An assessment of operations and maintenance costs in public-private partnerships

Public-private partnerships (PPPs) for the delivery of transportation infrastructure are said to offer increased efficiency resulting from the private sector’s life-cycle approach to design and construction. While the literature on PPPs endorses such efficiencies, studies don’t provide empirical support for that claim. The goal of this thesis was to assess that notion. Four tasks were carried out to explore that issue. First, a literature review searched for evidence of such efficiencies and methodologies to evaluate them. Second, a simple methodology to evaluate the life-cycle cost-efficiencies of the public and private sectors was proposed. Third, since most PPP projects in the U.S. are recent and currently subject to routine operations and maintenance (O&M), indicators to compare those costs were proposed as well. Fourth, a case study compared the routine O&M costs of a PPP and of those of a system of publicly developed and managed tollroads. The literature review found no empirical evidence of superior O&M cost-efficiency of PPPs, and also, that most studies focused on design and construction cost and schedule overruns. While some studies assessing performance and/or efficiency were at times theoretical and not likely employed in practice, one methodology is proposed to evaluate life-cycle cost-efficiency. The case study results showed that the concessionaire was more cost-efficient in terms of operating expenditures (OPEX) per mile (-60%) and per lane-mile (-53%) than the system. The public system was more cost-efficient in OPEX per vehicle-miles travelled (97%), number of toll transactions (332%), and toll revenue (20%). However, those three indicators depend on traffic volume which during the study period was overwhelmingly greater on the public system. While the case study showed cost-efficiency differences between the public and private sectors, additional research is needed to empirically test the hypothesis of greater efficiency of the private sector. The proposed framework can be used, but adequate data and further assumptions about O&M costs are needed; for that, it is recommended that more comprehensive case studies be performed to obtain detailed empirical data. A better understanding of the differences in cost-efficiency between publicly and privately managed roads will help decision-makers minimize the life-cycle cost of their investments.