Abstract
This article draws on the new stakeholder theory to examine the role of flexibility in the decision process within capital-intensive public–private partnerships (PPPs). It highlights that successful PPPs rely on the project sponsor’s ability to effectively utilize market stakeholders’ critical resources (i.e., information and expertise) to maximize economic value creation, and to gain nonmarket stakeholders’ critical resources (i.e., support) through equitable social value identification and distribution. Drawing on two case studies in the national capital region of the United States, this article proposes a theoretical view to understand flexibility and stakeholder management for capital-intensive PPPs.
Keywords
Introduction
Capital-intensive public–private partnerships (PPPs) involve long-term contractual agreements between public agencies and private sectors for large-scale infrastructures or public services (Kwak et al., 2009). These projects engage various stakeholder groups, each playing crucial roles in determining project success. Project management scholars have identified critical project success factors, among which are competition and user satisfaction (Munns & Bjeirmi, 1996). Strategic decision-making is crucial for these success factors. Particularly in the early stage of PPPs, project sponsors are faced with pivotal decisions: how to select the optimal delivery method and the private partner and how to identify the most appropriate project scope. The former decision directly determines the efficiency of competition, whereas the latter decision largely contributes to the users’ perceived value of the project, which leads to satisfaction. Given the high levels of complexity and uncertainty inherent in such projects, flexibility becomes an indispensable element in dealing with decision-making challenges (Cruz & Marques, 2013). Flexibility in the decision process allows for adaptation to changes in the project environment and enables project teams to respond to unexpected events during the project life cycle (Eriksson et al., 2017). Particularly in making early decisions, the focus should be on enabling the attainment of multiple end states by incorporating valuable flexibility (Gupta & Rosenhead, 1968). This strategy postpones decisions until the up-to-date information is available, thereby facilitating the maximization of potential outcomes while minimizing risk. However, as Olsson and Magnussen (2007) point out, flexibility can be both a blessing and a curse to project management as it prevents decisions being made with inadequate information while reducing stability.
Therefore, an effective flexibility strategy requires addressing two major concerns. First, because the positive effect of flexibility is realized when better informed decision-making is possible, it is imperative to seek proactive approaches to acquiring information. Second, as flexibility may be beneficial or detrimental in different circumstances, identifying preconditions for increasing flexibility is necessary to maximize benefits, whereas exercising caution to maintain control in situations where flexibility may prove disadvantageous.
Recently, the new stakeholder theory (NST) has emerged, which provides a theoretical foundation to inform these concerns by understanding stakeholders in organizations (Barney, 2018; Freeman et al., 2021). The NST focuses on which stakeholders should be involved and how values are created and distributed (McGahan, 2021). The value of a capital-intensive infrastructure project encompasses both economic and social benefits (Gil & Fu, 2022). Economic value in our context of transportation PPPs refers to the financial benefits derived from a project, such as cost savings, revenue generation, and enhanced property values. In a general sense, social value can be broadly defined as any improvement to society and communities by meeting social needs (Mendoza-Abarca & Mellema, 2016). In our context, we define social value as the nonmonetary benefits of a project such as accessibility and mobility, safety, environmental impact, and social equity. To achieve mutually beneficial value creation and distribution, megaprojects often require cooperation among stakeholder groups to pool resources. The NST views all project stakeholders as part of a broader organization where they possess essential resources for joint value creation (McGahan, 2023). Stakeholders’ interaction to affect value creation and value distribution has received great attention in the capital-intensive infrastructure project context (Gil & Fu, 2022; Lee et al., 2017; South et al., 2018).
These efforts showcase the analytical potential of NST to examine managerial issues within complex, capital-intensive PPP organizations. This study aims to investigate the role of flexibility in acquiring stakeholders’ critical resources from this novel perspective. We argue that in a capital-intensive PPP, flexibility helps gain two types of stakeholders’ resources: (1) core resources (information and expertise) from market stakeholders, for which flexibility facilitates fully excavating and properly utilizing resources to enhance decision-making and generate more economic value; and (2) support from nonmarket stakeholders, which requires balancing varied interests where flexibility in identifying and distributing social value helps deal with misalignments. Particularly in this context, the former impacts the competition in the procurement stage and the latter is affected by the perceived quality of project scope. Considering the different roles of the two types of stakeholders, this study aims to answer the following research questions:
How does flexibility in the decision process influence the efficiency of competition in the procurement stage of capital-intensive PPPs? How does flexibility in the decision process influence the quality of project scope determination?
We employed a case study method to examine two contemporary large transportation PPP projects. Public–private partnerships have a short history in the United States and their effectiveness is often questioned (Ahmed & Garvin, 2022). There is only general guidance rather than nationwide standards for PPP procurement. In fact, a one-size-fits-all procurement approach is impractical due to diverse circumstances (Dewulf & Garvin, 2020). To improve the maturity of PPP delivery, both practitioners and academics have been exploring best practices through successful and unsuccessful cases.
By analyzing the dynamics and outcomes of the two PPP projects, this study develops a theoretical view for managing flexibility that considers two stakeholder types. It highlights the significance of flexibility in value creation through the acquisition of expertise and information from market stakeholders. Its effectiveness is impacted by two boundary conditions: commitment credibility and the presence of a baseline option. It also emphasizes flexibility in social value identification and distribution, which encourages nonmarket stakeholders to collaborate. These findings provide a better understanding of flexibility in the decision process from the NST perspective.
Theoretical Background
Flexibility in the Decision Process
The notion of flexibility has been widely employed in management research, including the project management literature (Saleh et al., 2009). According to Olsson and Magnussen (2007), flexibility refers to the ability to make reversible decisions or defer irreversible decisions until more information is available. This characteristic allows project sponsors to navigate through uncertainty and complexity. Flexibility can thus be viewed as a strategy to mitigate the impact of unforeseen events and adapt to a changing project environment.
Olsson (2006) highlights two types of project flexibility: flexibility in the decision process, which pertains to flexible ways of implementing a project, and flexibility in the product, which refers to the potential of the product for alternative use. This study focuses on flexibility in the decision process. Research in project management has explored approaches to achieve this through implementing flexible investment strategies (Yeo & Qiu, 2003), adjusting budget and schedule arrangements (Huchzermeier & Loch, 2001), adapting planning and construction activities (Ford et al., 2002; Walker & Shen, 2002), employing contract mechanisms that provide stakeholders with the option to negotiate contract terms to accommodate changes (Cruz & Marques, 2013; Demirel et al., 2017), and so forth.
Despite these efforts, there is a lack of discussion about how to incorporate flexibility in early-stage decision-making in PPPs, particularly in selecting delivery methods and private partners and shaping project scope. Public–private partnership project delivery involves multiple phases: project identification, procurement, design and construction, and operations and maintenance (South et al., 2018). In the identification phase, flexibility may involve adjusting project objectives and scope or considering alternative solutions to accommodate changes in project requirements. In the procurement phase, flexibility can help select delivery methods for optimal economic and social outcomes.
