Public-Private Partnership Examples

Why This Matters

Public-private partnerships (PPPs) sit at the intersection of two major course themes: government resource allocation and market efficiency. When you encounter PPP questions on the exam, you're being tested on your understanding of how governments balance risk transfer, upfront capital needs, and long-term public interest against private sector goals of profit maximization and operational control. These partnerships reveal fundamental tensions in public policy—who bears financial risk, who controls pricing, and who's accountable when things go wrong.

The examples below demonstrate key concepts you'll need to analyze: contract structure and duration, revenue models, accountability mechanisms, and project delivery methods. Don't just memorize which city built which project—know what each case illustrates about PPP design, what made some succeed while others failed, and how contract terms shape outcomes for both taxpayers and private investors.

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Long-Term Lease Concessions

These partnerships transfer existing public assets to private operators for extended periods, typically 50-99 years. The government receives upfront capital while the private partner assumes operational risk and collects user fees—but this model raises critical questions about pricing power and democratic accountability.

Indiana Toll Road

• 75-year lease signed in 2006 for a 157-mile highway—one of the longest concession terms in U.S. history
• Upfront payment of $3.8 billion gave Indiana immediate infrastructure funds, but transferred decades of toll revenue to private hands
• Bankruptcy in 2014 demonstrated how traffic projections can fail catastrophically, leaving taxpayers to question whether the deal truly transferred risk

Chicago Skyway

• 99-year lease executed in 2005 for just 7.8 miles of roadway—the longest PPP concession in American infrastructure
• $1.83 billion upfront payment funded city priorities but removed public control over a critical transportation link for nearly a century
• Toll increases exceeding inflation sparked public backlash and became a cautionary tale about regulatory capture in long-term concessions

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Transportation Infrastructure Development

These PPPs involve building new facilities rather than leasing existing ones. The private partner finances and constructs the project in exchange for future revenue streams or availability payments—shifting construction risk while creating new public assets.

Port of Miami Tunnel

• Completed in 2014 to create a direct route between the port and interstate system, removing truck traffic from downtown streets
• Availability payment model means the government pays the private partner based on tunnel availability, not traffic volume—reducing private revenue risk
• Economic multiplier effects support regional trade and cruise industry, demonstrating how PPPs can address externalities that pure public projects might not prioritize

Gautrain Rapid Rail Link (South Africa)

• Launched in 2010 connecting Johannesburg, Pretoria, and OR Tambo Airport—Africa's first high-speed rail PPP
• Hybrid funding model combined government capital investment with private operational expertise, sharing both risk and reward
• Congestion reduction goals illustrate how PPPs can address negative externalities like traffic and pollution through coordinated infrastructure investment

LaGuardia Airport Terminal B Redevelopment

• Completed in 2020 as a complete terminal replacement—not renovation—transforming one of America's most criticized airports
• Private financing reduced public debt burden while maintaining Port Authority oversight of a critical regional asset
• Sustainability features and improved passenger flow demonstrate how PPP incentive structures can align private efficiency with public service quality

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Rapid Delivery and Bundled Projects

These partnerships prioritize speed and efficiency by bundling multiple projects or using design-build-finance-operate models. Private sector innovation in project management can compress timelines and reduce costs—but requires careful contract specification.

Pennsylvania Bridges Rapid Replacement Project

• 558 structurally deficient bridges replaced through a single bundled PPP contract, achieving scale economies impossible with traditional procurement
• Design-build-finance-maintain model gave the private consortium flexibility to innovate while holding them accountable for long-term performance
• Compressed timeline completed work years faster than conventional methods would allow, demonstrating PPP advantages in project delivery efficiency

Denver International Airport Great Hall Project

• Initiated in 2018 to address severe congestion in the airport's iconic tent-roofed terminal
• Progressive design-build approach aimed to modernize security, concessions, and passenger flow simultaneously
• Project faced significant challenges including cost overruns and contractor disputes—illustrating that PPP structures don't eliminate execution risk

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Social Infrastructure and Public Services

PPPs extend beyond transportation to courthouses, water systems, and civic facilities. These projects often use availability payment models where government pays for facility access rather than user fees—raising different accountability and financing questions.

Long Beach Courthouse (California)

• Completed in 2013 as California's first social infrastructure PPP, replacing a seismically unsafe 1950s facility
• 35-year lease agreement includes private facility management, maintenance, and lifecycle replacement—bundling services that government typically handles separately
• Availability payment structure means California pays regardless of usage, transferring construction and maintenance risk while retaining demand risk

Carlsbad Desalination Plant (California)

• Operational since 2015 as the Western Hemisphere's largest desalination facility, producing 50 million gallons daily
• 30-year water purchase agreement guarantees the private operator revenue while giving San Diego County drought-resistant supply
• Environmental trade-offs including energy consumption and marine impacts illustrate how PPPs must balance economic efficiency against environmental externalities

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Cautionary Cases: When PPPs Struggle

Not all partnerships succeed. Understanding failure modes is essential for analyzing PPP policy design and identifying what safeguards matter most.

London Underground Public-Private Partnership

• Launched in 2003 with a uniquely complex structure splitting infrastructure maintenance among multiple private consortia
• Metronet bankruptcy in 2007 forced the government to absorb billions in liabilities, undermining the entire risk-transfer rationale
• Fragmented accountability between track, stations, and operations created coordination failures—a textbook case of how transaction costs can overwhelm PPP efficiency gains

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Quick Reference Table

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Self-Check Questions

1. Which two PPP examples both used long-term lease concessions but experienced different types of problems—one financial collapse, one pricing controversy?

2. How does the availability payment model used in the Port of Miami Tunnel differ from the toll concession model used in the Chicago Skyway in terms of who bears demand risk?

3. Compare and contrast the Pennsylvania Bridges project and the London Underground PPP. Both involved infrastructure maintenance, but why did one succeed while the other failed?

4. If an FRQ asked you to evaluate whether PPPs effectively transfer risk from taxpayers to private investors, which two examples would you use to argue both sides of that question?

5. The Carlsbad Desalination Plant and Long Beach Courthouse both serve public needs through long-term contracts. What key difference in their payment structures reflects the different nature of their outputs?