Category: Current News

Center GRA Presents Research at the TRB 100th Annual Meeting – A Virtual Event

Center’s Graduate Research Assistant Narae Lee presented her research “Credit Support and Infrastructure Investment: The Case of the Transportation Infrastructure Finance and Innovation Act (TIFIA) Program at the TRB 100th Annual Meeting — A Virtual Event during a poster session. The session featured various works relating to the use of financial and economic analysis in addressing emerging issues in transportation areas. As outlined in the poster, the research addresses the TIFIA program’s market-leveraging function since the 2015 FAST Act. The final research report, co-authored with Center’s Director Jonathan Gifford, has been accepted for publication in the Transportation Research Record.

See here for the Presentation Poster and here for the Poster References.

The Washington Post Quotes Center Director

Center Director, Dr. Janothan Gifford was quoted in The Washington Post article titled,“ Maryland could face millions in cost risks if toll lane plan for Beltway, I-270 stalls”.

Jonathan Gifford, a professor at George Mason University and director of the Center for Transportation Public-Private Partnership Policy, said early collaboration can help governments advance projects more quickly and efficiently, while also improving the design.

“The earlier you get the contractor involved,” Gifford said, “the more options for innovation you have.”

See the full article here.

The Washington Post Quotes Center Director

Center Director Dr. Janothan Gifford was quoted in The Washington Post article titled, “Possible legal challenges pose cost risks for Maryland toll lanes proposal”.

Jonathan Gifford, a professor and expert in public-private partnerships at George Mason University, said state transportation officials might proceed with a controversial project if their lawyers conclude that any lawsuits are unlikely to succeed or cause significant delays.

The companies — and, more importantly, their investors — will protect themselves from a legally vulnerable environmental analysis, he said. That’s because private financing relies on collecting toll revenue to pay back bondholders and other investors on a certain schedule.

“I’d be astonished if the state or any developer would enter into an agreement without having very explicit discussions and agreeing on how they’d cover such an eventuality,” Gifford said.

See the full article here.

Farewell to the Center’s Program Manager

The Center is saying farewell to a longtime associate of the Center: Lauren N. McCarthy. Lauren began at the Center as a Graduate Research Assistant in 2015 and became the Program Manager in the Fall of 2017. Lauren has accepted a position with the Shared-Use Mobility Center (SUMC) and will be relocating to SUMC’s Los Angeles office. Lauren’s research focus is on shared-use mobility, and she recently defended her dissertation proposal titled “Micro-mobility and the Policy Process: Policymaking in the Age of the Smart City.” Her research on P3s, mobility, and her work as program manager of the Center have prepared her well for her new position. Lauren is excited to embark on a new chapter of her career and to work on the pressing transportation issues that face many large urban areas.

Lauren’s time at the Center yielded many insightful experiences, and beyond working with a great group of people, Lauren has had the opportunity to work on a broad range of research topics surrounding P3s in the United States. Some of Lauren’s accomplishments while at the Center include organizing the annual P3 Forum, multiple fellowships and scholarship awards, obtaining a broad reach of scholarship through various outlets, speaking engagements, adjunct teaching, and assistance. Some of the highlights of Lauren’s tenure with the P3 Center include selection as a 2019 Google Policy Fellow and AIAI 2017 Infrastructure Scholar, publication in Transport Policy: “Understanding project cancellation risks in U.S. P3 surface transportation infrastructure,” and presenting her research on P3s at Transportation Research Board (TRB) conference, Association for Public Policy Analysis and Management (APPAM), the World Conference on Transportation Research (WCTR), Transportation Research Forum (TRF), and the Annual Symposium on Transportation Informatics.

Lauren extends a heartfelt thank you to everyone she has worked with during her time at the P3 Center. To keep up with her activities follow her on twitter at @lmccart5 or check out her website at www.laurennmccarthy.com

Center Research Published in Transport Policy

“Understanding Project Cancellation Risks in U.S. P3 Surface Transportation Infrastructure”

The U.S. public sector has become increasingly interested in attracting private sector resources via public-private partnerships (P3s) when financing and delivering surface transportation and transit projects. Nevertheless, poorly managed political and economic risks have potential to drive P3 projects into contract renegotiations, bankruptcies, early contract terminations, deferrals, and, in the most extreme cases, outright cancellations. In response, this research explores the link between political risks, exogenous economic conditions, and project outcomes within the increasingly strained U.S. surface transportation P3 market. Specifically, the paper investigates how frequently P3 projects get cancelled, deferred, or terminated (CDT) and why.

