In the search for new sources of funding, federal, state, and local government officials in the U.S. have recently been exploring public private partnerships (PPPs). While promising, PPPs are neither a panacea nor an unwarranted gamble: both shining successes and troubling failures abound. Given the large variation in the efficiency, effectiveness, equity, and feasibility of public-private highway finance partnerships in past projects, federal and state officials have been enacting legislation and statutes to both promote PPPs and to protect public interests from the potential pitfalls of PPPs.

In this paper, we review past U.S. legislation to promote and/or limit PPPs on transportation projects in order to evaluate their relationship with the recent planning and implementation of highway projects through PPPs. We also carefully examine existing state legislation that address issues on economics, public finance, and governance as well as technical details of PPPs in order to provide an overview of the status of legislative settings pertinent to PPPs in the US.

Legislation sets the ground rules by which a public agency and private firms can settle on an appropriate PPP scheme among the many different forms of PPP available for designing, constructing, operating/managing, and/or financing transportation infrastructure. Specifically, legislation sets conditions that: 1) either promote or prevent PPPs for highway projects, 2) provide foundations for contracts between a public agency and a private firm, and 3) affect risks involved in PPPs for both parties. Legislation is the higher hierarchical instructional setting that determines the level of flexibility in contract negotiation between transportation agencies and private firms and, ultimately, the success of PPPs. While states with PPP-related legislation appear to have reached consensus on several issues (such as allowing for design-build projects, long-term leases, and use of the Transportation Infrastructure Finance and Innovation Act—TIFIA—funds), there is a huge variation among the same states in how best to deal with other issues (such as restricting what types of transportation projects are eligible for PPPs). This variation in legislation reflects each state’s general philosophical orientation toward PPPs: 1) aggressive (Indiana, Texas, and Virginia), 2) positive, but cautious (Arkansas and Minnesota), and 3) wary (Alabama, Missouri, and Tennessee). In addition, there are some issues and a certain level of details, such as toll rates and non-compete clauses that are more often worked out in contracts by the parties involved in projects that vary significantly in scope, scale, and setting.