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Previous Section | Table of Contents | Next Section I.Introduction to Public/Private Partnerships in Transportation"You got to be very careful if you don’t know where you’re going, because you might not get there." - Yogi Berra (1925- ), American Baseball Player Introduction Partnerships involving different mixes of U.S. public and private participants have existed for many years, yet are still nascent concepts on the research and development (R&D) landscape – a work in progress. To some extent, the public/private partnership (PPP) concept is a solution in search of a problem. Reflecting this unease, Steve Lockwood of the Federal Highway Administration (FHWA) and Parsons Brinckerhoff Quade & Douglas once titled a paper by asking, "Public/private partnerships are the answer; what is the question?"5 Judging by the sheer volume and diversity of partnership arrangements, a little bit more is known about the question, yet ironically one is less sure about the answer. In particular, what exactly is meant by the term partnership? From the findings of the May 2001 Symposium on PPPs held at the Volpe National Transportation Systems Center (Volpe Center), it is clear, as Volpe Center Director Dr. Richard John stated, "that partnerships mean all things to all people." Overview Largely based on analysis and summary of the presentations made at the Symposium, this report examines the philosophy of PPPs in light of the transportation system. It reviews earlier work, presents examples of successful arrangements, explores institutional and financial barriers and their role in the innovation process, and sizes up future prospects and opportunities. PPPs in U.S. History Although PPPs often assume a kind of cachet in the present, their history as noted by one of the Symposium speakers, Richard Norment, is as old as capitalism in the United States. For example, in 1736, Benjamin Franklin formed a partnership that began the nation’s first volunteer fire department and the first fire insurance company. Under its terms, the fire department would respond to a fire in any house that had a fire insurance policy in good standing, thus promoting insurance sales while building fire-fighting capacity in the city of Philadelphia. The Erie Canal, a partnership that changed the economic course of New York, was a partnership between state government and local immigrant workers; remarkably, there was no Federal involvement during the construction of this canal. Findings of Earlier PPP Reports In keeping with their closely aligned relationship to the science and technology initiatives of the Department of Transportation, the first two editions of the PPP report presented a decided bias toward research and development projects. Findings of Public/Private Partnerships: Implications for Innovation in Transportation The report provided an assessment of PPPs, the challenges they face, and their potential within the nation’s transportation system. PPPs in transportation have had modest success as compared to other public policy agendas. Some factors that act to impede success are divergent motivations, limited resources, evolving legal constraints, and changing agendas among participants. The report recommends preventive strategies to minimize the impact of these challenges. In order for transportation-related partnerships to achieve a fuller potential, additional efforts are needed to leverage existing R&D investments and build new ones, possibly as part of the overall R&D investment environment. The first report discussed three innovative partnerships that stand out as collaborative examples. For surface transportation, there is a Partnership for a New Generation of Vehicles (PNGV). PNGV addresses governmental concerns with ensuring a cleaner environment and maintaining natural resources. A prominent example on the aviation side is the Advanced General Aviation Transport Experiments (AGATE) Consortium, which addresses government concerns over industrial revitalization and air passenger safety.6 The Fuel Cell Technology Development for Marine Applications initiative demonstrates the Federal Government’s support for alternative energy technologies. These three examples have produced innovations that benefit a broad spectrum of clearly established Federal interests. Findings of Public/Private Partnerships II: Engines for Innovation in Transportation This was the second in a series of studies of the potential for PPPs to stimulate the development and deployment of advanced transportation-related technologies. As in the first report, descriptions and assessments of four actual partnership examples illuminate important factors such as the motivations and agendas, resources, and legal and institutional frameworks of the participants. The first case study describes an initiative of the National Highway Traffic Safety Administration (NHTSA) and the Crash Injury Research and Engineering Network (CIREN). The CIREN partnership aims to undertake basic medical research to benefit transportation safety. The second example is the Clean Cities Initiative, a Department of Energy program that seeks to stimulate the voluntary deployment of alternative fuel vehicles in response to legislative mandates. Third, the Next Generation High-Speed Rail Program (NGHSR) represents a series of partnerships between government and industry to promote commercial high-speed intercity passenger rail service in the United States. The fourth case study concerned the Fraunhofer Society in America, an example of how another developed nation, in this case Germany, manages