Construction Management

Planning, design, construction, and operation of surface transportation infrastructure projects—primarily highways and transit facilities—have traditionally been funded and managed by public-sector transportation agencies. Since the establishment of the Highway Trust Fund (HTF) in 1956, funding for highways and, later, other surface transportation facilities has derived chiefly from automotive fuel taxes gathered at the state level, remitted to the federal government, and distributed to the states in proportion to their respective contributions.

Construction underway in 2013 on the Innerbelt Bridge project in Cleveland, Ohio, where the interstate highway crosses over the Cuyahoga River. The state project has been accelerated by using a design-build-finance (DBF) approach with a private-sector partner. The DBF approach means that the private-sector partner partially or totally funds the project development using its own capital, or it arranges for short-term financing in anticipation of being paid in full by the public sector at a later date.

While sufficient for many years, recent improvements in vehicle fuel economy and reductions in [Page 406]total vehicle miles traveled have reduced these fuel tax revenues to the point where the HTF has begun to run a deficit that has required general fund contributions to meet state funding obligations. This comes at a critical time when the interstate system and other components of the U.S. surface transportation infrastructure (for example, state highways and bridges) are approaching the ends of their design lifetimes and are in need of significant repair or replacement.

In response to these pressures, the role of the private sector in public surface transportation facility development expanded in the 1990s with the passage of the Intermodal Surface Transportation Efficiency Act of 1991. The federal government has been experimenting with alternatives to the traditional public-sector-driven approach to the creation and maintenance of surface transportation facilities in the United States. These approaches focus not only on creative financing vehicles for transportation facilities (for example, the Transportation Infrastructure Financing Innovation Act, TIFIA) but also on the closer engagement of the private sector in all phases of the project life cycle. These public–private partnerships (PPPs) are designed to leverage private-sector innovation, capital, and capacity to design and implement surface transportation projects that might not be achievable or affordable in a timely fashion if left to traditional public-sector transportation programming.

According to its proponents, a public-private partnership capitalizes on traditional strengths of the private sector—innovation, cutting-edge technology, and access to private capital and labor markets among them. In this view, the private sector is often better positioned to build, if not finance, [Page 407]operate, and maintain the country's surface transportation infrastructure. Critics argue that ceding these responsibilities to the private sector reduces the degree of accountability to the voter for these transportation services and may result in the neglect of legitimate geographical transportation or social needs to the benefit of market priorities.

In its PPP programs, the U.S. Department of Transportation distinguishes between new and existing facilities and recognizes a gradient in the levels of public–private participation among the various partnerships. From more to less public responsibility for new facilities: Private Contract Fee Services, Design-Build, Design-Build-Operate-Maintain, Design-Build-Finance, Design-Build-Finance-Operate-Maintain, and Build-Own-Operate. For existing facilities, two PPP frameworks are examined: Operate & Maintain Concession and Long-Term Lease Concession.

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