Performance Metrics for Public–Private Partnerships (2021)

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1   Public–private partnerships (P3) allow public transportation agencies to attract private financing to deliver needed highway infrastructure and not have to wait until the required funding is fully in place via traditional state and federal sources. Additionally, P3s furnish a means to not only design and build the project but also operate and maintain it. When post- construction operations and maintenance (O&M) are added to the procurement, the familiar project delivery method models are changed significantly (Barutha 2016). The agency must recalibrate its approach to contracting from the prescriptive approach that has been used for decades to one that is performance oriented. To do so and still maintain its statutory fiduciary responsibilities to the taxpayer requires public engineers to transition from being designers and specifiers to developers of performance requirements and performance criteria that are supported by performance metrics. P3 performance metrics provide the means to differentiate between acceptable and unsatisfactory in the P3 quality management process, ultimately becoming the data used to ensure contract compliance. The objective of this synthesis was to document key performance metrics used in various long-term P3 contracts for the delivery of highway projects, including services by Depart- ments of Transportation (DOTs). The synthesis focused on the post-construction stage of P3 contracts. Unlike traditional construction contracts that deliver outputs, performance- based contracts like P3 concession agreements are established to deliver outcomes. The metrics reviewed in the synthesis are the measurements of those outcomes. When a criti- cal infrastructure asset is delivered using the Design-Build-Finance-Operate-Maintain (DBFOM) form of P3, the post-construction outcomes drive design decisions, often chang- ing the decision criterion from minimizing capital cost to minimizing life-cycle cost (Liu et al. 2014). Hence, a full suite of post-construction O&M performance metrics is a key success factor in P3 project delivery. The synthesis is based on information gleaned from a survey of 26 DOTs known to have the authority to use P3 in some form. Responses were received from 20 DOTs, yielding a response rate of 77%. Additionally, interviews with DOT personnel involved with six P3 projects where construction was complete and the O&M concession period had begun provided a more in-depth insight into the rationale for choosing P3 delivery, the metrics that were in use, and a perception of their effectiveness. A content analysis of performance metrics and handback criteria found in concession agreements from 18 P3 projects in nine states was also conducted. That analysis is synthesized in Appendix C and Appendix D. It furnishes a consolidated inventory of metrics used to measure performance across the full range of P3 project elements from technical features of work, like pavements and structures, to administrative requirements to manage tolling facilities and incident responses. The survey, interviews, and content analysis were developed after a comprehensive literature review on the topics of P3 project delivery and performance metric development was completed. S U M M A R Y Performance Metrics for Public–Private Partnerships

2 Performance Metrics for Public–Private Partnerships The study found that there is a multitude of possible combinations of P3 project delivery strategies available to public agencies. When one considers the myriad of potential financ- ing alternatives, the variations of constraints imposed by each state legislature and the fed- eral government, and the various different P3 contract types, the population of available P3 projects becomes extremely diverse. There has been no previous empirical research done on the effectiveness of P3 performance metrics. Thus, the development of P3 performance metrics is evolving. Key findings of the synthesis are as follows: • Of the P3 projects surveyed, Design-Build-Finance (DBF) and DBFOM were the most commonly used types. • Most of the current P3 programs utilize availability payment financing. • The survey respondents perceived their current set of metrics to be generally effective. • Challenges faced by survey respondents in implementing performance metrics fell into two categories: quantifying asset performance and program implementation. The gaps in the body of knowledge that could be addressed by future research were iden- tified. The first gap concerns the need to empirically measure the effectiveness of the current suite of P3 performance metrics, which would require producing guidance on how to develop reliable, measurable outcomes. The second would fill the gap that exists with regard to handback criteria, which would produce the same type of guidelines. Last, a third gap concerning the need for definitive guidance on computing incentive/disincentive (I/D) amounts for P3 projects was also identified.