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presented by: ignacio halley

Definition of Terms. Public-Private Partnership (PPP): Generally, a PPP is a contractual agreement between a governmental entity and one or more private entitles to fund, build, and operate a service which has been traditionally provided by the government.Design Build Finance (DBF): A PPP arrangement whereby the private partner builds a facility to specifications agreed to by the public entity. The transfer of title to the public agency occurs at the time construction is completed, not at the19

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presented by: ignacio halley

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    1. Presented by: Ignacio Halley Contractor’s Perspective

    2. Definition of Terms Public-Private Partnership (PPP): Generally, a PPP is a contractual agreement between a governmental entity and one or more private entitles to fund, build, and operate a service which has been traditionally provided by the government. Design Build Finance (DBF): A PPP arrangement whereby the private partner builds a facility to specifications agreed to by the public entity. The transfer of title to the public agency occurs at the time construction is completed, not at the end of the operations period. Design Build Finance Operation and Maintenance (Concessionaire): The Special Purpose Entity ("SPE") or Special Purpose Vehicle ("SPV") with whom the public agency almost always enters into a concessions contract. It is a private legal entity comprised of a private firm or firms which will finance, design, build, operate and/or maintain the asset to be constructed.

    3. Definition of Terms(Continuation) Design Build Finance (Unsolicited): Project initiated by Design Build. Similar to Design Build Finance (DBF). Set-Offs: GAP Financing: The difference between what the department has funds available to pay at a given time and cost to construct at a given period.

    5. Definition of Terms(Continuation) Brownfield Projects: The government is leasing the operation and maintenance of an existing asset to a private sector company in exchange for financial consideration. The private sector company receives lease payments over an extended time period (25 to 99 years) for taking over the operation and maintenance of the asset. Recent examples in the U. S. include the long term lease transaction of the Chicago skyway or the Indiana toll road. Another example is the proposed, but unsuccessful "lease" of various U. S. Port operations to a Dubai-based entity. Greenfield Project: New projects are designed, built, operated, and maintained by the private sector ("Concessionaire") on behalf of the public section through a long-term concession or lease agreement. Depending on the structure, the financing ultimately may or may not be provided by the Concessionaire. Recent examples include the proposed Port of Miami Tunnel. Value for Money: The concept that drives the PPP/PFI delivery system. Instead of basing the procurement decision on the lowest initial cost of construction, the decision is based on the whole life cost of procuring the services (not the asset) for the term the government plans to operate the facility.

    6. Definition of Payment Terms Delayed Payments: The government wishes to complete a project in a shorter time than the funds it has available within a given time . Therefore, design build contractor would have to fund the GAP and the payments. Tolling: In this model, the toll charge for use of the asset by the consumer is the sale reimbursement option for the Concessionaire. It is rarely used as the sale funding source anymore, as it is simply too risky, especially on Greenfield Projects. Availability Payments: In this model, the Concessionaire is reimbursed for the services provided, based on the availability of the asset. For example, on a road, the government entity makes payments to the developer based on the amount of time the lanes are available for use and other qualitative factors. As long as the Concessionaire provides an operating asset, there is very little risk that it will not receive the payment stream which will ultimately service the debt. This is the most common model. Combination Payments: Combines features of both tolling and availability payments.

    7. PPP ContractingProcess Two Alternatives: Government Entity Advertises a project for bid A “Proposer” makes an unsolicited offer to government Request for Qualifications RFQ (Government): Are issued by the government entity. This provides the guidelines for any interested Proposers to submit a Statement of Qualification (SOQ) for the project. At this point, a surety pre-qualification letter is often specified. The letter is typically only provided on behalf of the Design-Build contractor and the scope of work should be limited to the design and build portion of the project only. Statement of Qualification SOQ (Proposer): Are submitted and evaluated and a short list is generated limiting the proposal to three or four Proposers. This is critical because the cost to make one of these proposals can range in the millions and is largely not reimbursable, other than a small stipend. Surety Prequalification and Financial prequalification required Shortlist (3 to 4 Propose) (Government)

    8. Design Build Finance(DBF)

    9. Design Build FinanceOperations & Maintenance(DBFOM)

    11. Proposal Submittal Technical Financial Price Proposal: Construction Cost Payment Matrix Payout Schedule

    12. Quarterly Breakdown of Payouts

    14. Proposal Submittal Technical Financial Price Proposal: Construction Cost Payment Matrix Payout Schedule Selection of Proposer

