Article
Infrastructure Act advances U.S. public-private partnership growth to support community project delivery
Dec. 20, 2021
The Infrastructure Investment and Jobs Act (IIJA) was signed into law on Nov. 15, 2021, promising a long-awaited and significant capital infusion into our nation’s physical and digital infrastructure. The $1 trillion bill includes approximately $550 billion in new investments across all key infrastructure sectors: roads and bridges, public transportation, water and sewer, energy and broadband.
While the IIJA did not explicitly create funding mechanisms designed to attract private capital, there are several provisions within the bill that indirectly do just that. For anyone tracking public-private partnership (P3) projects and opportunities in the U.S., this is a very exciting proposition. Although commonly used in many other parts of the world, the P3 approach to developing major infrastructure is considerably rare in the U.S. at this time. While there has not been a single conclusive study of the space, it is believed that while P3 projects represent between 5% and 20% of total infrastructure spending in other developed countries, in the U.S. that proportion is closer to 1% to 2%. Historically, P3s have not been as favored in the U.S. for a wide range of reasons. However, the confluence of an ever-growing major infrastructure needs backlog at the local, state and national levels, combined with significant funding coming to state and local governments from the recently passed IIJA, suggests that there may be a growing appetite for alternative project delivery models.
IIJA provides P3 growth opportunities
The following are several ways the IIJA could help P3s gain popularity in the coming years.
- Value for Money analysis requirement: One reasons for the slower uptake of the P3 model in the U.S. is the general lack of an incentive and/or regulatory structure that encourages public entities to explore this method of project delivery instead of other more traditional methods. The IIJA attempts to begin to address that through a new requirement that all projects over $750 million applying for Transportation Infrastructure Finance and Innovation Act (TIFIA) or Railroad Rehabilitation and Improvement Financing (RRIF) funding complete a Value for Money (VfM) analysis to determine the delivery approach (public vs. private vs. P3) that would generate the most value over the life of the project.
- Expanding TIFIA: On a related note, the IIJA also expands the TIFIA program scope to include transit-oriented development (TOD) and airport upgrades and modernization. Both TODs and airports have historically favored P3 development given the public/private nature of both their use and ownership.
