Cost-Efficiency of Highway Operations and Maintenance of Public-Private Partnerships
Sergio E. Martinez and C. Michael Walton, August, 2014
While the literature on public-private partnerships (PPPs) argues that the private sector’s life-cycle approach to design and construction results in operational cost efficiencies, empirical support is missing. This study explored that issue by conducting a four-prong investigation. First, a literature review searched for evidence of such efficiencies and methodologies to evaluate them: it found no empirical evidence of superior operations and maintenance (O&M) cost-efficiency in PPPs. Second, a simple methodology to evaluate life-cycle cost-efficiency is proposed, but adequate data and assumptions about O&M costs are needed. Third, since PPP projects in the U.S. are recent and currently subject to routine O&M, indicators to compare those costs were proposed as well. Fourth, a case study compared the routine O&M costs of a PPP to those of a system of traditionally delivered toll roads. The results showed that the PPP was more cost-efficient in operating expenditures (OPEX) per mile (-60%) and per lane-mile (-53%). The traditional system was more cost-efficient in OPEX per vehicle miles travelled (97%), toll transactions (332%), and toll revenue (20%). However, those three indicators depend on traffic volumes, which were overwhelmingly greater on the traditional system. While the case study showed cost-efficiency differences between public and private sectors, additional research is needed to empirically test the hypothesis of the private sector’s greater efficiency. Understanding the differences in cost-efficiency between publicly and privately managed roads will help decision-makers to minimize the life-cycle cost of their investments.
Keywords: Public-Private Partnerships, PPPs, Transportation, O&M, Efficiency
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