    16. Surety’s Perspective Presented by: Tad Nelson

    17. FDOT~PPP Surety Bonds Travelers Bond and Financial Products Experience with PPP’s Nationally Locally Performance and Payment Bonds Dual Obligee FDOT Contracts

    18. FDOT~PPP Surety Bonds Normal Underwriting Considerations Size/Scope Capacity Capital Florida Department of Transportation Financing

    19. GAP Financing Florida & Minnesota Uncharted Waters Avoid bonding the obligations associated with financing.

    20. Financing Arrangements New Agreements Loan/Financing Assignment Intercreditor

    21. Travelers Framework Utilize Assignment and Intercreditor Agreements. Key Components of the Documents between the Contractor, Surety, and Financier. (As we know now) What happens without these agreements? Time and Information

    22. Concessionaire’s Contract With Joint Venture or Sole Venture Risks and Considerations for: Design Builder Concessionaire Subcontractors

    23. Questions What happens if Travelers has to complete the project and the financing institution terminates their funding? What happens if one part of the syndication terminates its obligation to fund? Are the sureties extensive rights to accounts receivables still applicable?

    24. Questions(Continued) What happens if these arrangements cannot be contractually structured? How does the FDOT’s right of Set Off applied? What kind of time and resources will be needed? What feedback has your CPA or Attorney provided?

    25. Summary There are differences between: PPP GAP Concessions Call in the reinforcements Allow enough time More to come

    27. Finance’s Perspective Presented by: Jack Holland

    28. Financing Options Company Funded: Contractor uses own capital and balance sheet. Bank Financing: Traditional Bank Loan – Taxable rate 8% to 15% depending on credit quality and security. Tax Exempt Funding: Contractor teams with a governmental entity and issues tax exempt debt, current average rate of 5% depending on credit structure.

    29. Execution of a Municipal Financing Tax Exempt Municipal Bonds and Notes are often used to fund public improvement: Traditional Public Finance G.O. Bonds Revenue Bonds On behalf of financing PPP (Public-Private Partnerships) Revenue Stream Secured Financing managed by Private Entity Facilities owned by Public Entity This method of financing is attractive for many reasons but the most important is that tax exempt financing results in lower debt service costs.

    30. PPP Financing integrated with project submittal: Pro-forma development schedule Capitalize development period debt service Project future construction reimbursement Confirm enforceability of FDOT contract and performance bonding. FDOT Awards the Contract FDOT Contract is reviewed by Oppenheimer and Bond Counsel. Final due diligence and document development. Execution of a Municipal Financing (Continued)

    31. Execution of a Municipal Financing (Continued) Credit Rating Application & Assignment: A Revenue Anticipation Note amortization structure is designed to retire the notes from the anticipated FDOT construction draw schedule Draft a Trust Indenture pledging FDOT revenues to repayment of the Notes. Note Documentation is submitted to Municipal Credit Rating Agencies and Credit Enhancements Providers and Note rating is received.

    32. Execution of a Municipal Financing (Continued) Securities Marketing: Issuer adopts Resolution authorizing the issuance of the Notes. Notes are issued and underwritten by Oppenheimer. Note Proceeds are deposited in a Project Fund, pursuant to the Trust Indenture, and invested in qualified securities prior to disbursement for project construction.

    35. Preliminary Documentation Required for Analysis Project Description Form of Contract with FDOT Pro-Forma of Construction Draws F-form of Performance Bond Company Financials

    36. Contacts

    38. Department’s Perspective Presented by: Greg Schiess

    39. Why are we taking advantage of the P3 means of project delivery? Nationally increasing congestion with deteriorating infrastructure More specifically in Florida is the growing burden of transportation demand and the need for additional capacity

    40. High expectations of our the elected officials “On Budget and On Time!” “Why Not Sooner!”

    41. Competition for scarce funding Objections to tax increases Increasing cost of new construction We need innovative solutions meaning investigating new options

    42. Federal initiative actively promoting the involvement of private financing which means projects are more financially feasible and the Department has a greater flexibility in delivering the project Our experience also places us in a good position to take advantage of possible economic stimulus initiatives.

    43. HB 985 Financial Policies

    44. HOWEVER The Florida statute that provided for P3s also limits the Department to 15% of the Department’s program. The majority of the Department’s work program will be delivered by low bid project delivery system.