Besides, flexibility is often viewed as the antithesis of control, sparking debate on balancing them for efficiency (Koppenjan et al., 2011; Lenfle & Loch, 2010; Osipova & Eriksson, 2013; Sun et al., 2020; Szentes & Eriksson, 2016). Achieving flexibility while maintaining control over the project requires careful planning, effective communication, and strong stakeholder collaboration. Therefore, it is important to explore the optimal approach to leverage flexibility to enhance project success.
Stakeholder Theory and New Stakeholder Theory
The concept of stakeholders, categorized into broad and narrow views as summarized by Mitchell et al. (1997), has been significant and long-standing in the management field. Freeman’s (1984, p. 46) classical definition from the broad view describes stakeholders as “any group or individual who can affect or is affected by the achievement of the organization’s objectives.” While the broad definitions facilitate the development of a socially responsive management theory, they are criticized for their vagueness associated with the “can affect” criterion (Laplume et al., 2008). This led to narrower definitions that emphasize moral or legal claims. For instance, Donaldson and Preston (1995, p. 67) define stakeholders as “persons or groups with legitimate interests in procedural and/or substantive aspects of corporate activity.”
Management scholars have proposed various categorizations to address stakeholders’ prioritization (e.g., Bridoux & Stoelhorst, 2014; Clarkson, 1995; Freeman, 1984; Vasi & King, 2012). Market stakeholders versus nonmarket stakeholders have been recognized as a meaningful categorization (e.g., Dorobantu et al., 2017; Gil, 2023; Mellahi et al., 2016; Odziemkowska & Dorobantu, 2021; Stevens et al., 2005). Market stakeholders, such as shareholders, customers, suppliers, and employees, are directly involved in the firm’s economic activities and value chain (Cummings & Doh, 2000). Nonmarket stakeholders include but are not limited to local authorities, local communities, nongovernmental organizations, interest groups, property owners, unions, and social and environmental activists, who often exist outside the traditional boundaries of the project value chain with ill-defined property (Gil, 2023).
The original stakeholder theory (or simply stakeholder theory) holds that a firm should consider the interests of all stakeholders, not just shareholders (Freeman, 1984; Donaldson & Preston, 1995; Freeman et al., 2004). Despite its widespread use, stakeholder theory faces criticism for inconsistent definitions and usage of concepts (Donaldson & Preston, 1995), unclear boundaries between stakeholders within and outside an organization’s scope of responsibility (Klein et al., 2019; McGahan, 2020), and limited analytical power due to an emphasis on moral and ethical obligations (Freeman, 1984; Phillips et al., 2003). Even more, whether it is indeed a theory with core arguments or just a perspective still remains unclear (Barney & Harrison, 2020).
In response, scholars have developed a more robust stakeholder theory known as new stakeholder theory (NST) to provide a clearer understanding of stakeholders in organizations (Barney, 2018; Freeman et al., 2021). The NST is devoted to two key questions: how to address the challenges in traditional stakeholder theory about enfranchising stakeholders (McGahan, 2020; McGahan, 2023) and how to distribute the value created by the enfranchised stakeholders (McGahan, 2023). Providing an analytical perspective on stakeholder motivation in the organization, the NST’s core argument is that “stakeholders will sustain their connection to an organization only if they expect and ultimately receive appropriate returns on their contributions” (McGahan, 2021, p. 1735). Extending upon, yet distinct from the original stakeholder theory, the NST aims to establish analytical foundations on stakeholder-related issues (McGahan, 2022) and to “explain the antecedents, conditions, mechanisms, and consequences of organizational activities that enfranchise stakeholders and distribute value among them” (McGahan, 2023, p. 5). The NST also considers how organizations appropriate value through stakeholder engagement and arrangements for value distribution (McGahan, 2021). Overall, the NST offers a way to understand how organizations facilitate collaboration among stakeholders toward common goals beyond profit and holds potential for integration with other theories due to its inclusive perspective on value (McGahan, 2023).
Flexibility From the NST Perspective
Previous research, as just discussed, primarily highlights flexibility for its ability to promptly adapt to contingencies, while overlooking its potential in resource acquisition and utilization. The NST offers a promising entry point to understanding this aspect of flexibility. Stakeholders’ resources can be regarded as an important source of information and expertise to enhance value creation. Flexibility holds the potential to facilitate informed decisions by integrating these resources, thereby maximizing opportunities and minimizing risk. Flexibility also allows for adaptation to project scope, which reflects value identification and distribution among stakeholders. From the NST perspective, this is crucial because stakeholders are more likely to remain engaged if they anticipate desired returns on their contributions. Flexibility shows the willingness to align with stakeholders’ interests, which promotes communication and coordination and leads to long-term cooperation.
Previous studies highlighted stakeholders’ critical roles in PPP success (Chang et al., 2013; Kwak & Lee, 2023; Shenhar & Holzmann, 2017). Specifically, capital-intensive PPPs involve diverse stakeholders whose contributions are crucial for value creation, providing an ideal context for applying the NST. This approach recognizes the importance of both market and nonmarket stakeholders in value creation. Involving market stakeholders in economic value creation is essential, as is recognizing the role of nonmarket stakeholders, who can be either supporters or opponents of the project, in social value identification and value distribution. By adopting a comprehensive stakeholder approach to incentivize and collaborate with market and nonmarket stakeholders, project sponsors can effectively utilize stakeholders’ resources and balance their competing demands (Gil, 2023).
Research Methods
Research Design and Setting
This study draws on the NST to investigate the role of flexibility in capital-intensive PPPs during the project identification and procurement phases. To this end, case study is an appropriate method since it can provide an in-depth and nuanced understanding of complex real-world phenomena (Eisenhardt & Graebner, 2007; Yin, 2018). This article presents two case studies. The first selected project, led by the Virginia Department of Transportation (VDOT), transformed Northern Virginia’s Interstate highway 66 into a multimodal corridor (hereafter referred to as the “I-66 project”). The second selected case, led by the Maryland Department of Transportation (MDOT), proposed to widen interstate highways 495 and 270 (hereafter referred to as the “I-495/I-270 project”).
We select two projects as our sample for the following considerations. Both projects are large transportation PPPs involving multiple stakeholders, suitable for investigating stakeholder interactions. Their significant economic and social impact also provides a good chance of rethinking the values expected from large infrastructure projects. As they share many similarities, this sampling controls extraneous variation to a great extent and focuses on variation stemming from their management strategies (Eisenhardt, 1989). Particularly, they have similar objectives to provide corridor improvements to alleviate traffic congestion in the U.S. national capital region. This region includes the capital city, Washington, D.C., and its surrounding areas, primarily parts of Maryland and Virginia. It is the center of political activity and home to many important national institutions such as the White House, Congress, the Supreme Court, and other federal agencies. Meanwhile, these two projects exhibit significant differences that create the ground for exploring project success factors. The I-66 project is widely regarded as a successful PPP project that adopted an innovative procurement method. In contrast, the I-495/I-270 project encountered numerous setbacks, and the lead partner in the consortium announced its exit from the project two years after signing the PPP agreement. Examining the two polar cases from theoretical sampling presents an opportunity for identifying critical factors that influence PPP success (Eisenhardt, 1989; Lijphart, 1975; Pettigrew, 1990).
