Panel Paper: Understanding Project Cancellation Risks in U.S. P3 Surface Transportation Infrastructure

Friday, November 9, 2018
8206 - Lobby Level (Marriott Wardman Park)

*Names in bold indicate Presenter

Lauren N McCarthy, Lisardo Bolaños, Jonathan Gifford and Jeong Yun Kweun, George Mason University

The research examines the risk of project cancellation in U.S. public-private partnership (P3) surface transportation infrastructure. First, a database was created of U.S. surface transportation P3 projects to evaluate empirical rates of P3 project cancellation and deferral. Out of the 43 design, build, finance, operate, and maintain (DBFOM) projects under analysis, 35% were cancelled and 7% were deferred. Out of the 25 non-DBFOM projects under analysis, 36% were cancelled and none deferred. A second stage of data collection focused on the development and application of a framework to evaluate the political and financial risk dimensions of cancelled P3 projects. With regards to the political dimension “Not in my backyard” (NIMBY) related public opposition presented the most relevant political risk factor driving project cancellation, underlining how important community engagement can be during P3 project development. While bureaucratic complexity and political transitions do not necessarily contribute to transportation P3 project cancellation, NIMBY-form public opposition presents a major political risk factor for deferral and cancellation. The financial risk dimension highlights the impact of recessionary based decisions, as well as poor project planning. Financial risk, based on overestimated demand, tight credit markets surrounding recessionary times, or foreclosure can lead to the cancellation of projects. The rate of project cancellation and deferral for infrastructure projects utilizing public-private partnership delivery methods concentrates before commercial close. Empirical cancellation and/or deferral rates, calculated based on previous transportation infrastructure P3 projects, may help practitioners justify compensation given varying cancellation and deferral rates across jurisdictions.

Full Paper: