5 November 2020

Bundling of public private partnerships (PPPs) to create efficiencies and economies of scale

5 November 2020

Pennsylvania Rapid Bridge Replacement P3

Context

  • In light of Pennsylvania having over 4,500 bridges classified as structurally deficient, the Pennsylvania Department of Transportation (PennDOT) decided to prioritize infrastructure repair and replacement work

Problem

  • PennDOT estimates it would take 8-12 years to replace the bridges through a traditional procurement process
  • Many of the bridges are located in rural areas with low traffic volumes, hence PPP solutions are not attractive for investors

Innovation

  • 558 of the bridges to be replaced were bundled together as part of a single PPP procurement package
  • The PPP deal involves the design, build, finance, and maintenance (DBFM) of the bridges over a 28-year term
  • Selected bridges are of similar size and design, allowing for standardization

Stakeholders Involved

  • PennDOT — Project owner
  • Plenary Walsh Keystone Partners (PWKP) — Consortium responsible for delivering PPP project
  • Welsh Investors — Project sponsor and equity investors in the PWKP consortium
  • Plenary Group — Project sponsor and equity investors in the PWKP consortium; also acting as financial arranger

Results/Impact

  • Bundling of the bridges is expected to reduce the total cost of the project by 20%; the average cost of building and maintaining each bridge in the PPP contract is USD 1.6M, significantly lower than the USD 2M estimated through a standard process
  • Construction of bridges is expected to take 4 years under the PPP bundling procurement method, much faster than the 8-12 years estimated using a traditional procurement method
  • As of January 2019, more than 500 bridges have been completed

Key lessons learnt

  • Bundling of assets provides the scale necessary for smaller projects to be procured viably as PPPs
  • Packaging assets with similar characteristics allows for more efficient delivery through (1) standardization of design and (2) innovative delivery methods (e.g., prefabrication of bridge components off site)
  • PennDOT had the necessary institutional capabilities to set up and deliver the PPP; the PennDOT’s PPP Office and the PPP Board had been established under the 2012 Public-Private Transportation Partnerships Act"
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