Data Collection and Analysis
We employed the triangulation of data to provide strong evidence for the theory building. The data sources for our case studies include project documents, semistructured interviews, and news articles.
Following Pentland’s (1999) methodology of theory building from narrative data, we built our theory step by step by moving from surface description to the underlying explanation. First, we collected project documents both from the project teams and websites, including project management plans, environmental documents, procurement documents, financial reports, traffic and revenue studies, technical reports, progress reports, meeting minutes, and public outreach presentations. We also collected news articles related to both projects using the news database Factiva. In total, 135 relevant news articles from 2015 to 2023 were collected for data analysis. Using these data, we organized the milestones and major events of each project in chronological order.
Next, we conducted three semistructured interviews with both public and private sectors, including two interviews with two government officials from VDOT’s management team who have directly led the I-66 project and one interview with two top executives from Cintra, a leading developer of transportation infrastructure that submitted bids for both projects. To help the interviewees understand our purpose and recall project details, we developed two open-ended question lists—one for the public sector and the other for the private sector—and sent them to the interviewers before the interview. Each interview lasted for one hour. In the interview, we first asked general questions to let respondents outline the events and their roles in the projects. After that, the conversion becomes more focused on the key points guided by question lists, digging into details with “what, why, and how” questions. In each interview, all three authors were present as multiple observers, with two leading the conversion and the third taking notes. This multi-investigator strategy allows discovering different findings from multiple perspectives in the theory building (Eisenhardt, 1989).
Following data collection, we discussed the lessons learned and identified key concepts such as market and nonmarket stakeholders, stakeholders’ critical resources, value identification, distribution, and creation. We then alternated between individual thinking and brainstorming to propose multiple theoretical frameworks to explain the underlying process for addressing the research questions as well as connect with existing project management literature. Finally, we proposed a theoretical view explaining the role of flexibility in early-stage PPP decision-making from the NST perspective.
Project History
This section describes the two selected projects, mainly focusing on the background, scope, and major events during the early stages.
Historical Evolution of the I-66 Project
A major highway in Northern Virginia, I-66, has been plagued by traffic congestion for many years, leading to increased travel times for commuters. In 2011, VDOT proposed I-66 corridor improvements but faced challenges in securing public funding using traditional delivery methods. This has driven Virginia to explore innovative methods like a PPP. In 2013, VDOT issued a request for information (RFI) to solicit input from industry and received 19 responses.
When VDOT initiated the process, PPPs were politically unfavorable. In 2014, a new governor of Virginia was elected. He was “not a big fan of PPPs” and criticized the midtown tunnel project that raised many questions about the benefits of PPPs in Virginia. “In that political environment, we had a lot of challenges. We couldn’t just go and start a PPP procurement… We had to prove to them that a PPP would be a better approach,” said a VDOT respondent.
Therefore, despite considering private financing, VDOT did not commit to a PPP at the outset. Instead, they explored a public-financing option. In 2015, the Virginia secretary of transportation indicated that using public funds instead of a PPP could save up to US$1 billion. While preferring public financing at that time, he remained open to PPPs but emphasized the need to confirm their value before proceeding.
To evaluate the financial feasibility, VDOT hired consultants to analyze the public-financing option. The analysis indicated a need for US$600 million in upfront public funding and US$500 million in future corridor improvements and transit service support. Knowing this, VDOT was prepared to pursue a more favorable agreement with private companies. For PPP methods, the VDOT required private companies to cap cost at US$2.1 billion—the estimated cost under traditional procurement. VDOT also projected a maximum of US$600 million in public funding under a PPP contract. These measures aimed to ensure that the project is completed within budget and maximize PPP efficiency. Working through this process not only politically helped us with those who were opposing the project to clearly see the benefits, but also helped us to create a new dimension of competition on the PPP side, because not only were PPP teams competing among themselves to give us the best price, but they were also competing with our public-financing options. (VDOT official)
Design-build with Alternative Technical Concepts (DB-ATC). The public sector is responsible for financing, toll collection, operation, and maintenance. The private sector handles design and construction. Alternative technical concepts (ATCs) are proposed improvements to project scope, design, construction, or other aspects, which offers flexibility to design builders to suggest innovative and cost-effective solutions.
Design-build-operate-maintain (DBOM). The public sector finances and collects tolls. The private sector is responsible for design and construction and operates and maintains the tolling system for 15 years to support the public sector in toll processing.
Design-build-finance-operate-maintain (DBFOM) or toll concession. The public sector provides a maximum of US$600 million and grants the private sector toll collection rights for up to 50 years. The private sector is responsible for design, construction, financing, operation, maintenance, and toll collection.
By October 2015, each delivery method received multiple submittals, including three for DBFOM. In December 2015, VDOT chose DBFOM as the best model and released a draft request for proposal (RFP) to the three consortia. All teams expressed confidence that they could fulfill or surpass the terms set by VDOT, which capped public cost at US$600 million and left the rest to the private sector.
In August 2016, VDOT issued a final RFP to the finalists. One of the short-listed dropped out and the other two submitted bids. The I-66 Express Mobility Partners team, led by Cintra and Meridiam, won the bid over the competing team led by Transurban and Skanska. The PPP agreement entitled the consortium 50-year toll rights and responsibility for designing, building, operating, and maintaining the express lanes (i.e., additional lanes built alongside existing general-purpose lanes to provide a faster trip through toll payment or carpooling). Furthermore, the consortium agreed to provide Virginia with a US$579 million upfront concession fee, contribute US$800 million to expand transit service, and US$350 million for future I-66 corridor congestion-reducing projects over 50 years. The innovative procurement process was considered a success in transportation improvements, winning the 2017 PPP Awards’ Best Transportation Project.
In November 2017, I-66 Express Mobility Partners achieved financial close, funded through a US$1.229 billion federal loan, US$737 million in bonds, and US$1.523 billion in private equity. Construction soon began on the US$3.7 billion project, including 22.5 miles of express lanes, 63 bridges, and over 4,000 park and ride spaces. It also featured multimodal transportation like new bus service, transit routes, and shared-use trails. In September 2022, the project’s initial phase opened to the public ahead of schedule, when many projects in the region were delayed due to the pandemic. Subsequently, in November, the final section of new lanes opened. Figure 1 presents the timeline of the I-66 project.
The I-66 project timeline.
