Using Public-Private Partnerships to Expand Subways: Madrid-Barajas International Airport Case Study

Abstract

In the beginning of 2006, the regional government of Madrid decided to expand the subway network to the new Terminal T-4 in Madrid-Barajas International Airport using a public-private partnership (PPP) approach. Owing to the peculiar characteristics of this new access as the enlargement of an existing subway line, the PPP approach was based on separating infrastructure management from transportation service operation. The PPP contractor was entrusted with the infrastructure construction and maintenance while Madrid’s public subway company remained in charge of operating the trains. This paper examines the theoretical foundation that justifies the implementation of different PPP approaches to deal with urban rail projects. The paper then explains the reasons why a nonintegrated PPP approach was ultimately adopted for the expansion of Madrid’s subway network to the airport. From the outcome of the tender and the present operation performance, we find that nonintegrated PPP contracts have important advantages for urban rail PPPs, particularly for conventional subway networks. These advantages are notable in terms of encouraging economies of scale and density, boosting competition, and reducing the financial costs.