Commentary

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.

Robert Poole is director of transportation policy and Searle Freedom Trust Transportation Fellow at Reason Foundation. Poole, an MIT-trained engineer, has advised the Ronald Reagan, the George H.W. Bush, the Clinton, and the George W. Bush administrations.

Surface Transportation

In the field of surface transportation, Poole has advised the Federal Highway Administration, the Federal Transit Administration, the White House Office of Policy Development, National Economic Council, Government Accountability Office, and state DOTs in numerous states.

Poole's 1988 policy paper proposing privately financed toll lanes to relieve congestion directly inspired California's landmark private tollway law (AB 680), which authorized four pilot toll projects including the successful 91 Express Lanes in Orange County. More than 20 other states and the federal government have since enacted similar public-private partnership legislation. In 1993, Poole oversaw a study that coined the term HOT (high-occupancy toll) Lanes, a term which has become widely accepted since.

California Gov. Pete Wilson appointed Poole to the California's Commission on Transportation Investment and he also served on the Caltrans Privatization Advisory Steering Committee, where he helped oversee the implementation of AB 680.

From 2003 to 2005, he was a member of the Transportation Research Board's special committee on the long-term viability of the fuel tax for highway finance. In 2008 he served as a member of the Texas Study Committee on Private Participation in Toll Roads, appointed by Gov. Rick Perry. In 2009, he was a member of an Expert Review Panel for Washington State DOT, advising on a $1.5 billion toll mega-project. In 2010, he was a member of the transportation transition team for Florida's Governor-elect Rick Scott. He is a member of two TRB standing committees: Congestion Pricing and Managed Lanes.

Aviation

Poole is a member of the Government Accountability Office's National Aviation Studies Advisory Panel and he has testified before the House and Senate's aviation subcommittees on numerous occasions. Following the terrorist attacks of Sept. 11, 2001, Poole consulted the White House Domestic Policy Council and the leadership of the House Transportation & Infrastructure Committee.

He has also advised the Federal Aviation Administration, Office of the Secretary of Transportation, White House Office of Policy Development, National Performance Review, National Economic Council, and the National Civil Aviation Review Commission on aviation issues. Poole is a member of the Critical Infrastructure Council of the Los Angeles Economic Development Corporation and of the Air Traffic Control Association.

Poole was among the first to propose the commercialization of the U.S. air traffic control system, and his work in this field has helped shape proposals for a U.S. air traffic control corporation. A version of his corporation concept was implemented in Canada in 1996 and was more recently endorsed by several former top FAA administrators.

Poole's studies also launched a national debate on airport privatization in the United States. He advised both the FAA and local officials during the 1989-90 controversy over the proposed privatization of Albany (NY) Airport. His policy research on this issue helped inspire Congress' 1996 enactment of the Airport Privatization Pilot Program and the privatization of Indianapolis' airport management under Mayor Steve Goldsmith.

General Background

Robert Poole co-founded the Reason Foundation with Manny Klausner and Tibor Machan in 1978, and served as its president and CEO from then until the end of 2000. He was a member of the Bush-Cheney transition team in 2000. Over the years, he has advised the Reagan, George H.W. Bush, Clinton, and George W. Bush administrations on privatization and transportation policy.

Poole is credited as the first person to use the term "privatization" to refer to the contracting-out of public services and is the author of the first-ever book on privatization, Cutting Back City Hall, published by Universe Books in 1980. He is also editor of the books Instead of Regulation: Alternatives to Federal Regulatory Agencies (Lexington Books, 1981), Defending a Free Society (Lexington Books, 1984), and Unnatural Monopolies (Lexington Books, 1985). He also co-edited the book Free Minds & Free Markets: 25 Years of Reason (Pacific Research Institute, 1993).

Poole has written hundreds of articles, papers, and policy studies on privatization and transportation issues. His popular writings have appeared in national newspapers, including The New York Times, The Wall Street Journal, USA Today, Forbes, and numerous other publications. He has also been a guest on network television programs such as Good Morning America, NBC's Nightly News, ABC's World News Tonight, and the CBS Evening News. Poole writes a monthly column on transportation issues for Public Works Financing.

Poole earned his B.S. and M.S. in mechanical engineering at Massachusetts Institute of Technology (MIT) and did graduate work in operations research at New York University.