Learning From Abroad: Public-Private Partnerships Building Highways Overseas

Some of the recent U.S. debates about public-private partnerships for highways sound as if the idea is brand new, untried, and hence inherently risky. Yet long-term concession agreements under which the private sector can design, finance, build, operate, and maintain major highways, bridges, and tunnels date back to the 1960s in Europe and the 1990s in Australia.

We can learn a tremendous amount from the experiences of our counterparts overseas. At the Transportation Research Board annual meeting in January, I attended a presentation on a study tour on the overseas public-private partnership (PPP) experience, organized by AASHTO and the FHWA as part of the National Cooperative Highway Research Program. The report on this study tour, “Public-Private Partnerships for Highway Infrastructure: Capitalizing on International Experience,” was published in March 2009 (FHWA-PL-09-010).

The group, representing FHWA and four state DOTs, visited Australia, Portugal, Spain, and the United Kingdom in the summer of 2008. These countries have been doing PPPs long enough that the team was able to learn about second-generation and even a few third-generation projects. Their general findings include the following:

  • Highway PPPs are used not simply for financial reasons but are selected on a value-for-money feasibility analysis basis.
  • PPPs are a critically important and growing percentage of national highway networks.
  • Highway PPPs do not necessarily require tolls; some are based on shadow tolls and/or availability payments.
  • The public sector mindset and skills for PPPs differ substantially from those needed for conventional project delivery.
  • A successful long-term PPP agreement must balance technical, commercial, and legal considerations.
  • Public agencies recognize that a PPP arrangement is, in fact, a long-term partnership with the private sector founded on a contract.

The descriptions alone of how these four countries have adapted general PPP principles to their circumstances are worth the price of admission. But the report goes on to report numerous useful findings about methodology in selecting, negotiating, and managing long-term PPP arrangements.

I should add, because this point is much-argued about in the United States, that the report’s statement that the longest concession term they observed was 50 years, with most running 30 to 40 years, is true of the countries they visited. France, which they did not visit, has a number of bridge and tunnel mega-projects with terms of 70 or more years.