Evaluating Viability of Privatized Transportation Projects

Abstract

The public sector has increasingly been adopting private financing alternatives in providing new infrastructure investment to address an ever increasing imbalance between funding and needs for public works projects. These privately financed projects are alternatively called privatized projects or public/private partnership (P/P P) projects. This paper describes a tool that evaluates the viability of prospective P/P P transportation projects. Most of the available literature and discussions on the subject have taken a financial institution or public sector point of view. While these documents can provide a good introduction, they often fail to adequately represent the developer's perspective. Namely, why would an engineer/constructor be interested in undertaking a long-term and often very risky P/P P project? The tool described in this paper was developed after extensive interviews with owners, developers, and investment bankers who are familiar with P/P P projects. The tool is called the Project Scoring Table (PST), and it is designed to help potential P/P P developers identify high quality projects. The PST identifies nine high-level evaluation criteria for a P/P P project, ranging from the political circumstances of the project to its environmental cleanup needs. Using the PST helps both the public agency and its private partners evaluate potential projects in three ways. First, it helps establish the overall viability of the project. Second, it helps define the parity between the owner and the developer. Finally, it helps the P/P P partners determine where their interests are coincident and where they diverge.