    45. Procurement Team Financing Team Engineering and Operation Team

    46. The Department’s objective is to develop policies and procedures including boilerplate documents to assist in the develop of the projects.

    47. We need to recognize that as we continue to learn from such projects the policies and requirements will continue to evolve. For example

    48. Like the elimination of the off set payment provision that was in the traditional design/bid/build delivery system. And the increased time between award and contract execution due to the additional actions required for a 3P

    49. Bond requirements are also changing. Presently the Department will require a performance and payment bond for contracts less than $250 M For those over $250 M a letter of credit for $250M performance and $250M payment bond is required

    50. General Philosophy is that our standards and specifications are the baseline. However we strongly encourage the use of the Alternative Technical Concept Proposals to submit innovative ideas.

    51. For example…. The standard CQC specifications include a sampling and testing frequency …One approach might be to establish a Construction Quality Management Plan where the rate of sampling and testing is variable based on the results, location of the mix, etc., permitting the traditional QC and VT to be substantially reduced.

    52. Or… The Resolution Process is eliminated Robust Concessionaires Construction Quality Management Program would be developed The information would be shared with the Department including the Concessionaire’s means of monitoring the actual performance. This allows the early detection and remedial work before the distress can be detected by the traveling public. If the CON detects a concern (which previously would have might a production stoppage) the approach might to the present the facts to the Departments and address the concerns at that time. To further explain use low air voids or low density that would mean a production shut down under the present specifications. CON would provide the information to the Department and explain a monitoring of the pavement performance to detect and rehab before the traveling public if affectedIf the CON detects a concern (which previously would have might a production stoppage) the approach might to the present the facts to the Departments and address the concerns at that time. To further explain use low air voids or low density that would mean a production shut down under the present specifications. CON would provide the information to the Department and explain a monitoring of the pavement performance to detect and rehab before the traveling public if affected

    53. Another Option Align the goals of the Department and the Concessionaire!

    54. Switch to output specifications. Develop a robust Quality Management System where the Concessionaire's DOR inspects the construction at critical points and certifies compliance. Continuous monitoring and incremental improvements .

    55. What Output Specifications? Ride Flow (Average running speed) Capacity Crash Rate

    56. Allow choices to be made

    57. Types of payments: Toll collects, direct or shadow Availability Payments Periodic payments over an extended period of time beyond the actual construction

    58. Adjectival Scoring System with five levels, poor through excellent and are is used for the remaining elements such as the following items; Management Approach Quality Plan Maintenance of Traffic Public Involvement The persons doing the scoring will not know the numeric value of the adjectival rating.

    59. Selection and Evaluation Pass fail on the ITP criteria Selection Criteria The scoring will be based on the financial aspects and engineering aspects. For the I-595 50% of the score is financial with 45 of that based on the Maximum Availability Payment the majority of the selection is based

    60. Developers have approached the Department to provide capacity improvements to State routes as a part of their planned developments: Developer to use FDOT Qualified DOR, Contractor, and CEI All accomplished in accordance with the Department’s design and construction standards which include Value Added specifications

    61. Two Approaches Solicited Proposals Unsolicited Proposals: $50,000 Fee Published for two weeks Accept proposal within 120 days

