Private Sector Participation in Public Transportation (forum is now closed)

Purpose

The Private Sector Participation provisions of MAP-21 require FTA to undertake actions, including a rulemaking, to promote more effective utilization of private sector expertise, financing, and operational capacity to deliver costly and complex new fixed guideway capital projects.

To implement the Private Sector Participation provisions of MAP-21, FTA is conducting an Online Dialogue to engage grantees and other stakeholders to inform the rulemaking, as well as obtain feedback on FTA’s proposed guidance on assessments and model contracts. The following 22 probing questions are meant to elicit discussion; please feel free to have conversations on related elements. If you need assistance or have questions, contact FTA. The dialogue will close on January 2, 2015.

Statutory Requirements

The Private Sector Participation provisions of MAP-21 require FTA to:

  • Identify any provisions of 49 U.S.C. Chapter 53, including regulations or practices, that are impediments to greater use of public-private partnerships (P3s) and private investment in public transportation capital projects; develop and implement on a project basis procedures and approaches that address such impediments in a manner similar to the Special Experimental Project Number 15 (commonly referred to as SEP-15) of the Federal Highway Administration (FHWA), and also protects the public interest; and issue regulations to carry out the procedures and approaches developed that address any impediment;
  • Develop guidance to promote greater transparency and public access to P3 agreements involving recipients of FTA financial assistance under Chapter 53. In developing this guidance, FTA will encourage project sponsors to conduct assessments to determine whether use of a P3 represents a better public and financial benefit than a similar transaction using public funding or public project delivery.
  • Provide technical assistance, at the request by a sponsor of a new fixed guideway capital project, by (1) identifying best practices for P3 models in the U.S. and in other countries; (2) develop standard P3 transaction model contracts; and (3) perform financial assessments that include the calculation of public and private benefits of a proposed P3 transaction.

FTA would like your feedback on the following areas:

  1. Technical Assistance on Assessments read more
  2. Technical Assistance on Model Contracts read more
  3. Impediments to Greater Private Sector Involvement in Capital Projects read more
  4. Proposed Procedures and Approaches to Address Impediments read more

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  1. Promote TMAs as effective & cost-efficient public/private models for creating & delivering transportation services

    Transportation Management Associations (TMAs) are public-private partnerships that generate enormous public benefits at minimal public price tags. By leveraging modest government funding with significant private sector investments, TMAs are able to provide transportation services that not only improve and enhance existing public transportation but effectively close connectivity gaps without additional public expenditures.

    In Massachusetts, for example, the state DOT invests just 550,000 per year in 11 TMAs, and yielded the following impacts in 2013:
    • 1,263,507 fewer vehicle trips generated
    • 4,673,507 lbs of CO2 emissions reduced
    • 495,065 gallons of gas saved
    • $2,156,143 put back into the pockets…

    20 votes
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    • collaborate for a third generation bioindustry and new systems. Biomass for food and trading of mineral oil.

      Offices led by women design an active global campaign and green design protecting health and independent marketing.

      1 vote
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      • Modifying or expediting New Starts procedures would help facilitate P3s

        It is challenging to integrate the FTA New Starts process with a P3, particularly a P3 where the concessionaire uses the low-cost financing available with TIFIA. The primary impediment is reconciling the timing requirements of the three parties: FTA, TIFIA, and the P3 bidders. P3 bidders can only keep their prices and non-federal financing (lender) commitments for six months, which creates urgency to reach financial close in a P3. If the concessionaire uses TIFIA financing, TIFIA requires the Full Funding Grant Agreement to be signed prior to financial close. However, FTA generally requires the agency to receive bids on major…

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        • Integrating the New Starts process with TIFIA is challenging in a P3

          It is challenging to integrate the FTA New Starts process with a P3, particularly a P3 where the concessionaire uses the low-cost financing available with TIFIA. The primary impediment is reconciling the timing requirements of the three parties: FTA, TIFIA, and the P3 bidders. P3 bidders can only keep their prices and non-federal financing (lender) commitments for six months, which creates urgency to reach financial close in a P3. If the concessionaire uses TIFIA financing, TIFIA requires the Full Funding Grant Agreement to be signed prior to financial close. However, FTA generally requires the agency to receive bids on major…

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          • Changes to the Private Activity Bonds (PABs) provisions would help facilitate transit P3s

            SAFETEA-LU created a new type of tax-exempt Private Activity Bond (PAB) for surface transportation projects, providing USDOT with the authority to authorize up to $15 B of such bonds. Two legislative changes would help facilitate more transit P3s in the future:
            1. Increase the $15 B volume cap. While the $15 B limit has not yet been fully allocated, the amount is getting closer and could soon become an impediment.
            2. Modify the existing provision that says “any project that receives Title 23 assistance” to say “any project that receives Title 23 or Title 49 assistance”. This would make it…

            3 votes
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            • Question 15: Model procurement process

              P3 procurements generally provide much more interaction between the agency and potential bidders than traditional procurements. This includes one-on-one meetings with bidders during the procurement where commercial, technical, financial, and legal issues are discussed, as well as the opportunity for shortlisted bidders to review and comment on drafts of the RFP and contract. This process can be extremely valuable in that it often helps lead to improved engineering solutions, a fairer procurement process, better financing terms, and better value for money for the public.

