Cost Overrun in Public-Private Partnerships: Toward Sustainable Highway Maintenance and Rehabilitation

Abstract

Transportation agencies worldwide have been preparing themselves to face the growing demand for transportation infrastructure by forming public-private partnerships (PPP), contractual agreements formed between public and private sector entities, to allow for greater private sector participation in the delivery of transportation projects. However, there is one major concern that needs to be addressed: the issue of accurately estimating maintenance and rehabilitation costs at the project planning stage. The accuracy of these estimates plays a significant role in determining project characteristics, and in selecting appropriate projects and PPP approaches for implementation, so that they may lead to sustainable highway preservation strategies. This paper compares the contract winning bid cost with the final as-built cost of highway maintenance and rehabilitation projects, determines possible cost overruns across the projects and identifies influential factors that affect them. The analysis is performed separately by PPP contracting approach, and thereby relaxes the assumption of past research that cost overrun behaves identically across different contracting approaches. The results show that a number of factors play a role in the determination of cost overrun, including the project size (cost, duration, and length) and specific maintenance and rehabilitation activities.