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Audit of transportation-related public private partnerships
Office of the Inspector General, US Department Of Transportation
In response to the attention given to US transportation-related PPPs, the Office of the Inspector General (OIG) of the US Department of Transportation conducted an audit of transportation PPPs.
Steer Davies Gleave assisted the OIG by providing independent assessments and technical analysis. Specifically, we analyzed the following issues:
- The cost advantages and disadvantages to the public sector of transportation PPP transactions compared to conventional project financing through the issuance of debt by government or quasi-government entities
- The benefits of PPPs to financial institutions and private investors as compared to the value realized by the public sector
- The extent to which PPPs result in operating efficiencies
How we did it
The relative value of public vs. PPP financing of a project depends in large part on the financial characteristics associated with the project and financing method. In response to this, Steer Davies Gleave created a valuation model that considered traditional tax-exempt debt and PPP financing approaches and applied it through a systematic approach that evaluated the valuation sensitivities of each approach to a variety of key financial parameters.
The model quantified the cost advantages and disadvantages to the public sector as well as the benefits realized by the private and public sector through traditional municipal financing vs. a PPP financing. The model also provided a side-by-side comparison of the net contribution to the public sector under each delivery approach.
Ultimately the analysis did not identify a single preferred option under all circumstances. Rather, an evaluation must be conducted based on the specific features of a particular project to determine whether PPP or traditional municipal financing is a better approach for that project.