Evaluating the Potential Economic Efficiency of Project Delivery Options

This paper illustrates a comparison of the incremental costs and benefits of alternative delivery options for highway projects that used the FHWA's P3-VALUE analytic tool for much of the computation. The hypothetical example project consists of (a) upgrading an urban freeway with added express toll lanes, (b) possibly delivering the project via a public-private partnership concession, (c) possibly transferring the revenue risk back to the public agency via availability payments (APs), and (d) possibly substituting a hybrid payment mechanism that compensates the operator with a fixed AP plus shadow tolls paid on the basis of person throughput. Under the hybrid payment mechanism, the concessionaire would continue to set toll rates to ensure efficient operations (as under a normal toll concession), but all toll revenue would go to the public agency, as in an AP concession. The multipart payment strategy would potentially restore incentives for ensuring optimal utilization of the facility. The goal is to maximize economic efficiency, which is assessed by using benefitcost analysis. The evaluation explores the conditions under which the features considered would be incrementally beneficial.