Methodology to Screen Candidate Public–Private Partnership Projects for Financial and Economic Viability

Abstract

This paper demonstrates a screening analysis to assess the financial and economic viability of public–private partnership (P3) projects involving priced managed lanes in metro areas. The methodology uses the P3-VALUE 2.3 analytical tool, which is capable of performing financial and benefit–cost analyses to evaluate the viability of highway projects delivered through P3s. The methodology is demonstrated using alternatives for a hypothetical existing six-lane freeway segment (three lanes per direction inclusive of one high-occupancy vehicle [HOV] lane per direction). Alternatives evaluated included (1) adding a single new high-occupancy toll (HOT) lane per direction with free service for HOVs with three persons or more (HOV3+) as a replacement for the existing HOV2+ lane, which would become a general-purpose lane; (2) converting the existing HOV lane to a HOT lane and simultaneously converting the right shoulder to a part-time shoulder travel lane, with surplus revenue dedicated to support multimodal improvements and cash rewards for transit riders and carpoolers; and (3) adding a new HOT lane and converting the adjacent HOV lane to a HOT lane, while converting the right shoulder to a part-time shoulder travel lane. The evaluation suggests that, for the hypothetical freeway, P3 delivery of Alternative 2 would be financially viable with a small government contribution, would affect the sponsoring agency’s budget positively over the proposed 50-year P3 concession, and would generate significant net social welfare benefits. Where right-of-way is limited, the other two alternatives would require significant government contributions while generating smaller net social welfare benefits.