Portman, Manchin Announce Value for Money Analysis Bill Included in Bipartisan Infrastructure Legislation
WASHINGTON, DC – Today, Senators Rob Portman (R-OH) and Joe Manchin (D-WV) announced that their bipartisan legislation requiring value for money analyses on federally-supported transportation loans has been included as part of the Infrastructure Investment and Jobs Act, the end result of bipartisan infrastructure negotiations they have both played a crucial role in over the past three months. Public-private partnerships, or P3s, are contractual relationships between a state or local government and a private entity. The relationship allows for more efficient and effective project delivery at a lower cost. According to the Federal Highway Administration, 36 states have passed P3-enabling legislation, yet the use of this financing tool is still quite small. The Congressional Budget Office states that P3s have accounted for only one to three percent of spending for highway, transit, and water infrastructure since 1990.
Portman and Manchin’s legislation requires Transportation Infrastructure Finance and Innovation Act (TIFIA) and Railroad Rehabilitation & Improvement Financing (RRIF) applicants with project costs over $750 million to conduct a value for money analysis as part of their application process. In addition, the bill requires the Build America Bureau (the Department of Transportation’s hub for funding and financing resources), to report to Congress on the utilization of P3s and best practices for project financing.
“Oftentimes public-private-partnerships (P3) produce high quality projects at a lower cost. With the vast amount of infrastructure improvements needed around this country, P3s are a helpful way in keeping taxpayer costs down,” said Senator Portman. “I am pleased that this legislation is included in the bipartisan Infrastructure Investment and Jobs Act as it directs DOT to require certain federally-supported projects to do a Value for Money analysis, an essential step for states and localities in determining whether or not a P3 would in fact be a less expensive, more efficient path forward for project delivery.”
“Public-private partnerships are valuable ways for states and localities to complete projects through financially sound solutions. Our bipartisan legislation will require states and communities to consider public-private partnerships when reviewing transportation project financing to ensure that we are making the best use of taxpayer dollars,” said Senator Manchin. “I’m pleased that our legislation has been included in the bipartisan infrastructure agreement and I look forward to working with my colleagues on both sides of the aisle to create fiscally responsible transportation infrastructure.”
The analysis would be required, at minimum, to involve an evaluation of: the life-cycle cost and project delivery timeframes; the costs of using public financing versus private financing for the project; a description of the key assumptions made in developing the analysis, including an analysis of likely federal grants and subsidies, the key terms of the proposed P3 agreement (including likely rate of return for private debt and equity); and a discussion of the benefits and costs associated with the allocation of risk and the determination of risk premiums assigned to various project delivery scenarios.
Note: In May, Senator Portman participated in a Senate Finance Committee hearing, where he asked witnesses about potential solutions to pay for major infrastructure upgrades, including public-private partnerships. He questioned whether the federal government should be encouraging value for money analyses to try and drive the use of P3s in project financing, in which witnesses said P3s are a powerful tool and that “those opportunities to partner with the private sector to increase the investment in transportation are extremely attractive.”