Historical Evolution of the I-495/I-270 Project
Interstate highway I-270, a critical commuting route connecting suburban Maryland to interstate highway I-495 and the nation’s capital region, also faced heavy congestion. This fact urged the state with the nation’s second-longest commuting times to address growing transportation demands.
In September 2017, Maryland’s governor announced a US$9 billion traffic relief plan to add toll lanes to I-495, I-270, and the Baltimore-Washington Parkway, hoping to initiate construction before the end of his term. This plan initiated the RFI to the transportation infrastructure construction industry, with the PPP portion of the plan seeking private companies to add new lanes to I-495 and I-270, while keeping existing lanes toll free. By January 2018, MDOT received 27 responses to the RFI. In March, the Federal Highway Administration (FHWA) gave notice to MDOT to prepare an environmental impact statement (EIS). This document serves as a decision-making tool mandated by U.S. law that assesses the potential environmental effects of a proposed major federal action. It would also evaluate the traffic and present alternatives, among which a preferred option will be selected for further study. The plan was acclaimed by some transportation companies and government officials, who emphasized the necessity of a PPP in light of the state’s limited borrowing capability for a large project.
In comparison to the support, however, the plan faced more skepticism and opposition from a range of stakeholders. Transit advocates near the corridor criticized it for not funding public transit and multimodal solutions. In response, the governor’s office, citing no plan or sufficient funding to support additional transit, claimed that expanding highways was “an immediate solution” to congestion. Opponents argued that widening roads would increase traffic and that toll lanes, dubbed “Lexus lanes,” would primarily serve the wealthy while leaving behind the low-income population, which contradicts social justice. The U.S. Public Interest Research Group Education Fund and the Frontier Group labeled it a “misguided highway project” prompting more cars to use the highway. The Maryland Transit Opportunities Coalition, advocating for rail enhancements, also opposed the project. Prince George and Montgomery County officials strongly expressed their preference for prioritizing transit options, bike lanes, and pedestrian amenities over expanding highways that would encroach on already densely populated areas.
Skeptics also raised concerns about the potential need for public funding despite the Maryland administration’s claim of “no net cost” to taxpayers. Some responses to the RFI questioned the feasibility of financing a project of this magnitude solely through toll revenue and suggested MDOT further consult the private sector. A draft EIS released in 2020 indicated a possible need of US$482 million to US$1 billion in government subsidy. The RFP released in December 2020 also noted a US$50 million reimbursement to the private sector for predevelopment if toll lanes weren’t environmentally approved, implying taxpayers might bear preliminary expenses, albeit not construction costs.
Environmental impact concerns were another source of opposition. The Maryland-National Capital Park and Planning Commission, appointed by Montgomery and Prince George Counties, rejected a study of the project due to these concerns, implying a possible legal challenge against the use of eminent domain for public parkland. Facing fierce opposition, MDOT postponed work on a controversial segment on I-495 east of I-270 in 2019. Environmental organizations also objected due to increased air and water pollution risks. In October 2022, several groups filed a lawsuit claiming that the environmental analysis of the proposal was “deficient.” They criticized the toll lanes proposal as “harmful and unnecessary” and called for “smarter and cleaner” solutions.
As early as 2018, state and local officials expressed their perception of a lack of transparency in discussing the proposed project during an informational public presentation. As the project plan progressed, concerns grew about inadequate public scrutiny over the environmental and draft procurement documents. The draft EIS, prepared by FHWA and MDOT and released in June 2020, faced criticism from officials and residents who cited “significant deficiencies” for its alternatives to suggesting adding new lanes. Without public notice, MDOT released the RFP for a phase developer on 18 December 2020, calling for technical proposals from private consortia three business days later. Although state officials clarified that they had been collaborating with potential consortia for six months, opponents criticized that the state officials ignored public oversight, as the RFP documents were not available on the project website until 23 December. More criticisms arose in June 2022 when the final EIS, responding to over 5,000 public comments, offered a 30-day comment period for the public to review the extensive 26,000-page documents. The final EIS was questioned by transit advocates for the reliability of the traffic analysis. They called for an independent federal review, arguing that the state’s analysis did not account for substantial differences between the latest computer models and earlier studies, which could be manipulated.
The I-495/I-270 project also faced a lawsuit from a bidder. In February 2021, MDOT awarded a predevelopment agreement to Accelerate Maryland Partners, led by Transurban and Macquarie. However, a losing bidder led by Cintra filed a protest against the winning bid for having unrealistic construction cost assumptions, as the winner’s initial lead contractor left the team shortly after the contract shortlist announcement. MDOT rejected the protest as untimely and unjustified, and defended its selection of the winning bidder for their project experience and financial integrity. The Cintra team later filed a protest in Montgomery County Circuit Court. The judge ordered the state to reconsider its contract award decision, but MDOT rejected it again. In November 2022, the Cintra team won a procedural ruling from a county judge, adding uncertainty to the appeal outcome and the possibility of significant delays.
As the governor’s office promoted the project plan, significant political changes arose. In January 2023, a new governor took office and criticized the project for neglecting transit and equity issues that impacted underserved communities, indicating that he would seek changes.
The project failure eventually came after numerous obstacles. In March 2023, the PPP consortium terminated the agreement, attributing delays in environmental approvals, unresolved lawsuits, and political changes. Figure 2 presents the timeline of the I-495/I-270 project.
The I-495/I-270 project timeline.
Case Analysis
This section analyzes how each project addressed two decision-making challenges under a flexibility strategy framework. Drawing on the NST, we investigate: (1) the impact of flexibility on the efficiency of competition in the procurement stage, highlighting its role in utilizing market stakeholders’ expertise and information; and (2), the influence of flexibility in shaping project scope to acquire support from nonmarket stakeholders. Through these explorations, we observe how different flexibility strategies result in diverse outcomes, then extract key constructs and develop theoretical propositions. Finally, we present an integrated NST-based view to recap the role of flexibility in the decision process in capital-intensive PPPs.
Flexibility in Economic Value Creation With Market Stakeholders
Impact of Flexibility in the Utilization of Market Stakeholders’ Resources
In the competitive procurement process, the private sector acts as the primary market stakeholder. The analysis of the I-66 project demonstrates how VDOT’s flexibility strategy incentivized the private sector to contribute their critical resources—specifically, their unique information and expertise that the public sector typically lacks. Such resource contribution enhanced economic value creation, which represented efficient competition during procurement.
A notable innovation of the I-66 project is the adoption of a flexible approach in its competitive procurement process, with VDOT issuing an RFQ for three delivery options. Instead of relying solely on an internal analysis with a public sector comparator and a shadow bid, VDOT leveraged the private sector’s responses to the RFQ to determine the optimal delivery method that would provide the best project scope and payment value to Virginia. “The secretary had US$600 million sitting aside. If he needed to, he could go forward with the DB… but he felt that [we should] have the private sector really show us through a DBFOM or a DBOM,” said a VDOT respondent.
