For the first time in over a decade, Congress passed a long-term transportation bill, "Fixing America's Surface Transportation", which provides $305 billion in funding over five years.  The FAST Act programs focus on improving roads, bridges, transit systems and rail transportation networks.  The funding amounts to approximately a 15 percent increase to the current level.  What is the impact on public-private partnership projects, if any? The greatest benefit to the infrastructure world, in general, is that the Act provides certainty to state and local governments, and the business sector around funding levels, which should assist in—or at least reduce some of the anxiety around—critical financial planning of major infrastructure projects. 

Specifically, the Act provides $233 billion for highways, $49 billion for transit and $10 billion for federal passenger rail to Amtrak, all over a period of five years.  States will receive federal funding for major projects based on a formula.

In general, states have relied on federal transportation funding derived from motor fuel taxes, which are deposited into the Highway Trust Fund for completing transportation infrastructure projects.  Unfortunately, the Act does not raise the 18.4 cents per gallon federal gasoline tax, which has not been increased in 20 years.  Congress raised the new, additional funds by reallocating funds from other federal budget items.  So in essence, this is not new federal spending, rather existing federal dollars that have been reallocated to transportation under the FAST Act.  However, the long-term funding of the Highway Trust Fund still remains an issue.

Those projects funded by the HTF generally involve procurement processes where contractors submit proposals and the state selects the best bid. This is considered a traditional design-bid-build concept, whereby states specify their requirements, issue a request for proposal and select the best bid.  But with states and local government facing major fiscal challenges, many in recent years have explored the PPP model to leverage private investment to launch infrastructure projects.  The PPP structures are attractive to local governments and states because the private sector provides the investment, creates greater efficiencies, provides innovative technology and assumes most of the risk in the project.  In addition, the public entity often receives an upfront financial payment as part of the transaction. 


The Transportation Infrastructure Finance and Innovation Act, is a credit assistance program that helps make projects more feasible by lowering the cost of capital by providing lower cost debt, but is not a grant program.  The FAST Act, unfortunately, reduced TIFIA funding, which often serves to fund PPP projects.   The new law reduces funding from $1 billion over the last two years to $275 million in FY2016, but increases TIFIA funding to $300 million for FY 2019 and FY2020.  This reduction has been met with some criticism from the private investment sector, though it's worth noting that TIFIA has not used all of its allocated funds in the last few years.

On the upside, the Act allows smaller projects to be eligible for TIFIA funding, by reducing the project minimum from $50 million to $10 million.  This could allow more projects to be funded, if private dollars can be leveraged with these smaller TIFIA funds.  On balance, the fact that the federal law provides funding security for 5 years outweighs concerns regarding the decrease in the TIFIA program funding.

FAST Act provides another boost to PPP projects by codifying the current US DOT practice of allowing costs related to PPP projects using an availability payment concession model to qualify for federal reimbursement.


Like most prior transportation bills, the majority of the funds will be channeled through the states.  About 90% of the federal funding is distributed to the state departments of transportation for allocation.  However, the Act increased the amount of funds from the Surface Transportation Program that is dedicated to specific metropolitan regions from 50 percent to 55 percent.  The new law converts the STP to a block grant program, which maximizes the flexibility of STP for states and local governments.    

The FAST Act also established the National Surface Transportation and Innovative Finance Bureau as a "one-stop-shop" for states and local government to receive federal financing and funding assistance. 

Nationally Significant Freight and Highway Projects

The FAST Act created a new grant program, the Nationally Significant Freight and Highway Projects Program, funded at $4.5 billion over five years, for “nationally significant” projects costing more than $100 million that improve the movement of both freight and people, increase competitiveness, reduce bottlenecks, and improve intermodal connectivity.  The funds will be released based on a competitive nationwide selection process. 

Streamlining Approval Process

One of the best aspects of the FAST Act, at least from the PPP perspective, is that it streamlines the environmental review and permitting process in order to accelerate project approvals, all without sacrificing environmental regulatory standards.  The Act seeks to align environmental reviews for historic properties, establish a new pilot program to allow up to five states to substitute their own environmental regulatory framework for the National Environment Policy Act if the state's law and regulations are at least as strict as NEPA's. 


Overall, the FAST Act will help maintain growth in investment for major transportation projects, provide more certainty for smart long-term planning, and improve  transportation networks in the long-run.  It is incumbent on states and local governments to research and explore available funding options set forth in the FAST Act framework that address their infrastructure needs and proactively seek out private sector partners to help them convert their transportation and infrastructure needs into reality.