              2 votes
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              • Question 10: Who is best to manage different risks

                This will depend on the specific circumstances of both the project and the project sponsor. However, a general rule of thumb is that the party who is best able to manage a particular risk should be responsible for it, and certain risks are shared to provide incentives and assurances that both parties will work diligently to address them. For example, the risk of whether federal funding is received is best managed by the public agency, the risk of integrating rail vehicles/systems/infrastructure might be best managed by the concessionaire, and risks associated with finding unknown hazardous materials might best be shared…

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                • Question 9: Ensuring transparency in P3 contracts

                  This is best addressed at the local level, as local statutes establish reporting requirements. Creating federal requirements might not be helpful. However, some transit agencies (e.g., Maryland MTA) post both the P3 RFP and final contract online to promote transparency.

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                  • Question 8: Payment Models for Transit Projects

                    Transit projects generally do not generate net revenue during the operating period so some form of public subsidy is required. With a DBFOM or DBFM P3, this is addressed using an “Availability Payment” approach where the concessionaire is paid based on meeting performance requirements (and payment deductions are applied when performance is not delivered). If a DBOM contract or just an O&M contract is used, performance deductions can still be applied but generally not near the same extent as the prior cases where there is private financing and equity at risk.

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                    • Question 2: The best procurement approach depends on the agency's goals and unique circumstances

                      The best procurement approach will depend on the agency’s goals and the unique circumstances of the project. DBF and DBFOM are both P3s that can warrant consideration in the right circumstances but not in others.

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                      • Question 3: Type of projects that lend themselves to P3s

                        The model contract should be independent of the project mode or asset type. Each type of project may warrant P3 consideration, but there are also circumstances with each where P3 is not the best delivery model. Other factors (e.g., who is best able to manage the delivery and integration risks, whether there is innovation potential, whether clear lines can be drawn around the private partner’s responsibilities to ensure performance accountability) should have a greater impact than the type of project.

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                        • The maximum term of the P3 contract depends heavily on the asset type and specific P3 approach

                          The maximum term of a model contract should depend on the asset and specific type of delivery method (e.g., DBF versus DBFOM or DBFM). For example, the contract term for a DBF would only cover the construction period, while a DBFM or DBFOM by its nature includes many years during the operating period. However, it is common for large DBFOM and DBFM projects such as a New Start or Small Start to have a term that includes 25-30 years during the operating period. A term that included more than 30 years of operations would be atypical in the current transit…

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                          • Help agencies assess P3s during the conceptual project design stage

                            In response to FTA's question on what is the minimum percentage of the project's design that should be completed to utilize a P3 assessment tool, we would suggest the toolkits and guidance be designed to help during the conceptual design stage (i.e., pre-30% design). Agencies typically don't perform more than 30% design in a P3 (and recent Canadian transit P3s have performed far less for certain design elements). It also takes considerable time for an agency to pivot fully from a traditional delivery approach to P3.

                            2 votes
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                            • Build on FHWA's existing P3 toolkit

                              FHWA has built a toolkit that is intended to address key questions of risk assessment and value for money (please see http://www.fhwa.dot.gov/ipd/p3/toolkit/analytical_tools/). In lieu of building a new tool from scratch, we would suggest FTA provide guidance on how the FHWA toolkit can be best applied to availability payment transit projects

                              2 votes
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                              • FTA needs to do a better job providing best practices when it comes to contracting for contract services (e.g. vanpool)

                                MichDOT, GRTA in Atlanta, DART in Dallas come to mind as examples of best practices in this field.

                                6 votes
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                                • FTA needs to provide better education, information, and guidance to FTA regional offices and designated recipients regarding eligibility

                                  ...of private providers; Additionally it can and should do a better job promoting the role the private sector can play in this capacity, especially in the context of creating and expanding privately-capitalized vanpool projects.

                                  6 votes
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                                  • 6 votes
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                                    • 6 votes
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                                      • 9 votes
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                                        • 6 votes
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