A unique aspect of the RFQ was the inclusion of a financial element, which is uncommon in typically qualification-based RFQs. VDOT requested the teams submit nonbinding indicative financial proposals, which estimate overall costs and potential payments to Virginia at financial close. This flexible approach gave VDOT a detailed view of the financial feasibility of each delivery method, which informed their decision-making process. “Having that unique element with the financial proposals really helped us make the decision from a value-for-money analysis,” as emphasized by a VDOT respondent. “This is because we truly got what the private sector thought they could do out with it, either a DBFOM or DBOM.”
The RFQ encouraged alternative technical concepts (ATCs) from the private sector by making experience in delivering ATCs a key qualification for all three delivery methods. Consortium I-66 Express Mobility Partners won the bid by proposing several ATCs, termed connectivity enhancement, designed to improve infrastructure access and generate 31% of the revenue. With these ATCs, they proposed a US$3.5 billion investment, US$1.1 billion higher than their competitor. The difference was so significant that many believed these traffic assumptions to be overly optimistic at that time. However, the team substantiated their proposal with solid numbers, drawing on their successful history with similar ATCs in previous PPP projects. North Tarrant Express Lanes is a project we bid on in 2009. The total investment was US$2 billion. The difference with the second best was US$6 million, more than 25% different. The primary reason is that we added connectivity as well. (Cintra top executive) We gave them much more flexibility than what they typically get. Cintra proposed many new ramps not in the environmental document. It allows them to serve more communities, which means more customers for them. That’s why Cintra’s revenue line is much higher than its competitor. (VDOT official)
We devoted tremendous resources to the bidding process. We had many people working on that from the design, construction, and development teams. Two-thirds of the ATCs were from our team. Some of those ATCs are really innovations that DOT recognized. (Cintra top executive)
While providing sufficient flexibility to the private sector, VDOT also established risk response mechanisms for deviations in traffic forecasts.
For transit, Cintra’s proposals seem aggressive at the time. [People asked that] what if the project is not performing well? To solve that problem, we created a reserve account to ensure at least two years for transit funding. This was a risk mitigation strategy that if things go wrong, we have two years to find a solution. (VDOT official)
Besides, to develop a better financing package, VDOT also encouraged the private sector to come up with innovative financing concepts even if they might deviate a little bit from some of the requirements in the RFP.
The I-66 project successfully delivered benefits across multiple aspects. First, it provided traffic relief through added toll lanes, increased transportation options, integration with mass transit, and commitments for future improvements. Particularly, experienced contractors’ ATCs increased the capability of the project to move more people by improving connectivity. One of the beauties of competition is innovation…. These ATCs not only bring traffic, but also provide a service to people…. We had a team look at the entire managed lanes and see where it made sense to do entrance and exit so more people could use them. (Cintra top executive)
Second, the project achieved significant government budget savings, as it was funded entirely by the private sector. Third, the project has incorporated the latest technologies, including Cintra’s AIVIA Smart Roads Initiative, which facilitated seamless operation for all vehicle types, and conventional while enhancing travel safety through sensor-based hazard alerts for autonomous, connected vehicles. The project also utilized advanced rubblization techniques to reduce carbon emission by cutting truck trips. The project boosted the local economy, involving over 400 companies and creating 8,000 jobs. The project stands as a significant milestone in the region’s transportation. It exemplifies how innovative procurement and strong local partnerships can lead to successful and sustainable infrastructure development.
It is almost impossible for VDOT to achieve this success without leveraging the private sector’s resources, especially their capability in ATC design and traffic prediction. “The most important thing is that we always maintained a high level of competition as we went through the procurement” (VDOT official). VDOT’s flexible approach motivated market stakeholders to contribute more resources to ensure a robust package including public funding savings, optimized project design, and advanced technology, all contributing to economic value creation. Therefore, we propose that:
Boundary Conditions of the Effectiveness of Flexibility
As discussed in the previous section, when selecting the optimal delivery method and private partner, flexibility brings many benefits for the I-66 project procurement. On one hand, this strategy allows VDOT to avoid shortcuts that may cause problems later on. On the other hand, they cannot waste time either because the private partners will not “stay in the game forever.” Therefore, it is tricky to find a balance between “not rushing things unnecessarily to miss something” and “not moving too slow to lose potential partners.” The I-495/I-270 project also incorporated flexibility through a progressive PPP model. In a progressive PPP, the public sector selects the private partner based on qualifications. Then they sign a predevelopment agreement to work collaboratively on project development and risk allocation before entering into a comprehensive agreement (Casady & Garvin, 2022). This model allows for greater flexibility in scope and design. Comparing the two projects, we observed remarkable differences in employing flexibility to obtain market stakeholders’ critical resources. This reveals that a successful flexible strategy relies on two critical conditions, conceptualized as the baseline option and credible commitment.
VDOT had confidence in the flexible procurement for the major reason that they had a well-prepared, feasible public-financing option. As the environmental study started in 2011, VDOT recognized the importance of assembling all necessary components to achieve their goal, so they embarked on putting together important pieces across several areas. On the engineering side, they engaged a company for preliminary engineering. On the political side, to address political skepticism toward PPPs, they assembled a dedicated team of consultants and internal staff and developed a public-financing plan before procuring PPPs as the benchmark, against which they sought better solutions. VDOT invited DB contractors to verify the DB price, approached PPP developers for a clear understanding of the proposed plan, and hired two consultants to conduct financial analysis—one for public financing and the other for PPPs. This avoided potential bias toward one approach over the other, as each consultant had expertise in their respective field. We were careful not to hire one consultant to work on both sides, because there might be some bias. One consultant is more comfortable with public-financing options, while the other is more comfortable with PPPs. Having them work on those two scenarios separately, we were able to truly create a realistic public sector option while we were also pursuing a PPP option…. [In this way,] we were able to verify the DB price and understand exactly how PPP developers’ proposals look like. (VDOT official)
…Governors have limited term, and private companies know that. You [project sponsor] can always say that if I don’t get this type of proposal from private companies within these parameters, I can terminate my procurement and walk away. Sometimes private companies know that is just a bluff because you don’t have time to start a new DB procurement… Because we have the public-financing option, we told them that “if the public money that you require to make this deal happen exceeds US$600 million, you are going to walk away.” That US$600 million is exactly the gap in our public-financing option. We knew how much the project was going to cost and how much financing we could raise. (VDOT official)
Now it becomes clearer why the flexibility strategy in the I-495/I-270 project, in other words, adopting a progressive PPP model, was not effective. The early decision to opt for a PPP precluded evaluating a public-financing benchmark for truly better private sector deals. MDOT’s belief that PPP is the only cost-saving method for this project lacks a value-for-money comparison with conventional financing. Transportation agencies often conduct such analyses to weigh public versus private financing costs. Regarding this project, some officials doubted the cost effectiveness of involving private companies. There were voices suggesting two reversible lanes using less costly government financing, instead of the more lucrative four-lane plan preferred by the private sector.
