This is the first in a series of three posts of a questionnaire with Min Wei, CFO of Cubic Transportation Systems, following his bylined article in Mass Transit Magazine, “What are Some Tips for Successful Public-Private Partnerships?”

Budget shortfalls, shrinking traditional funding sources, aging and under-capacity infrastructure and other challenges are leading more transit operators to form Public Private Partnerships (PPP or P3) with the private sector to achieve sustainability and growth.   Here is what you should expect in a P3 and some best practices, drawn from Cubic Transportation Systems’ more than 20 years of P3 experience working with leading financial advisors and banks to construct, deliver and service some of the largest projects in the automated fare collection (AFC) industry. 

1.      What are the common elements of a P3 in the transit sector? E.g., financing, services, financial arrangements…define it.

The first common element is a contract called a concession agreement that specifies the rights and obligations of the public sponsor—the transit agency—and the concessionaire—the private partner. In an AFC system such as Cubic provides, the concessionaire will typically have the responsibility to design, build, and finance the project during the construction phase, and then operate and maintain the system once implemented. The concessionaire will collect, deposit and report fare revenues, and in exchange for these services will receive compensation to cover the costs and return on capital. Other common elements include performance requirements with rewards or penalties for the private partner, and termination provisions.

2.      Can you give us some examples of Cubic’s P3 experiences with different agencies?

Cubic has successfully managed many of the largest P3 transactions in the public transit AFC industry and has extensive experience in working with lead financial advisors and banks. In 1998, Cubic won the world’s largest transit AFC P3, the £1 billion London Prestige contract to deliver, finance, and operate the London Oyster® Card. The 15 million passenger Oyster system is now more than 10 years old and Cubic assumed full operating responsibilities in 2008.

Another example is Cubic’s competitive award in 2011 of a $454 million, 12-year contract to design, build, finance, market, operate, and maintain an open payments fare system for the Chicago Transit Authority.  The Chicago open payment AFC system will allow riders to pay transit fares using contactless bank cards, NFC enabled mobile phones, and other accepted payment media. Transaction top up can be performed through over 2,000 partner retail outlets, vending machines, and the Web and mobile portals.