May 31, 2018

The Federal Transit Administration (FTA) issued a final rule Wednesday on Private Investment Project Procedures (PIPP), which allows recipients of FTA funding for public transportation capital projects to modify or waive FTA requirements for that project if they can demonstrate the waiver will encourage private sector involvement.

The Moving Ahead for Progress in the 21^stCentury Act (MAP-21) passed in 2012 required FTA to identify any provisions of 49 U.S.C. chapter 53 (Public Transportation) that impede the use of public-private partnerships (P3) and private investment and to issue a rule to address those impediments. The notice of proposed rulemaking (NPRM) was posted in July 2017 following private sector comments that FTA’s processes for reviewing and issuing grants was “discourag[ing] lender interest.”

PIPP also seems to mesh well with the Trump Administration’s stated desire to leverage more private investment in transportation infrastructure projects than in the past; FTA states that the primary goal of PIPP is “to address impediments to the greater use of public-private partnerships and private investment in public transportation capital projects.”

In order to receive a modification or waiver of an FTA requirement, the recipient of federal financial assistance must demonstrate that the requirement discourages the use of P3, joint development, or other private sector investment; that the proposed modification or waiver will likely encourage “sufficient” private sector participation or risk transfer to be worthy of a modification or waiver; and that the modification or waiver can be accomplished while protecting the public interest and any public investment in the project.

Importantly, the rule does not specifically list which FTA requirements might be waived, though the agency said it is limited to waiving or modifying administrative requirements (such as regulations, policies, or guidance documents), and not statutory provisions.

During the public comment period, some commenters asked FTA to list the specific requirements that may be waived. FTA responded that it “does not intend to develop a list of provisions that might be waived or modified. It is up to the recipient/project sponsor to identify FTA administrative requirements that are standing in the way of private investment or participation in a particular project. Such impediments are likely to vary from project to project.”

FTA did say, however, that it cannot modify or waive any requirement under 49 U.S.C. 5333 (labor standards, including prevailing wages and employee protective arrangements), the National Environmental Policy Act (NEPA),  or any other provision of federal statute.

In announcing the rule, FTA seemed to grant that it did not know how helpful the new procedures will be, given they apply only to FTA administrative requirements—and they built in a reporting requirement to help them find out. Waiver recipients must submit to FTA a report that evaluates the effects of the modification or waiver on the delivery of the project.

“FTA anticipates using the lessons learned from these experimental procedures to develop more effective approaches to including private participation and investment in project planning, project development, finance, design, construction, maintenance, and operations,” the agency wrote.