limitations on existing initiatives. “There is significant controversy surrounding many of these projects,” explains Stagner. “It comes from many quarters.” Among them: those opposed to toll roads, land use and agricultural groups, public policy organizations and engineering and construction firms that prefer the traditional public toll authority model over unconventional PPPs. “The major issue in Texas is not whether we are going to have tolls,” adds Stagner. “The question is whether we are going to pursue toll strategies using the traditional public toll authority model or through concessions.” Taking the High Road orders, but you also can lose money if you don’t crunch the numbers and manage a project effectively,” says Bartlett W. Patton, chief operating officer at Kleinfelder, an Irvine, Calif.-based design and engineering firm with PPPs in California, New Mexico, Colorado and Texas. Bridge to the Future Many private engineering firms are less than enthusiastically drawn into the PPP arena. Though the majority of firms prefer the traditional contract-construction model, standing on the sidelines often means missing opportunities and foregoing potential profits. “You can realize a substantial return if you perform well and avoid change Putting PPPs in the Fast Lane The U.S. Federal Highway administration (FHWa) has made it a priority to promote and facilitate public-private partnerships. at the core of this effort is SeP-15. The experimental program, rolled out in 2004, introduces a process for FHWa to identify new public-private partnership opportunities. The goal is to provide efficient delivery of transportation projects “without impairing FHWa’s ability to carry out its stewardship responsibilities to protect both the environment and american taxpayers.” FHWa hopes the initiative will serve as a one-stop shop for contracting information, compliance with environmental requirements, right-of-way acquisition and project finance. Officials say they plan to improve project management flexibility, deliver faster federal approvals and reduce red tape. Across the board, interest in privatization is growing. Pennsylvania, Delaware, Ohio and New Jersey are among the states weighing PPP initiatives. In March 2005, the Texas Department of Transportation and Cintra-Zachry signed an agreement to develop TTC-35. The $7.2 billion investment would develop a 600mile tract of road running from Oklahoma to Mexico as part of the Trans Texas Corridor. As part of the agreement, CintraZachry reportedly offered to pay as much as $1.2 billion to operate the toll road for 50 years prior to returning control to the state. In San Diego, the SR 125 South Toll Road (also known as the South Bay Expressway) opened in July. The 10-mile, $642 million project was funded by senior bank debt, a Transportation Infrastructure Finance and Innovation credit assistance loan, sponsor equity and donated right-of-way. These pockets of innovation aside, PPPs likely won’t enter the mainstream until stakeholders, including transportation officials and the public, ratchet up their understanding of the process and what it has to offer. “Long-term concessions represent a significant change from the status quo,” says Little. “Their effects are not easily understood, even by experienced public policy and transportation professionals.” A firm’s ability to get it right from the start and forge relationships goes a long way toward success. Concerns must be addressed during planning and negotiation. “Public-private partnerships are complex initiatives with a lot of twists and turns,” explains Little. “The right upfront planning and preparation greatly increases the odds of success.” n Samuel Greengard is a business writer and technology writer based in West Linn, Ore. 22 ENGINEERING INC. sEptEmbER / oCtobER 2007
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