Big Cities Benefit from Transit P3s

Art Hadnett

big city public-private partnerships

According to global transportation analytics firm Inrix, Inc., the U.S. had three of the top five most congested cities globally, with Los Angeles holding onto the top of the list for the sixth year in a row. New York came in second and San Francisco, fifth. Angelenos spent an average of 102 hours last year driving in traffic during peak travel periods, costing drivers $2,828 each and the city $19.2 billion from direct and indirect costs. 

“With the windfall of local transportation measures generating billons for congestion relief, local governments are encouraging the use of public-private partnerships, or P3s, to accelerate delivery of these much-needed projects,” said Katie Nees, national P3 director and senior vice president at HNTB. “Transit, combined with other congestion management initiatives including the introduction of autonomous vehicles, is essential to meeting future transportation needs. Additionally, space constraints, coupled with keeping pace with the demands of existing traffic, become a critical issue. To successfully relieve traffic congestion, these projects need to be planned and executed in an efficient and timely manner.” 

So, how would a transit P3 work? A public agency forms a partnership with a private developer who provides the money to develop and construct the project, without the need to wait for enough funds to accumulate from traditional revenue sources. The agency then pays the private partner back over a period of time with funds from sales tax revenues and other sources.

In well-executed P3 projects, taxpayers benefit from the much-needed transportation projects because they are typically funded and built sooner. There is also level of price certainty, and frequently shorter construction periods that would positively affect the public’s commute. The private partner also benefits—contractors can bid and construct projects more efficiently and often bring innovations in design, materials and execution.

The traditional project delivery method of design-bid-build is where an agency designs the project and then puts the project out for bid, taking on both the design and schedule risk as well as  price uncertainty if there are unknown site conditions or errors or omissions in the plans.  Under the P3 design-build delivery method, contractors and designers bring design and construction expertise, innovation—and cost savings—to the project, while the agency still retains influence on decisions and the overall project scope. In this type of partnership, more of the risk and accountability is placed on the private developer, who has the incentive to complete the project on time and on budget, based on his schedule, timeline, resources and budget.

Although this sounds wonderful, every project is different and government agencies often have concerns about P3s. Highway projects have utilized P3s for over 30 years, but the transit market has only recently engaged in the use of P3s. One primary reason transit has been more reluctant to use P3s is due to the complications surrounding operations and maintenance of the systems, rate charging, and safety. Many transit agencies prefer to operate and maintain their own transit systems, although some agencies are now considering allowing project extensions and additions to be maintained and operated by developers. Existing facilities and public safety are risk elements that are also more complicated to transfer to the developer. The public perceives the agency as being ultimately responsible for public safety, but detailed and carefully constructed contracts with the concessionaires and contractors can clearly detail responsibilities, accountabilities and sanctions for non-performance. 

Prior to entering into a partnership, all parties (public, private, agency, developer) must understand the goals and priorities for the project including level of service, system availability, and other factors that assure the riding public a safe and reliable system. Since agencies are working under parameters determined by local and federal legislation, they should consider their goals prior to deciding which delivery model to use. It’s useful for both parties to consider hiring an outside consultant to address legal and financial terms in the agreement to ensure both entities and the public understand the terms of the contract and its requirements. 

Public support is as critical as choosing the appropriate delivery model and contract requirements. Agencies should take steps to inform and educate constituents about the process, the benefits of the project and why the chosen delivery method is a good fit. When stakeholders are involved and understand what the partnership is doing and why, they are more likely to support the project and partnership.  

Transit P3s have been beneficial in providing a form of transportation that otherwise would not have been possible or funded in the same time frame. HNTB’s Nees foresees transit P3s being expanded in the future to applications such as transit hubs like those in Europe—where rail, bus and parking are all housed in one facility. Gaps between modes of transportation can greatly impact the overall use of public transit and impact efficient mobility. Hopefully, we will see more partnerships established between the various transit and other modes to make safety a priority for all commuters, while helping us get to our destination easily and quickly. As Los Angeles and other urban centers implement solutions that will remove them from the top ten list of congested cities, P3s offer another option to achieve and meet the transportation demands of the future.

Art Hadnett is president of HNTB Corporation’s West Division. HNTB is an employee-owned infrastructure firm that provides award-winning architecture, engineering, planning and construction services. With more than a century of service in the United States, HNTB understands the life cycle of infrastructure and addresses clients’ most complex technical, financial and operational challenges. Professionals nationwide deliver a full range of infrastructure-related services, including award-winning planning, design, program management and construction management.

art hadnett