PPPs for technological development and deployment, and of how this model is exported to another country. Background Conditions and Characteristics of Transportation Partnerships True partnerships – as distinct from simple grants, contracts, or even subsidies – represent a way for the Department of Transportation (DOT) and other agencies to achieve strategic goals while avoiding possible duplication of R&D efforts. They also economize resources, speed up the innovation process, and establish a culture of cooperation that can have long-lasting benefits to the agencies and to society. Partnerships of both public and private sector participants are instruments that help ensure that higher-risk, higher-payoff projects are properly cultivated in the planning and budgeting process. DOT actively supports and initiates partnerships and collaborations among its operating administrations and other government agencies, businesses, and universities to leverage resources and broaden the range of transportation expertise. R&D Partnership Activity in the Department of Transportation Toward the late 1990s, DOT and other Federal agencies with transportation interests collaborated to form a national, transportation science and technology strategy. Affirming that the United States can best profit from its investments in research through the exchange of people and ideas among governments, industry, and academia, the group identified 13 technology partnerships.7
These partnerships address national priorities, and typically involve technologies that are mature enough to allow development of implementation partnerships among elements of the public and private sectors. Since state and local governments and industry provide most transportation systems and services, the appropriate Federal role to bring them into service is to establish partnerships with appropriate organizations. This enables the participants to focus their collective resources and capabilities on addressing the long-term needs of the transportation system with the new technology options. Rather than encompass formal research programs, the technology partnerships represent broad-based collaborative efforts in key technology areas. These partnerships vary in terms of their maturity, with some representing well-established R&D activities and others requiring further definition and interagency coordination. Yet, all of the partnerships focus on the innovation process: getting technology into the marketplace cheaper, faster, safer, and in an environmentally friendly way. The Department’s role in these efforts includes strategic planning; reducing barriers; promoting national technical standards, fostering private sector investments, and stimulating creative financing for technology deployment. Reasons for Partnerships At their best, partnerships economize resources, speed up the innovation process, and establish a culture of cooperation that can have long-lasting benefits to the agencies and to society. Private-public partnerships are instruments that help ensure that higher-risk, higher-payoff projects are properly cultivated in the planning and budget process. Still, these should balance against potential risks, including loss of control, possible increased costs, political accountability, and vulnerability, and issues of standards and quality and customer dissatisfaction. For example, in a 1998 presentation at the Volpe Center Symposium on Advanced Multimodal Transportation Weather Services, Maria Pirone stressed the need for a coordinated effort to partner public programs and initiatives with private sector capabilities in order to advance the weather industry to the next level.8 According to Ms. Pirone, both surface and air transportation systems will depend on this fusion of capabilities to reach their pinnacle, early in the next century. Good progress has occurred toward that pinnacle, but reaching the true summit remains a challenge. Some of these challenges and barriers are financial in nature; others are institutional, and technological. Others concern the delicate interplay between the respective roles of public and private sector participants and the imprecision of current boundaries and responsibilities between public good versus private gain. Partnership Models Several partnership models exist with varying degrees of formality, scale, and end use. They include transportation projects involving themes of construction, technology, operations, research, and education. No single model fits all situations. Partnerships help ensure that higher-risk, higher-payoff projects are encouraged, but they also carry potential risks. These risks or barriers to success may be financial, institutional, and technological. Other risks concern the roles of public and private sector participants, and the imprecision of current boundaries and responsibilities between public good versus private gain. Partnership arrangements have branched off into a broad collection of partnership models with varying degrees of formality and scale (see Box 1). End use is one way to classify PPPs. Partnerships created to develop large infrastructure projects (e.g., the Route 125 project in San Diego County) may run into the hundreds of millions of dollars. On the other hand, R&D partnerships (e.g., development of new algorithms or models) or education partnerships (e.g., training programs) may involve relatively modest sums, despite their intrinsic potential payoffs. Technology partnerships (e.g., intelligent vehicles) and operations-oriented partnerships (e.g., traveler information systems) may differ widely in both funding and scope.
