US Department of Transportation

FHWA PlanWorks: Better Planning, Better Projects

US Department of Transportation

FHWA Planworks: Better Planning, Better Projects

Public Private Partnerships


P3 and the Decision Guide

The use of Public-Private Partnerships (P3s) marks a shift away from traditional ways of procuring and financing highway projects. Under the P3 model, a private partner may participate in some combination of design, construction, financing, operations and maintenance, including collection of toll revenues. This approach provides promising tools for developing or expanding transportation infrastructure and for solving complex problems creatively and efficiently. Many states allow P3 in transportation planning and project development, either through blanket policies or on a project-by-project basis. Lessons learned from pioneering projects indicate that early consideration of P3 increases the likelihood of success for both the public and private entities involved. See FHWA's Center for Innovative Finance Support Website (Reference Links) for more information.

Three areas of information support this application:

  1. P3 and the Decision Guide (below). Each of the four planning phases provides opportunities to educate decision makers and stakeholders about P3s.The Decision Guide describes when and how to include P3 considerations, including questions to consider, data, relationships to other topics, and examples from current practice.
  2. Revenue Generation. Mechanisms such as value capture and tolling or congestion pricing can provide additional sources of funding for traditionally-delivered as well as P3 transportation projects.
  3. Innovative Financing. Innovative sources of financing can leverage revenues that are expected in the future (such as revenue from tolls) to allow investment in traditionally-delivered as well as P3 projects. Financial resources made available by P3 may free up traditional funding to be applied to other projects.

Application Roles Example

The role of each partner changes from one Key Decision to another. Understanding partner roles and how they change throughout the process is essential to successful collaboration. The Decision Guide describes the four possible roles for partners at each Key Decision:

Application Role Index Table

lrp-icon
LRP

This is going to be replaced with a description for Long Range Transportation Planning.

pro-icon
PRO

This is going to be replaced with a description for Programming phase in the Decision Guide.

cor-icon
COR

Corridor Planning I'm sure has an important description that will be replaced with this sample text.

env-icon
ENV

Evironmental Review (NEPA) Merged with Permitting something something.

norole-icon
No Role

Does not participate because the resulting action is outside the agency’s interests and requirements.

LRP-1
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/LRP-1

Explore whether revenue generation strategies such as tolling or value capture taxation are potential revenue sources for the LRTP. Identify internal or external financial experts to provide input. If there is no interest or ability to support these strategies at this point, you may wish to reconsider during environmental review.
LRP-2
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/LRP-2

Evaluate whether regional goals are related to the use of innovative sources of financing and revenue as well as innovative procurement models.
LRP-3
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/LRP-3

Define evaluation criteria related to revenue generation, access to alternative funding, and technical innovation; the specific measures that will be assessed; and analytical methods to apply in scenario analysis.
LRP-4
This Key Decision is not associated with application.
LRP-5
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/LRP-5

Reach consensus on the ability to include innovative financing options in fiscal constraint.
LRP-6
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/LRP-6

Based on agreements to consider P3, incorporate strategies related to tolling and the use of alternative revenue and financing sources.
LRP-7
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/LRP-7

Incorporate P3 into scenarios for evaluation and comparison with other regional priorities.
LRP-8
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/LRP-8

Consider the role of P3 financing and associated revenue generation in achieving the plan goals to inform the selection of a preferred scenario.
LRP-9
This Key Decision is not associated with application.
LRP-10
This Key Decision is not associated with application.
LRP-11
This Key Decision is not associated with application.

PRO-1
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/PRO-1

Identify new financial developments and funding sources, including the use of P3 financing.
PRO-2
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/PRO-2

Ensure that the methodology for allocating revenue and identifying costs is inclusive enough to cover P3.
PRO-3
This Key Decision is not associated with application.
PRO-4
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/PRO-4

Identify how P3 financing may impact the full list of projects for prioritization in the TIP and STIP.
PRO-5
This Key Decision is not associated with application.
PRO-6
This Key Decision is not associated with application.
PRO-7
This Key Decision is not associated with application.
PRO-8
This Key Decision is not associated with application.
PRO-9
This Key Decision is not associated with application.

