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Private sector brings infrastructure projects in on time and under budget

Samuel Staley
January 5, 2009, 8:10am

It's more than a bit odd that Congress is debating the efficacy of private sector participation in providing infrastructure in the U.S. Congressmen, apparently, are reluctant to expand critical programs such as TFIA and Private Activity Bonds (PAB) at the federal level that could significantly boost private sector participation in building roads, ports, airports, and other projects. Yet, as Bob Poole pointed out recently in his Surface Transportation Innovations newsletter, the private sector is consistently bringing key projects on-line on budget and ahead of schedule:
But now an extremely well-done study has addressed that question, using a database of 54 infrastructure projects in Australia, of which 21 were concession-type projects (which the report defined as PPPs) and 33 were Traditional. It was conducted by The Allen Consulting Group and the University of Melbourne for the nonprofit group, Infrastructure Partnerships Australia. (http://infrastructureaustralia.org/research/pdf/InfrastructurePartnershipsAustralia_PPPReport_Final.pdf) The findings of "Performance of PPPs and Traditional Procurement in Australia" are dramatic. "Our overall conclusion is that PPPs provide superior performance in both the cost and time dimensions, and that the PPP advantage increases (in absolute terms) with the size and complexity of projects." More specifically, on $4.9 billion of PPP projects, the net cost over-run was just $58 million, which (at 1.2%) is not statistically different from zero. By contrast, on $4.5 billion of Traditional procurements, the net over-run was a whopping $673 million (15%). Likewise, regarding on-time completion, PPP projects were on average completed 3.4% ahead of schedule, versus Traditional projects averaging 23.5% late. And while smaller Traditional projects tended to be completed on schedule, on-time performance decreased sharply as project size increased-but size made no difference in the on-time performance of PPP projects.

Samuel Staley is Research Fellow


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