Comparing the two projects implies that flexibility in acquiring resources from market stakeholders for economic value creation relies on specific conditions. The I-66 project had a distinct advantage of having a public-financing option before soliciting proposals from private bidders, which guaranteed that any proposal had to create greater value. This set a lower bound for the space of alternatives, as illustrated in Figure 3. In contrast, the I-495/I-270 project lacked such an option. MDOT’s claim of no additional cost to taxpayers was not built on a solid cost and financial feasibility estimate. Opponents of the project pointed to the absence of a reliable traffic analysis as a key issue. Without a reference point, outcomes could vary widely, possibly not achieving the project’s full potential value. As a VDOT respondent pointed out, “If you don’t have a public [financing] option, you kill competition at the PPP level.”
Economic value creation from market stakeholders’ resource contribution: Boundary conditions.
Based on this observation, we argue that the reference point, conceptualized as the baseline option—a well-designed, feasible solution for comparison with other alternatives—was key to the effectiveness of flexibility. This forms a boundary condition for Proposition 1, which identifies a core variable affecting the focal relation:
Another key difference in the flexibility strategy between the two projects lies in the credibility of the bidders’ commitment to their proposals. According to Shepsle (1991, p. 247), a commitment can be considered credible in two ways: motivational and imperative. Motivational credibility refers to the continued desire of the committee to honor the commitment, which is “incentive compatible and self-enforcing.” Imperative credibility implies an adherence due to coercion or limited discretion.
In this regard, the I-66 project created real competition by ensuring that the bidders were committed to their proposals with motivational and imperative credibility. After receiving two compliant bids, VDOT explicitly stated that any proposal requiring over US$600 million in public money, the amount that VDOT had to put in the public-financing option, would not be accepted. The public-financing option remained available until the final contract was signed. The bidders were thus motivated to make credible innovations to outperform both competitors and the public-financing option. Meanwhile, they also knew that their proposed technical and financial plans would be contractually binding, and therefore they had a strong motivation to ensure their plans’ feasibility. This deterred bidders from playing lowball to win the contract and negotiating with VDOT later. Therefore, the proposals held imperative credibility. “Everything the bidders added, we went back and put in the contract to make sure they are contractually obligated to deliver,” as noted by a VDOT respondent.
The I-495/I-270 project, adopting the progressive PPP model to facilitate early private sector engagement, lacked measures to ensure credible commitments. This model can be advantageous as it facilitates more upfront collaboration between the public and private sectors, especially with uncertain designs. However, both projects are revenue risk PPPs, meaning that the bidding competition revolves around the traffic revenue projections. Unlike traditional PPP procurements with committed bids to RFPs, progressive PPPs could involve a qualification-based private partner selection with less comprehensive assessment of the contract’s costs and risks. In this case, the promise may not be a real commitment. Nonetheless, it is difficult for the public sector to refuse a seemingly better proposal despite its nonbinding technical and financial parts. Once the preferred bidder is selected, the value creation process becomes locked within a bilateral relationship, limiting the public sector’s negotiation leverage due to the high cost of restarting the procurement. Overall, this process did not create real competition that fostered the private sector’s credible resources contribution. Since the qualification-based selection could not guarantee the private partner would fulfill the promises, it prevented the best use of their expertise and information to provide reliable and innovative solutions. “To create a competition, the PPP developer needs to give a real commitment. If you don’t have a security package, the developer could leave without any costs,” emphasized one of our respondents, a top executive from Cintra. This perspective was also verified by a VDOT respondent. In our competition, we got two committed, complete bids. What they [MDOT] got was an essay that said I [the private partner] promised to build this, but there was no guarantee on what they said. At that point, they didn’t have traffic and revenue numbers, a committed DB price, or a committed financial model…. They lost competition on revenue line in a revenue risk PPP project. (VDOT official)
The comparison highlights the difference between the two projects in terms of credibility of market stakeholders’ commitment to resources contribution, as illustrated in Figure 3. In the I-66 project, bidders understood that their proposals must surpass the baseline option and competitors, while also being feasible since they would become part of the final contract. Consequently, they had a strong incentive to devote efforts to developing their proposals. In contrast, the I-495/I-270 project missed the measures to secure credible commitments. The qualification-based selection criteria and non-legally enforceable proposals could incentivize bidders to develop unrealistically optimistic plans over diligent ones.
The way [to make a fair and transparent evaluation] is to do a fixed-price contract. If you [the public sector] choose a predevelopment agreement for someone who makes promises to you but doesn’t need to really commit to anything, you will have a developer that doesn’t have any incentive to be innovative [but] you won’t have any leverage to negotiate. (Cintra top executive)
Moreover, flexibility in this progressive PPP procurement occurred at a stage involving a single private partner with less incentives. In this circumstance, a flexible strategy was less likely to generate controllable outcomes. Therefore, we propose the second boundary condition for Proposition 1:
Flexibility as a Catalyst for Resource Contribution From Nonmarket Stakeholders
Nonmarket stakeholders’ primary concerns about a project are the potential impact on them, whether positive or negative. These reflect their perceived social value. Conflicts among different stakeholders over this value are common and may impact project performance (Davis, 2017). The two projects employed contrasting strategies to identify and distribute social value, which led to different results in terms of nonmarket stakeholders’ contribution of their critical resource, in other words, support.
The I-66 project’s scope finalization was unique and innovative, showcasing the power of flexibility in addressing nonmarket stakeholders’ concerns and reconciling conflicts. VDOT prioritized feedback from these stakeholders for project success. In their efforts to ensure nonmarket stakeholders’ satisfaction and support, VDOT invested considerable time and effort in establishing credibility for the team and the project. They compiled a comprehensive list of stakeholders, ranging from local, state to federal stakeholders, and special interest groups, and formed a stakeholder advisory committee with representatives of key stakeholders (e.g., counties). Through regular monthly meetings, VDOT sought technical information and other feedback and adapted their approaches accordingly. This led to a solution that not only met contractual requirements but also addressed underlying problems. Unlike many project sponsors who prioritize completing the contract, VDOT focused on achieving stakeholders’ desired outcomes and ensuring their support throughout the process. It was not like just going to them [stakeholder advisory committee members] and saying this is what we were planning to do. We were truly sharing information and getting feedback. In many cases, based on their feedback we adopted that new approach. (VDOT official)
When determining the project scope, VDOT evaluated multiple alternatives through the environmental study, including extending the metro line, adding free lanes, and building express lanes. They recognized the need to navigate the varying interests and policies of three counties in the project area: Arlington, Fairfax, and Prince William. For example, many Prince William County residents worked in Washington, D.C. and they desired a better commute there, which required passing through Fairfax County and Arlington County. However, Arlington residents did not like this idea because they were concerned about increased traffic and pollution in their neighborhood. Fairfax residents had varying opinions on the project’s impact on their land rights. To accommodate conflicts of interest, VDOT devised an innovative solution, including free existing lanes, new express lanes with a dynamic toll system for reliable travel times, expanded park and ride facilities for carpoolers, and a reliable and affordable transit option funded through toll revenue. This transit option was particularly appealing to Arlington, as it aligned with their pro-transit stance. Ultimately, all three counties supported the project because each had their concerns addressed. This was akin to “deal making,” said one of the respondents, where key stakeholders must be kept content in a successful solution.