COR-1
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/COR-1

Decide whether P3 may be considered as a potential project delivery mechanism. Identify resource and information needs and identify relevant partners and stakeholders.
COR-2
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/COR-2

Identify challenges and opportunities for P3 development. Consider the financing and revenue potential of the corridor if developed through P3. Conduct industry and stakeholder outreach to refine project scope.
COR-3
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/COR-3

Determine the relationship between corridor goals and the use of innovative sources of financing, revenue, and procurement.
COR-4
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/COR-4

Identify how potential impacts associated with P3 and innovative financing strategies should be considered during environmental review.
COR-5
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/COR-5

Identify evaluation criteria, performance measures, and analytical methods related to the use of innovative sources of financing, revenue, and procurement that can be used to assess the feasibility of P3 solutions in the corridor.
COR-6
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/COR-6

Evaluate and compare the proposed solution sets based on the use of P3 options to deliver one or more projects within the corridor. The use of P3 could influence the number of projects to be built in a corridor and the timing of the delivery of those facilities.
COR-7
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/COR-7

Identify specific solutions that best suit P3 development.
COR-8
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/COR-8

Gather private sector stakeholder input on criteria for prioritization.
COR-9
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/COR-9

Consider impact to overall project prioritization based on P3 participation.

ENV-1
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/ENV-1

Reach agreement that the project has the potential to include P3-supportive revenue generation strategies or user fees designed to manage congestion (e.g., tolling). Identify data, resources, and stakeholders related to the revenue generation strategy to include in the ENV process.
ENV-2
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/ENV-2

Validate that the brief description of the action and possible alternatives included in the NOI are broad enough to include a potential P3.
ENV-3
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/ENV-3

Use information from planning or other previous studies about financial feasibility and/or tolling in the development of the purpose and need.
ENV-4
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/ENV-4

Consider input from private sector stakeholders when defining the study area to facilitate flexibility in the subsequent design of the project.
ENV-5
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/ENV-5

Identify evaluation criteria related to project operations, financing, revenue generation, and project delivery, as well as criteria and methods to evaluate potential impacts and benefits of a P3.
ENV-6
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/ENV-6

Identify alternatives that will support the use of innovative sources of financing, revenue, and innovative procurement models consistent with the adopted purpose and need.
ENV-7
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/ENV-7

Consider if there are P3 supported alternatives that are fatally flawed and must be eliminated. Validate or revise previous funding/prioritization assumptions as required.
ENV-8
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/ENV-8

Compare all the impacts of alternatives developed through P3 with respect to financing, revenue, and technical analysis.
ENV-9
This Key Decision is not associated with application.
ENV-10
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/ENV-10

Ensure the preferred alternative is consistent with P3 assumptions incorporated in the long-range plan and purpose and need.
ENV-11
This Key Decision is not associated with application.
ENV-12
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/ENV-12

Reach agreement on any mitigation actions required to avoid potential negative impacts. Consider implications of the private sector stakeholder role in the permitting process including providing support for approval of the permit.
ENV-13
This Key Decision is not associated with application.
ENV-14
https://fhwaapps.fhwa.dot.gov/planworks/DecisionGuide/Step/ENV-14

Consider implications of the private sector stakeholder role related to any advance mitigation.

Revenue Generation

Revenue is different than "Innovative Finance" and encompasses tolling, pricing, taxes, loans, and the relatively new topic of value capture. Below are some brief descriptions with examples to help navigate the options for revenue generation.

Tolling has become a familiar approach to revenue generation in recent years where the private sector assumes both the risks and potential benefits of highway expansion. Direct user fees generate revenues and may result in economic benefit. Few facilities can be fully financed using toll revenues alone; most projects will require a combination of revenue sources to work.

Example: E-470 Tollway

Pricing is a broad strategy that generally imposes user fees that vary based on the travel demand on a highway. Fees may vary based on different travel conditions such as peak-period, congestion, market-based pricing, and other factors.

Example: 35Express

State taxes are the traditional revenue sources for transportation. Taxes may be placed on motor fuel, vehicle registration, and other taxes such as general fund revenues. For more detail see State Revenue Sources.

Sales taxes are more common at the local level where taxes and fees are authorized at the state level or approved by voters. For additional information see Local Revenue Sources.

Federal-aid highway funds are available through a variety of mechanisms including bonds, loans, and matching funds. For the wide-range of options in this category see Federal-aid Fund Management Tools.

Value capture is another approach to revenue generation that has not generally been used with highway P3 projects in the past. However, MAP-21 authorized new ways to expedite multiple loan request under a single loan agreement with the Federal government.

Example: I-405 Improvement Project

For additional information, visit the FHWA Center for Innovative Finance Support where you can reach out to experts in many aspects of revenue generation who are available to provide information and assistance.

Innovative Financing

Traditionally, agencies have used public funding and bonds for transportation projects.With P3s there are more financing options available.In addition to private banks and bonds that the private sector has access to,there are a range of finance tools for P3 projects - including innovative programs offered by USDOT.Private sector partners can bring expertise in arranging complex project financing packages, and help assume financial risk.