PRIVATIZATION - A NEW TRANSPORTATION PARADIGM

A new approach to the funding, management, and operation of transporta tion infrastructure is emerging, ''Privatization'' refers to several d ifferent ways in which private sector firms, usually under some form o f government supervision, assume significant responsibility for these major systems. Although the traditional U.S. model of user taxes, trus t funds, centralized resource allocation, and government ownership and operation has produced reasonably good transportation infrastructure, this approach carries with it incentives for suboptimal performance-s uch as allocating resources on political rather than economic-value gr ounds, encouraging congestion at peak hours, and skimping on maintenan ce. The privatization techniques offer the potential of institutionali zing a better set of incentives for cost-effective performance. This a rticle explores the use of (1) contract management and operation, (2) long-term franchises and concessions, and (3) divestiture as privatiza tion modes that can be applied to highways and airports.