    62. 62 We are implementing a number of different P3 projects as shown on the map. Some of the other P3 highlights include: I-75 Design Build Finance Project in Lee/Collier Counties –This project is the first DBF in the state and at the time was the largest single construction contract ever let by Florida DOT. The innovative financial component of this project allows the job to be built in just over three years with the department paying the contractor over five years. Construction began October 28, 2007 and is expected to finish at the end of 2010 (weather days excluded). The job six lanes 30 miles of I-75 from the new Golden Gate interchange in Collier County (completed in March) to the Colonial Blvd. interchange in Lee County. New lanes will be added to the inside toward the median. The project also includes making improvements to the Immokalee Road interchange in Collier County. Bid of $430.5 million fits our budget. We’ve offered a $15 million incentive for early completion ($100,000/day up to five months). Disincentive for late completion also is part of the contract. Anderson-Columbia and Ajax Paving are partnered with HDR for design. Metric Engineering is providing CEI services. (Total cost is $469 million.) We are in discussions with the Southwest Florida Expressway Authority on the possibility of advancing the 10 lanes in Lee and maybe Collier Cos. I-595 Improvements – Four firms were short listed with one subsequently withdrawing. The draft RFP has been given to the firms with fianl RFP to be sent out April 1st . There were a a series of projects to widen I-595 and improve interchanges from the Turnpike west to I-75/Sawgrass Expressway that hae. This will also include adding “Express Lanes” in the center of I-595. It is expected the procurement will begin in October and be complete this time next year. Estimated cost is $1.3 billion. US-1 Improvements in the “18-Mile Stretch” – This was an unsolicited proposal that was advertised and is now being finalized. This series of projects widen US-1 to three lanes south of Miami to make major safety improvements in this section of US-1. An unsolicited proposal was received to advance several segments of US-1 improvements in the Adopted Work Program by as much as four years. The total capital cost is $113 million. I-95 Widening/Pineda Causeway Interchange – This would advance projects in the Adopted Work Program to widen I-95 and improve the Pineda Causeway Interchange in Brevard County. The total capital cost is $211 million. Palmetto Expressway Widening and Interchange Improvements – This would advance the last segment widening the Palmetto Expressway (SR-826) in Miami from north of Bird Road to south of the Don Shula Expressway (SR-874), with interchange improvements at Bird Road and the Shula Expressway. The total capital cost is over $232 million. First Coast Outer Beltway – This is a new road in the First Coast area beginning west of Jacksonville on I-10, heading south into Clay County and east to St. Johns County connecting to I-95 south of Jacksonville. It is expected this project will move into procurement in early 2008. Estimated cost is $1.8 billion. $30 million of State funds are moving the procurement forward and the remainder will be funded from future toll revenues.We are implementing a number of different P3 projects as shown on the map. Some of the other P3 highlights include: I-75 Design Build Finance Project in Lee/Collier Counties –This project is the first DBF in the state and at the time was the largest single construction contract ever let by Florida DOT. The innovative financial component of this project allows the job to be built in just over three years with the department paying the contractor over five years. Construction began October 28, 2007 and is expected to finish at the end of 2010 (weather days excluded). The job six lanes 30 miles of I-75 from the new Golden Gate interchange in Collier County (completed in March) to the Colonial Blvd. interchange in Lee County. New lanes will be added to the inside toward the median. The project also includes making improvements to the Immokalee Road interchange in Collier County. Bid of $430.5 million fits our budget. We’ve offered a $15 million incentive for early completion ($100,000/day up to five months). Disincentive for late completion also is part of the contract. Anderson-Columbia and Ajax Paving are partnered with HDR for design. Metric Engineering is providing CEI services. (Total cost is $469 million.) We are in discussions with the Southwest Florida Expressway Authority on the possibility of advancing the 10 lanes in Lee and maybe Collier Cos. I-595 Improvements – Four firms were short listed with one subsequently withdrawing. The draft RFP has been given to the firms with fianl RFP to be sent out April 1st . There were a a series of projects to widen I-595 and improve interchanges from the Turnpike west to I-75/Sawgrass Expressway that hae. This will also include adding “Express Lanes” in the center of I-595. It is expected the procurement will begin in October and be complete this time next year. Estimated cost is $1.3 billion. US-1 Improvements in the “18-Mile Stretch” – This was an unsolicited proposal that was advertised and is now being finalized. This series of projects widen US-1 to three lanes south of Miami to make major safety improvements in this section of US-1. An unsolicited proposal was received to advance several segments of US-1 improvements in the Adopted Work Program by as much as four years. The total capital cost is $113 million. I-95 Widening/Pineda Causeway Interchange – This would advance projects in the Adopted Work Program to widen I-95 and improve the Pineda Causeway Interchange in Brevard County. The total capital cost is $211 million. Palmetto Expressway Widening and Interchange Improvements – This would advance the last segment widening the Palmetto Expressway (SR-826) in Miami from north of Bird Road to south of the Don Shula Expressway (SR-874), with interchange improvements at Bird Road and the Shula Expressway. The total capital cost is over $232 million. First Coast Outer Beltway – This is a new road in the First Coast area beginning west of Jacksonville on I-10, heading south into Clay County and east to St. Johns County connecting to I-95 south of Jacksonville. It is expected this project will move into procurement in early 2008. Estimated cost is $1.8 billion. $30 million of State funds are moving the procurement forward and the remainder will be funded from future toll revenues.

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