What Does the Bipartisan Infrastructure Law Do for Public-Private Partnerships?

The new Infrastructure Investment and Jobs Act (IIJA) may not have a lot of new public-private partnership (P3) programs, but there are some aspects which should be helpful to organizations that are committed to P3 approaches or anxious to maximize their investment and project delivery capacity.

The IIJA does advance new requirements for value-for-the-money analyses. Value-for-the-money analyses consider life-cycle project costs under an array of project delivery options, including P3 approaches, to assess the delivery alternative with the best value over the full life of the asset. The policy intent of more value-for-the-money analyses is to ensure transportation operators become more familiar with these analyses and understand their benefit in programming capital projects and prioritizing project selection.

IIJA specifies (Section 11508) that all projects seeking federal assistance and are using a public-private partnership project delivery method are required to have completed a value-for-the money analysis. This section also requires the public partner to submit a project review to USDOT no later than three years after the P3 project opens to traffic that indicates whether or not the private partner complied with the terms of the P3 agreement. The public partner is required to provide USDOT with a certification of the private partner’s compliance with all terms of the P3 agreement, noting areas of non-compliance with each term of the agreement with a description of the nature of each violation.

The new infrastructure law also requires in Section 70701 that all projects seeking financing from the Transportation Infrastructure Finance and Innovation Act (TIFIA) or Railroad Rehabilitation and Improvement Financing (RRIF) programs with a total cost of $750 million or more must undergo a value-for-the-money analysis. 

Additionally, Section 71001 creates an asset concession and innovative finance assistance program. The purpose of the program would be “to facilitate access to expert services for, and to provide grants to, eligible entities to enhance the technical capacity of eligible entities to facilitate and evaluate public-private partnerships in which the private sector partner could assume a greater role in project planning, development, financing, construction, maintenance, and operation, including by assisting eligible entities in entering into asset concessions.” Eligible entities would be able to apply for up to $2 million for technical assistance or to retain expert services to assist in establishing a concession agreement. While the intent is to provide federal assistance to help organizations in creating rather complex and often nuanced P3 agreements, there is an unfortunate requirement in the section that requires the Transportation Secretary to ensure, as a condition of receiving a grant under this section, “the terms of the asset concession shall not result in any increase in costs under the asset concession being shifted to taxpayers the annual household income of whom is less than $400,000 per year, including through taxes, user fees, tolls, or any other measure, for use of an approved infrastructure asset.” While this was a recognition of the Biden Administration’s commitment to not create new tax burdens for working families, the requirement may suppress interest for many projects that are contemplating pricing as an aspect of their financial plan. 

Several other aspects of the IIJA may not directly target public-private partnerships but should have a favorable effect on the project financing environment for P3 project delivery models. The most significant of these is the overall increase in federal funding available across the board. USDOT points to nearly a 29% increase in federal-aid funding for highway programs and activities. Additionally, there are more than a dozen new programs that have been introduced with new funding opportunities. Overall, more federal spending may create more transportation projects in the pipeline that could benefit from P3 project delivery approaches. Finally, IIJA provides more money in discretionary and competitive grant programs than ever before, which is open to many new transportation and mobility organizations, including toll operators. The broader eligibility for federal funding may create more openness to consideration of private project delivery models, especially as public staff resources are stretched and experienced staff in new eligible entities are limited. 

So, while IIJA may not aggressively promote more public-private partnerships directly, its emphasis on more life-cycle analyses of alternative project delivery methods and overall increases in funding and eligibility may represent fertile ground for increased private investment and project delivery in the years ahead.