The authors compiled a dataset coving the whole U.S. surface transportation P3 project population (68 projects), including information on project stages and associated CDT risks. Data collection efforts focused on primary data sources available from government agencies, project documentation, and specialized news sources. Risk factors were coded into four categories: bureaucratic complexity (intergovernmental conflicts, inadequate contract terms); public voice (local opposition, ideological opposition), political voice (political transitions, legislative change, political opposition), and economic complications. Of the 68 projects examined, 37% were cancelled, 3% were deferred, and 6% had their contracts terminated early. Overall, these CDTs made up 46% of all U.S. surface transportation P3 projects.

Political risks contributed to 19 of 25 project cancellations, 1 out of 2 deferrals, and 2 out of 4 early terminations. Bureaucratic complexity influenced several database cases but was not as common as other risk factors. When they occurred, inadequate contract terms tended to generate destructive power imbalances within partnerships or legal vulnerabilities that voided project terms. Multi-level governance influenced intergovernmental conflicts, but also allowed for decentralized input and decision-making from several levels of government. Learning across the industry and within government may explain the low frequency of bureaucratic complexity in recent years.

Local and ideological opposition to environmental impacts, noise pollution, and eminent domain seizures appeared frequently among the CDTs, along with anti-corporate mistrust and opposition to project costs. Public voice often produced political activity and/or compounded economic complications to undermine the database projects. Jurisdictions with strong public voice traditions should prioritize public engagement when pursuing large scale investment decisions in their communities. In addition, projects with high environmental risks were frequently subject to both public and ideological opposition. In cases where ideological opposition is present, better due diligence is needed to fully assess whether a P3 approach is appropriate. This appears particularly important for complex P3 delivery models like DBFOM and DBOM contracts given their complex risk-sharing arrangements, project structures, potential benefits, and benefit schedules.

Economic risks contributed to 16 out of 25 cancellations, 1 out of 2 deferrals, and 3 out of 4 early terminations. Several database projects presented insufficient economic viability to reach completion, demonstrating how P3 delivery most likely cannot turn an unviable project into a viable one. In addition, even well-developed projects failed under unfavorable fiscal and/or market conditions. Improved due diligence, evaluation criteria, usage best practices, and competitive processes (public and private) appear critical for successful P3 project selection and for avoiding the business-practice and competitiveness issues that can undermine otherwise promising projects. Ongoing sensitivity analyses for fiscal constraints, demand projections, and interest rate projections probably can also improve risk management. Finally, the high number of projects cancelled rather than deferred suggests that the market might benefit from better mechanisms for deferring projects until more advantageous economic conditions arise.

Ultimately, the study findings suggest that all four potential drivers – bureaucratic complexity, public voice, political voice, and economic complications – played a strong role in U.S. surface transportation P3 CDTs. The findings also suggest that troubled projects reflect broad economic and political risk management failures by both the public and the private sectors. Nevertheless, CDTs do not necessarily indicate inherent flaws in P3 projects or their deal structures. Political risk and/or economic factors might simply overwhelm an otherwise viable project. Overall, improved risk awareness and risk mitigation strategies, especially stronger due diligence and community engagement, might reduce CDTs in future.
For more information please contact: Lauren N. McCarthy [email protected]

Citation:
Lauren N. McCarthy, Lisardo Bolaños, Jeong Yun Kweun, Jonathan Gifford. “Understanding project cancellation risks in U.S. P3 surface transportation infrastructure.” Transport Policy (2019) https://doi.org/10.1016/j.tranpol.2019.10.009.

Student Research Presented at ARTBA P3 Conference

In July 2019, Center Director Dr. Jonathan Gifford and Center GRA Eric Childress participated in the American Road & Transportation Builders Association’s (ARTBA) 31st Annual Public-Private Partnerships in Transportation Conference. Dr. Gifford moderated the July 19th breakout session, “Putting P3 Research into Action,” where “Candidates for advanced academic degrees share[d] their P3-related research with emerging leaders, with the shared objective of gaining more recognition for and positively influencing real-world projects through this important work among P3 practitioners.”

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