On June 29, 2018, the Federal Transit Administration’s Private Investment Project Procedures (PIPP) rule came into effect. This rule concern recipients of funding from the FTA for public transportation capital projects.
Under the new rule, such recipients are allowed to request a modification or waiver of an FTA requirement if they can demonstrate that these impede the use of public-private partnerships (P3s) and private investment in such projects.
The passing of the PIPP rule marks the beginning of a process of greater involvement by private parties in public transport projects.
Here’s what contractors need to know about the rule.
What is the PIPP rule intended to achieve?
There are several main aims that the PIPP rule hopes to achieve. The primary goal of the rule is to “address impediments to the greater use of public-private partnerships and private investment in public transportation capital projects.”
To do so, the rule will make it possible for project sponsors to seek waivers or modifications of current FTA regulations that create such impediments for their projects. According to the FTA, the more far-reaching goals of such actions will be to:
- achieve greater project management flexibility;
- streamline project delivery;
- attract more investment in public transport projects; and
- introduce more innovation and efficiency.
Who is eligible to apply under the PIPP?
Not all parties working on a public transport can seek a waiver under the rule. Specifically, only recipients of funding under the Transportation Infrastructure Finance and Innovation Act (TIFIA), the Railroad Rehabilitation and Improvement Financing (RRIF) program, or of other federal financial assistance can make use of the so-called “experimental procedures.”
A project is considered eligible under the PIPP if the sponsor establishes that their project could significantly be improved through an “innovative project delivery technique” that is not allowed under current FTA regulations and policy.
According to “Subpart B—Private Investment Project Procedures,” to receive a waiver or modification, the sponsor will then need to demonstrate that such regulations or policy impede the use of P3s or private sector investments. They will also need to demonstrate to the FTA that if they are granted a modification or waiver, this will encourage such P3s or investments.
Finally, sponsors will need to demonstrate that being granted a waiver can be accomplished while protecting the public interest and public project investments.
What kind of regulations or policies can be waived?
The FTA has stressed that it cannot waive or modify federal statutes and provisions, such as the National Environmental Policy Act (NEPA), labor standards or others.
Instead, the experimental procedures only apply to the waiver or modification of FTA administrative requirements, such as regulations, practices, policies, procedures, guidance documents, etc.
What impact will the PIPP rule have for P3s and public investments?
While there is cause for optimism, it is not sure what the exact impact of the PIPP rule will be. During the public comment period, the FTA did not obtain any significant information regarding the costs and benefits of implementing the rule. The administration does believe, though, that its deregulatory action will lead to cost savings and reduce compliance costs for project sponsors.
It is also telling that the procedures provided by the FTA are called experimental. One comment on the rule pointed out that in implementing the rule the FTA seemed uncertain about the efficiency of the procedures since they only apply to the administration’s own regulations.
As such, the PIPP is also a way for the FTA to assess whether there can be a positive impact from such deregulatory action. To do so, the administration will also require waiver recipients to report on the impact of the waiver on the delivery of their project. The FTA hopes to consider the outcomes of the procedures to develop more solid and efficient approaches to including private participation and investment in various other areas.
Following P3 Trends
P3 legislation across the country has slowly been gaining traction over the past few years. There is a growing trend in states adopting legislation that allows for greater private participation in all sorts of public projects.
In this regard, the FTA rule is in line with what seems like a real possibility for the U.S. construction industry to provide increasingly greater input into public works projects.
