Management & Operations

Pub Perspective: Growth in contracting gives agencies more tools in the toolbox

Posted on July 10, 2017 by James Blue

Transdev
Transdev

As public transportation budgets and political support have grown in the U.S. and elsewhere, so too has the interest in using private operators. Whether out of local political climate or a desire to have more flexible options for delivering services, outsourcing presents both challenges and opportunities. In short, each circumstance is different.

Factors affecting growth
A variety of factors have contributed to the growth in outsourcing to a private operator. Not least of these is expediency, but the growth differed slightly by industry sector. In U.S. commuter rail, for example, the best way to get new service up and running was to contract to Amtrak or several private rail firms. In paratransit service, new regulatory demands in the wake of the 1990 Americans with Disabilities Act drove a need to control cost of compliance, and the best way for many agencies to do that was to turn to specialty operators. Particularly in the U.S. Sunbelt, such as in Las Vegas and Phoenix, where there was little existing transit service but a rapidly growing need, agencies turned to contractors. Others, such as Denver and San Diego, sought a mix of privately provided and directly operated service.

More recently, the growing interest in alternative project delivery for new capital investments has increased demand for contracting. Examples include Denver’s Eagle P3 commuter rail service, but the state of Maryland is now also seeking to use a similar model for its Purple Line light rail project. Most ambitious of all is the California High-Speed Rail program’s plan to use international consortia not only to design, but also to operate and partially finance the network. Internationally, service delivery through contracted or franchised arrangements with private firms is the rule, not the exception.

Not exactly a new idea
Of course, in many ways this is a “back to the future” return. This century’s twist, however, is how best to manage public sector control and the issues in the public interest. Key issues include risk sharing, incentives, and performance monitoring. Each situation is different.

In the U.S., we are in the early days of this new era. So far we seem to be doing this incrementally, and it is probably wise. We can learn much, however — both what to do and what to avoid — by looking to international examples in Britain, Australia, and perhaps most appropriate of all, Canada. The latter will be a good laboratory as we learn more about what the Trump Administration would like to do with private sector involvement in infrastructure investments.

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