One pure type of partnership is the Cooperative Research and Development Agreement (CRADA), a legal agreement between a Federal laboratory and a non-Federal party to conduct specified R&D efforts consistent with the mission of the Federal laboratory. Created from the Stevenson-Wydler Technology Innovation Act of 1980, as amended by the Federal Technology Transfer Act of 1986 (FTTA), CRADAs encourage the transfer of commercially useful technologies from Federal laboratories to the private sector. Other common types of arrangements involve a Federal and state government partnership, with or without participation by private industry or universities. Non-Federal partners may provide funds, personnel, services, equipment, facilities, intellectual property, or other resources needed to conduct a specific R&D effort. The Federal laboratory may provide similar resources but may not directly provide Federal funds to the non-Federal CRADA partner. The Federal Government protects any proprietary information brought to the CRADA effort by the non-Federal partner, thus providing a true collaborative opportunity. Financial Structures Public financing may take the form of grants, loans, in-kind support, bonds, and equity. Other partners may need to find matching funds, or determine the appropriate levels of their contributions to the project. Often viewed as prerequisite for a bona fide partnership, the participation of a commercial enterprise may generate large amounts of private capital and resources to supplement government funds. Participants need to assure themselves that all contributions – funds or payments in–kind – adequately reflect both risks and payoffs of participation. Finance mechanisms may vary with generic focus of project PPP (i.e., whether it is building infrastructure, supporting operations, undertaking R&D, or stressing education) as well as with project evolution. Structural terms of the agreement should contain enough incentives to ensure that public funds are well represented in the probability of future success. Public agencies also may have to adjust their cultural perspectives to recognize the inherent importance of revenue generation and profits to private industry in order to sustain interest and optimize the collective expenditures of participants. Very large, capital spending partnerships may be fraught with political, institutional, and economic complexities, where the financial and legal roles of participants assume enormous presence as the project unfolds. Such monumental efforts may require a unique set of financial and staffing arrangements that differ significantly from those needed for more modest undertakings. Attributes of Successful PPPs What are the core qualities of a successful PPP? The following list is an initial starting point, but other attributes also can be included. Projects highlighted in the May 2001 Symposium all possess the basic characteristics that help to overcome barriers – anticipated or unanticipated – that sometimes arise during the course of a PPP.
The transportation community needs to build partnerships, and DOT is one logical focal point for establishing and maintaining this type of effort – strengthening internal linkages and coordinating with other Federal agencies and labs. Other opportunities exist to collaborate with state and local governments, especially those with unique needs or limitations. Beyond the public sector, partnerships with traditional allies – universities, non-profits, and labor unions – continue to offer fruitful possibilities for joint efforts. Private industry also offers enormous opportunities for collaboration on projects where dissimilar motivations can couple in common purpose. The overall challenge is to strategically construct these linkages to best serve the transportation system. Symposium on Implementing Successful Public/Private Partnerships in Transportation The May 2001 Symposium— a midstream assessment of transportation partnerships — brought together a range of topics and nearly 75 participants (see Appendix B for a complete list), resulting in a stimulating, informative event. Five separate sessions covered the rationale for partnerships, details on successful ongoing initiatives, discussion of institutional barriers, and analysis of future opportunities. Luncheon and dinner speakers also imparted guidance and insight into PPPs and their benefits to transportation and other sectors. In simplest terms, PPPs are an approach to problem solving whereby resources or capacities of different organizations are pooled in common purpose. Variations on this basic theme, however, are almost as numerous as the partnerships themselves. To accurately measure the success of partnering arrangements, one must also weigh the ability of the partnership to conquer institutional and financial barriers along the way toward achieving common goals of the project. In many ways, PPPs are the natural outgrowth of three trends established in the late 20th century: explosive development of technologies, democratization of information, and devolution of government. Persuasive evidence exists that partnerships are effective instruments for the times in which we live, and the nettlesome issues that we face. Objectives of the Symposium The meeting examined the philosophy of PPPs in light of the transportation system. Presenting examples of successful arrangements, exploring barriers and incentives, understanding the role of innovation, and sizing up future prospects and opportunities, speakers at the symposium reported their experiences and assessments to the group. Several partnership models exist with varying degrees of formality, scale, and end use. They include projects involving themes of construction, technology, operations, research, and education. No single model fits all situations. Partnerships help ensure that higher-risk, higher-payoff projects are encouraged, but they also carry potential risks. These risks or barriers to success may be financial, institutional, legal, and technological. Other risks concern the roles of public and private sector participants, and imprecision of current boundaries and responsibilities between public good and private gain. Questions dealt with the nature and characteristics of PPPs and motivating factors that give rise to them (see Box 2). Most partnerships are primarily traceable to failures of existing markets, and secondarily by desires to leverage resources, share risks, and access needed resources. Past partnerships provide lessons in finance, law, and institutional behavior. Incorporation of these lessons will improve practices going forward. While most PPPs – as an activity in common – must somewhere balance the public good versus private gain, many are inherently idiosyncratic, with different goals and irregular life cycles. Members of the PPPs also may have various exit strategies and plans for technology transfer or project close-out. All have implications for planning and evaluation, and therefore must have negotiated agreements in place early in the partnership process.
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 U.S. Department of Transportation |