Further Thoughts on Revenue-Risk Concessions

by Robert W. Poole, Jr., Director of Transportation Policy, Reason Foundation

This is the third in a series of opinion pieces by Bob Poole and P3 practitioners in which they argue the merits of the revenue risk (Poole) and availability payment (practitioners) models for DBFOM delivery of infrastructure projects. The series is available on our website (pwfinance.net) under “Reprints”.

I appreciated last month’s defense of Availability Payment (AP) concessions, and agree with much of what the authors had to say. Design/build/finance/operate/maintain (DBFOM) is a major advance over traditional design/bid/build which focuses only on the lowest bid to build a standardized design. It’s also a big improvement over design/build, since it focuses on lowest life-cycle cost. I also agree that since either form of DBFOM is better than older procurement methods, there are cases where AP concessions, all things considered, can be a good choice for a transportation agency; I provided examples in my November 2017 Reason policy paper on the subject.