If they [stakeholder advisory committee members] proposed a change to an intersection that would impact Fairfax County, we had the director of DOT at Fairfax. In a proprietary environment, we would help him with what that idea is and gauge his interest or objection. We could see whether the counties [were] on board with that change or not. (VDOT official)
VDOT’s flexible approach to finalizing project scope reflected their consideration of social impact beyond the financial benefits. The multimodal improvements offered commuters choices and incentives to use alternative transportation modes. This solution balanced stakeholder interests in mitigating environmental impact and improving local residents’ quality of life. Ultimately, this flexible approach encouraged nonmarket stakeholders’ support by equitably distributing value among them.
We were open minded, but it didn’t mean we were compromising on our goals. We knew from the beginning what we wanted… we would not eliminate transit or impact a lot of right of way. There were lines that we don’t want to cross because they go to the core of project objectives and policy goals. (VDOT official)
What happened along the I-495/I-270 corridor is another story. From the start, transit advocates have been strongly against it. However, MDOT insisted on the highway widening plan without seeking a compromise solution. The region’s Transportation Planning Board once removed the I-495/I-270 project from its priority list, which could have impeded the project from receiving federal funding. In response, MDOT declared to redirect funding from other road and transit projects to support the toll lanes plan. This move was criticized by Montgomery County officials who accused this as leverage to force local support. The board later approved the proposal, but opponents noted that many of the projects MDOT claimed to be threatening were not allocated state funding, suggesting their threats were empty. MDOT and the nonmarket stakeholders were locked in disagreement, with a deterioration of trust. Due to strong opposition, MDOT finally made significant changes, including postponed toll lanes and earlier allocation of toll revenue for transit. Despite these modifications, critics remained skeptical, viewing them as superficial attempts to create a facade of collaboration.
The situation with express lanes is similar. In 2019, the secretary of transportation announced that all drivers would be required to pay, with no free access to high-occupancy vehicle lanes. This may benefit private companies, as they always prioritize profit maximization. Making high-occupancy vehicle lanes free means losing some of the revenue. However, this act risked losing support from local nonmarket stakeholders, as evidenced by Montgomery County’s opposition. Later, MDOT changed its position when they were under pressure. As a VDOT respondent pointed out, “When you are under pressure, you are making concessions. It’s not the same thing. It doesn’t have the same impact.”
The analysis indicates that MDOT inadequately identified social value. They overlooked transit advocates’ needs for public transit services and multimodal solutions. Furthermore, the process was criticized for lacking transparency and failing to actively engage the public, and consequently conveyed a message of insufficient value identification.
In addition to social value identification, reconciling stakeholder expectations for equitable value distribution is also critical for project success (Scheepers et al., 2022). This is another missing piece in the I-495/I-270 project. The toll lane arrangement failed to address social value distribution, since the plan conveyed a negative signal to the public that the government priorities were skewed toward private companies’ profitability rather than the public interest. Additionally, low-income users perceived that the toll lanes favored the wealthy, which contradicted social justice principles and undermined the project’s inclusivity and fairness for diverse socioeconomic groups. This issue highlights the need for a balance between private profitability and public welfare to ensure equitable access and benefits for all. In summary, the project’s inflexibility in its scope led to nonmarket stakeholders’ perception of unfair value distribution, which led to mistrust. Although later adjustments were made, it was difficult to produce the same effect achieved through a flexible approach from the beginning.
An interesting observation from this comparison provides insights into an underlying reason for the distinct flexibility strategies in the two projects in determining project scope. When the I-495/I-270 project was initially proposed, the governor’s unwavering support for the PPP model led to a top-down process for selecting the project scope and delivery method. While the authorities’ strong support is favorable, it reflected a disregard for the enfranchisement of nonmarket stakeholders. In contrast, the PPP approach for the I-66 project did not have initial support from the governor. The challenge to justify the project’s benefits prompted a more collaborative and bottom-up approach, which identifies both essential market stakeholders and nonmarket stakeholders as enfranchised in delivery method selection and project scope determination. This resulted in a broader identification of social value such as traffic improvement, social equity, and environmental sustainability, alongside economic values as crucial elements of the stakeholders’ joint value creation. Sometimes project sponsors make the mistake that they just work to quickly get the project under contract. In our case, we were truly focused on the outcomes. [We focused on] the problem and the solution, and whether that solution is acceptable for stakeholders, because at the end of the day, we need their support in order to execute that solution. (VDOT official)
Upon identifying social value, the I-66 project’s flexible approach accommodated conflicts among nonmarket stakeholders and resulted in an equitable value distribution. As illustrated in Figure 4, this fairness was well received by nonmarket stakeholders, thereby fostering their willingness to contribute their critical resource, in other words, support to the project. The I-495/I-270 project’s inflexibility in adapting to nonmarket stakeholder expectations led to a lack of support. Based on these findings, we propose that:
Nonmarket stakeholders’ resource contribution from social value identification and distribution.
To summarize the key features observed in the two projects from the case study, Table 1 presents these differences across several key dimensions.
Comparison of the Two Projects
A Theoretical View for Capital-Intensive PPPs: Incorporating Flexibility and the NST
Finally, this study presents an integrative view that depicts the interrelatedness and synergy between flexibility and stakeholder involvement, as shown in Figure 5. Drawing on the NST perspective, we dissect two mechanisms of the flexibility strategy regarding two distinct stakeholder groups: nonmarket and market. For market stakeholders, flexibility can increase economic value creation through the acquisition of expertise and information from market stakeholders, bounded by two specific conditions that impact flexibility’s effectiveness, including the presence of a baseline option and credible commitment. For nonmarket stakeholders, flexibility encourages support through enhanced social value identification and distribution.
Flexibility from the NST perspective for capital-intensive PPPs.
Discussion and Conclusion
This case study provides evidence and an integrated view of the role of flexibility in capital-intensive PPPs. These findings provide valuable insights for PPP practitioners to enhance their stakeholder management by incorporating flexibility for successful outcomes.
Theoretical Implications
This study contributes to the NST perspective in two aspects. First, it examines the role of market stakeholders’ critical resources in economic value creation and showcases the dynamics between nonmarket stakeholders’ critical resources and value identification/distribution within the NST framework, which offers nuanced insights into value cocreation. Second, by examining the impacts of flexibility on stakeholder interactions and value creation, our research extends the NST literature by incorporating flexibility as an antecedent to stakeholder engagement.
