FAQs > About Public Private Partnerships

What is a public-private partnership?

In its simplest form a PPP is a performance-based contractual arrangement between a government agency and a private sector entity. The skills and assets of each sector are shared to deliver a benefit to the public.

How do PPP’s work?

The Commonwealth of Virginia will sign an agreement with ERC in which ERC will build and operate the project in exchange for toll revenue over the life of the contract. The Commonwealth will always own and have oversight of the assets, and remain in control of the toll rate.

How was ERC selected?

In May 2008 in accordance with its Public-Private Transportation Act of 1995, VDOT initiated a procurement process for the Project. It is a multi-layer public process that involves extensive reviews by multiple parties, including the public, an Independent Review Panel and the Commonwealth Transportation Board. ERC has achieved financial and technical endorsement and is currently in negotiations with VDOT.

How is the public protected?

A detailed concession agreement/contract will give the Commonwealth clear powers and responsibilities of public oversight including setting the toll rate setting performance standards for ERC. The contract will requirements to ensure that the road is developed in accordance with all state and federal safety standards and that it is well maintained throughout the term of the contract. In the event of non-performance, the state can take the project back from the private sector. Further, ownership is not transferred and stays with the state.

How will ERC be monitored? What is VDOT or the Commonwealth’s role?

VDOT will continue to own the Project “infrastructure” (i.e. roadways, extensions, tunnels), all of the right of way, and will have complete oversight of ERC. As part of the process, VDOT will decide upon strict guidelines that must be met by ERC throughout the life of the contract.

Where else have PPP’s been done?

Public private partnerships have been used successfully all over the world to procure needed infrastructure, including schools, hospitals, roads and bridges. In the US more than half of the states currently utilize PPPs for infrastructure. Virginia has a strong and successful track record with using PPP contracts for state and local infrastructure projects.

Why do we need a PPP?

Funding constraints have prevented this project from being traditionally procured. Those constraints remain and, unfortunately, this project will not be possible without a PPP.

What are the benefits of a PPP?

There are a number of benefits of PPPs including:

• Expedited completion compared to conventional project delivery methods, which in turn, reduces project costs;
• Transfer of construction and management risk to the private sector partner;
• Guaranteed fixed price and cost of operations over the life of the contract;
• Improved quality and system performance from the use of innovative materials and management techniques; and,
• Access to new sources of private capital.

How is this PPP structured?

The Commonwealth will retain ownership and enter into a detailed concession agreement (contract) with ERC. The contract will outline rights and responsibilities of each party including detailed performance measures and requirements. Because the Project requires a large amount of funding, loans to secure that capital must be extended over a long-term period to keep the toll range affordable. It is anticipated that the concession will last for 50 years, during which VDOT has ultimate control of services provided and the toll rate.