In light of chronic funding shortfalls and waxing highway construction and maintenance demands, public private partnerships (PPPs) (often though not always in conjunction with road pricing) have been garnering increasing attention from government officials in the U.S. and abroad. Despite many strongly-held opinions on PPPs – both pro and con – systematic evaluations of their efficiency, effectiveness, equity, and feasibility are all too rare.

This paper is the first part of a research project that aims to rectify this shortage of careful, evenhanded, and rigorous analyses of PPPs by drawing on the research literature to develop a comprehensive PPP evaluation framework. Drawing on a careful and extensive review of the research literature, we (1) present the often misunderstood economic properties of highway and road infrastructure, (2) outline the rationales governments cite for engaging in PPPs, (3) review the various types of applicable PPP arrangements, and (4) describe the conditions and factors that influence the success of PPPs. In the final section, we emphasize the differences between financial and socio-economic evaluations of PPP in describing our proposed PPP evaluation framework for highway projects. These differences in focus – between shorter-term financial considerations and longer-term economic considerations – lead to an important point that PPPs are not revenue sources per se. Rather they are means by which projects can be financed, delivered, and operated, but may or may not do so more cheaply than through more traditional finance, delivery, and operation. To the extent that tolling may be implemented to generate a revenue stream for a private contractor, PPPs may allow governments to tap into new sources of funding. But in such cases it is the tolls that generate funding, not the PPPs.

Despite this, and despite the potential efficiencies of private sector development and operation, PPPs appear to public officials as a way to generate “free money” for highway projects. But, of course, neither lunches nor highway projects are free. In attracting private capital, PPPs often redistribute costs and risks between the public and private sectors in ways that are not always clear to all involved. When project responsibility and authority is explicitly allocated to either the public sector or the private actor with the most relevant expertise and experience, significant efficiencies can be realized.

Despite the desperate need for upgrades to California’s highway network, officials must approach the PPPs carefully to ensure that projects will generate public benefits that exceed public costs. Whether or not a PPP is a good deal for the public very much depends on the project specifics. When properly structured and managed, PPPs can bring significant public benefit, but poorly conceived projects may entail far more risk than enthusiastic public officials may realize. When it comes to PPPs for highway projects, the devil is indeed in the details.

Smart cards are gaining momentum as transit agencies across the country have been implementing them as a fare medium. Smart cards hold the promise of revolutionizing the way riders use transit, and how transit systems operate. But in order to adopt smart cards, transit agencies must purchase new equipment and upgrade their entire fare collection system – a very expensive process. In addition, many of the oft-touted benefits of smart cards are vague, and it is not at all certain if they are worth the high cost of implementation.

This study examines how transportation agencies in three metropolitan areas evaluated smart card systems – the only three major transit smart card cost/benefit analysis studies that we found in the U.S. by the date of data collection. In addition to these three studies, we also reviewed other less extensive analyses that only partially address issues associated with the implementation of smart card technologies as transit fare media. In reviewing documents from these analyses, combined with information collected in the previous steps of the research, we found that the analyses are neither consistent with one another nor definitive to provide any systematic evaluation of costs and benefits of smart card deployment. These shortcomings are mainly due to: (1) difficulty of estimating many of the qualitative benefits, such as convenience for transfers and comprehensive regional travel data, (2) a significant variation in quantitative cost estimates among the analyses for unclear reasons, and (3) difficulty in generalizing costs and benefits among cases with the unique organizational structures and particular political issues in different regions.

Given a lack of solid information available in the literature, we drew on the relevant studies available to identify the cost and benefit items of smart card media and systems and examine the level of reliability and certainty of information for these items. Then we developed a framework on how a proper transit smart card cost/benefit analysis ought to be conducted. With this proposed framework, we found that individual transit operators and multiple agencies bear the majority of the deployment costs, while transit users and individual operators enjoy most of the smart card benefits. The proposed framework sheds light for more comprehensive cost/benefit analysis to evaluate smart card transit fare systems in the current status of knowledge.