This study also revisits project success from a stakeholder management perspective. Although the project success literature identifies various stakeholders and the impact of their diverse perceptions on project value and project success (Davis, 2014), there has been a lack of work on how such perceptions affect stakeholders’ resource contribution, which in turn impacts project success. According to Baccarini (1999), project success consists of project management success (focused on inputs and outputs, such as budget, schedule, quality, and project management process quality) and product success (mainly concerned with the project’s purposes and goals, such as meeting the strategic objectives and satisfying stakeholders’ needs). In this case study, the decision-making that involves the interactions with two types of stakeholders can be evaluated from these dimensions. Market stakeholders are related to project management success through procurement process design in selecting the optimal delivery method and bidder, whereas nonmarket stakeholders who are concerned with best value for them are associated with product success. Product success is a key evaluation criterion since the ultimate purpose of these projects is to benefit the public. Although product success is often evaluated as a postdelivery criterion, in this context it has been reflected to a certain extent at the early stage by nonmarket stakeholders’ support, which in turn affects the project management process. Similarly, project management success can also be evaluated from the nonmarket stakeholder side in terms of communication process with them. In this sense, product success and project management success are mutually reinforcing, not separate dimensions.
Managerial Implications
The findings presented in this study have several key managerial implications for practitioners, particularly government agencies acting as project sponsors of capital-intensive PPPs. First, the study recognizes the power of a flexibility strategy in improving the efficiency of competition in the procurement stage. By adopting a flexible approach toward the selection of delivery methods and private partners, project sponsors can involve more experienced potential bidders into project procurement to tap into valuable expertise and information from the experienced private sector, leading to better decision-making and improved project outcomes. In addition, the study highlights that flexibility creates real competition in project procurement when certain conditions are met. First, having a feasible public-financing option before soliciting a PPP provides a reference point against which the merits of alternative options can be measured. By carefully designing the public-financing option, project sponsors could achieve optimal outcomes in terms of economic value creation. In this regard, flexibility never means more laissez-faire. On the contrary, flexibility comes with good preparation that requires upfront efforts to come up with a good package. Second, the credibility of bidders’ commitment to their proposals is crucial since a legally binding proposal is more likely to result in dedicated efforts that align with project objectives. Therefore, project sponsors need to ensure that the selected private partner is motivated to fulfill their commitments. It is through these boundary conditions that PPP procurements gain a real sense of competition, which incentivizes the potential bidders to put their resources to good use for committed innovative solutions. This reminds future PPP sponsors of the capacity to “control” flexibility. They should pay attention to the premise for implementing flexibility, which involves establishing viable alternative plans and ensuring that bidders’ commitments are clear and enforceable before reaching a bilateral agreement. Flexibility should not be taken as a separate element in the entire process. “Everything was in place for a reason. It is impossible to expect things to work the same when taking pieces out,” as one of the VDOT respondents pointed out.
Apart from the private sector as the market stakeholders, the study emphasizes the importance of considering the interests of the broader nonmarket stakeholders. Building flexibility through a collaborative approach can facilitate adaptation to diverse stakeholder expectations. Project sponsors should actively engage nonmarket stakeholders in the project scoping determination, by identifying the social value of different nonmarket stakeholder groups and balancing their conflicting interests. This ensures that projects align with their expectations and create shared value, thereby fostering their support and cooperation. With regard to nonmarket stakeholders, flexibility does not mean a prolonged determination of project scope. On the contrary, flexibility brings more voices to the table at an early stage to help formulate a project scope that truly meets stakeholders’ needs, builds trust, and avoids iterative changes at a later stage.
Overall, the flexibility strategy reflects the mindset and management capabilities of project sponsors. In terms of mindset, it is important to adopt an inclusive approach to welcome inputs from all the key stakeholders. From the viewpoint of management capabilities, project sponsors must clearly understand their own capacities—what can be and needs to be accomplished with their own abilities and what requires collaboration with stakeholders. They must also efficiently implement these interactions with different stakeholder groups, and then select the optimal solution when they have the initiative.
This study also suggests evaluating project success beyond economic outcomes to include social value such as social equity and sustainability. Project sponsors should broaden their view on project success and develop appropriate evaluation criteria that encompass economic and social dimensions. To this end, the stakeholder perspective can help better understand the holistic impact of projects and make informed decisions.
Limitations and Future Research
We recognize there are several limitations in this study. First, the findings are based on the characteristics of two cases, potentially limiting their generalizability to a broader range of projects. To ensure appropriate extension of our findings, it is important to take into account specific conditions such as a regulatory environment where the support or opposition from nonmarket stakeholders holds significant influence over project approval. Second, capital-intensive PPPs are inherently complex and involve a multitude of stakeholders beyond those discussed in this article. It is possible that other unexamined factors could significantly influence project outcomes. It is essential to note that this study adopts a narrow focus to examine the role of flexibility from the NST perspective. While emphasizing the power and powerlessness of flexibility, there remains the potential for other factors and mechanisms to explain how flexibility impacts project success.
There are multiple potential directions for future research. First, while this study focuses on project management success in early project stages, future work could examine the impact of flexibility on the product success dimension given the long-term feature of PPP relationships and prolonged impact of large infrastructures. Second, since political factors play a crucial role in PPP projects, PPP success and failure can be revisited from the perspective of political capital. Given the significance of performance during a governmental administration’s term, politicians tend to view the success of large infrastructure as critical to attracting continued support in future elections. In particular, the support of collective groups—nonmarket stakeholders in this study—provides social capital, which is a critical aspect of political capital (Casey, 2008). Political capital affects the power of the administration to implement an infrastructure project, which in turn affects the accumulation of political capital. Given these considerations, the adoption of flexibility can be significantly affected. Future studies can investigate the conceptualization and quantification of political capital that influences the game among empowered community members. Third, the I-66 project had many innovative pieces in delivering a complex project that satisfies multiple stakeholders with conflicting interests, realizing both efficiency and equality. To name a few, using a unique set of evaluation criteria that encourage bidders to exceed the minimum requirements in the RFP, creating a reserve account to seek a balance between financing costs and revenue risk, and being the first project in the United States to use toll revenue to fund the transit for 50 years. These successful attempts provide valuable practical implications for the PPP industry. Future studies can systematically investigate innovations in PPP procurement that led to project success. Fourth, progressive PPP is a relatively new model. Based on the insights of our interviewees, progressive PPPs might be more appropriate for availability payment deals rather than revenue risk deals like the two projects in this study. They provide ideal examples for future research on examining the choice among different PPP procurement methods and the right ways of designing and executing progressive PPPs.
Footnotes
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The authors received no financial support for the research, authorship, and/or publication of this article.
