Guarantees property issues of land acquisition

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Unformatted text preview: ciated with the use of public funds: Davis-Bacon, Buy American, etc. Competition and anti-trust regulations Currency and profit repatriation rules Public sector borrowing restrictions Tax and accounting liabilities Adequacy of procurement and selection procedures Contract provisions Property and intellectual property laws regarding proprietary technologies and transfer of know-how Adequacy of oversight and monitoring procedures Authority of other public entities over infrastructure assets and access to them Authority to regulate services Ability for and restrictions on transfer of private sector contract responsibilities to other parties Major Surface Transportation PPPs in the Major Continental U.S. since 1991 1H 1T 1H 1H 1 1T 3T 1H 1H 4H 1T 1T 2H 1 1 2H 7H 1H 1H 4H 1H 2H 5H 3H 5H 1T *States with PPP projects over $53 million with Notice to Proceed by 1991 #H #T States with Major PPPs* (number of highway projects) Number of major highway capital projects delivered as PPPs by the State States with Major PPPs* (number of highway projects) Number of major transit capital projects delivered as PPPs by state 1H 1 H 2T 1T 1T Use of PPPs for Major Highway and Transit Projects since 1991 Transit Major Highway PPP Projects Since 1991 (44 Projects) Major Transit PPP Projects Since 1991 (13 Projects) BOT, 1 DBM, 1 DBOM, 3 DBFO, 2 DBF, 3 DBFO, 1 Concession, 6 BOT, 1 DB, 8 DB, 31 Major Highway PPP Project Costs Since 1991 (Total: $22,431 Million) BOT DBM DBFO DBF 0% 6% 2% 3% DB 54% Concession 35% Major Transit PPP Costs Since 1991 (Total: $7,384 Million) DB 43% BOT DMFO 9% 5% DBOM 43% (Project costs shown in millions of dollars) Primary PPP Approaches for Surface Transportation Projects in the Near Future in the U.S. DB DB (medium to large new or reconstruction highway projects; transit new (medium starts) DBOM DBOM (new tolled or non-tolled roads; transit) (new DBOM-F DBOM (primarily new toll roads) (primarily Concession Concession (primarily existing and new toll roads) (primarily Joint Development Agreement/Transit-Oriented Development Joint (JDA/TOD) (transit new starts) (transit MIT OpenCourseWare 1.040 Project Management Spring 2009 For information about citing these materials or our Terms of Use, visit: 1.040/1.401 1.040/1.401 Project Management Spring 2009 Private Finance Initiative Lecture 7 Fred Moavenzadeh Department of Civil and Environmental Engineering Environmental neering Massachusetts Institute of Technology Edited by Kyle Frazier Edited Private Finance Initiative Private „ „ „ Denationalization program of Margaret Thatcher (British Prime Minister in the 1980’s) Minister The concept of PFI was introduced in 1992. Unlike privatization the emphasis of PFI is not on “asset acquisition” but on “procurement of service” acquisition The Concept: „ “The Private Sector will provide funding for the capital project and will operate the facility to provide a public service” and „ “Revenue will be achieved either directly from the user or through a payment mechanism negotiated with the public through sector” sector Government’s Role: „ “Provision of public services,” not acquisition of capital assets. „ Arguments for popularity of PFI „ „ „ „ „ „ Primarily: Government budgets have been capped; thus less funding is available for acquisition of capital assets available Government’s ability to borrow has been curtailed (see above) Direct user fees provide a clear conduit for capital recovery, avoiding governmental bureaucracy. governmental Efficiency arguments: Design-Build-Operate nature of PFI projects allows for greater efficiency allows Private sector can/could manage and operate projects in a more efficient manner? manner? Implementation: „ „ „ Financially free-standing projects Joint venture projects Sale of services „ Issues of importance to success of PFI’s „ „ „ „ „ Educating government agencies (specifically local authorities) about “do’s” and “don’ts” of PFI service delivery Risks Legal limits Cost of capital (commercial roles vs. tax-free bonds) Bidding for PFI projects „ In the case of joint venture type of PFI, government authority is faced with: with: „ „ „ „ Whether the project will proceed at all; if so Whether the project will be procured traditionally or as a PFI one; if so How to choose aPFI ssupplier. PFI The last point is typically the main cause of contention between the governmental authority and PFI bidders. „ „ „ Large sums of money involved in bid preparation preparation Long negotiating time Lack of experience on both sides Construction Industry’s Role: Construction „ „ Since they know how to build and - on many occasions - how to maintain infrastructure projects, they werethe main players these types of PFI projects. infrastructure the main players these types of Their weaknesses: „ Lack of capital to participate in capitalization „ Lack of experience in operation & cos...
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