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Tools to Successfully Establish Public Private Risk Partnerships

Learn how to develop communication strategies, cultivate relationships with community leaders, and minimize risk through mutually beneficial agreements in public-private partnerships. Explore examples, contractual considerations, insurance considerations, and effective risk management strategies.

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Tools to Successfully Establish Public Private Risk Partnerships

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  1. Tools to Successfully Establish Public Private Risk Partnerships Marilyn L Rivers, CPCU ARM AICDirector of Risk and Safety City of Saratoga Springs, NY

  2. Learning Objectives: • Develop communication strategies to promote your risk management programming within your community’s activities. • Identify and cultivate relationships with community leaders to assist in managing your public and private risk partnerships. • Learn to set and achieve expectations minimizing the risk of community programs through the use of mutually beneficial agreements.

  3. Business Continuum Public <--------------> Private

  4. PPP (P3’s) Public-Private Partnership (PPP) is a “contractual agreement between a public agency (federal, state or local) and a private sector agency. Through this agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public. In addition to the sharing of resources, each party shares in the risks and rewards potential in the delivery of the service and/or facility.” National Council for Public-Private Partnerships

  5. Special Purpose Vehicle (SPV) “A public sector consortium composed of a contractor, maintenance company, and bank lenders who form a special company to develop, build, maintain and operate a public asset for a contracted period.” Wikipedia

  6. 2013 USDOT FHA: Financial Structuring of Public-Private Partnerships (P3’s) Simple P3 Financing Structure Availability Payment or Subsidy Shared Revenue Repayments Dividends Bonds, loans Equity Investments Funds to build, maintain and operate Toll Revenue

  7. PPP Examples Healthcare Housing Infrastructure Power Telecommunications Transportation systems Water and Sewer

  8. Public Entity Contributions to PPP Services in kind Capital budget subsidies Grants Revenue subsidies Tax breaks

  9. Private Entity Contributions to PPP Capital Expertise Transfer and sharing of risk Operational and maintenance Opportunities for innovation Managerial expertise

  10. Rules of Engagement What is the public purpose of the PPP? What is the PPP’s contractual time period? Who will be responsible for the creation? How will the PPP be managed? How will procurement and purchasing be managed? What are the terms and conditions of the PPP? How will the ROI be communicated? Who will be responsible for recurring maintenance?

  11. Potential PPP Community Partners Public economic development agencies Private economic development agencies Regional and local chambers of commerce Organized business districts Commercial entities Traditional and non-traditional financing

  12. PPP Concerns Community public funding gaps Taxes…taxes…taxes Integrity of relationships Global economic pressures Continuing costs of maintenance Cost of money Weighted Average Cost of Capital (WACC)

  13. Governance Goals and Initiatives Transparency in communication Good governance in public and private Anti-corruption initiatives and ethics Alignment of fiduciary responsibilities Labor relations and legislative mandates

  14. What is a mutually beneficial agreement?

  15. Contractual Considerations Establishment of legal partnerships Pre-determined revenue and expense sharing Delineation of contractual responsibilities Design-Build-Finance-Operate-Maintain Payment structure Indemnification and insurance Regulatory requirements

  16. Insurance Considerations Insurance for project assets Construction “All Risk” (CAR) Professional Errors and Omissions Third Party Liability Property and Casualty Workers Compensation & Employer’s Liability Lenders as Co-Insureds Reinsurance

  17. Project Scope and Complexity Considerations Project size Identified risks Allocation of risk to public and private entities Innovation potential Cost efficiencies and savings Quality of product and services Life cycle costs

  18. Communication Strategies Public-private work groups Standardized communication Project milestone presentations Annual reviews and remediation Financial review and analysis Community feedback initiatives

  19. Risk Management in the PPP Allocate risk according to your tolerance of risk Manage public-private relationships Establish clear incentives, contingencies, performance requirements and milestones Participate in the design build process Remain aware of political pressures Know the ramifications of the private sector’s risk Understand reputation risk and public perception

  20. Sustainable solutions?

  21. Keys to Successfully Managing PPP’sDeveloped by the National Council for Public-Private Partnerships“Testing Tradition: Assessing the Added Value of Public-Private Partnerships” Appoint a Public Sector Champion Establish a Statutory Environment Dedicate a Public Sector Organized Structure Execute a Detailed Business Plan Clearly Define Revenue Streams Engage Stakeholder Support Pick Your Partner Carefully

  22. PPP Examples World Health Organization (WHO) financed by the United Nations US Food and Drug Administration White Oak Campus ( www1.eere.energy.gov/femp/financing/superespcs_fda.html) Chicago O’Hare International Airport Consolidated Joint Use Facility Project http://www.fhwa.dot.gov/ipd/project_profiles/il_ohare.htm Presidio Parkway, San Francisco, CA (www.presidioparkway.org)

  23. Questions?

  24. Reference and Resource Documents “Testing Tradition: Assessing the Added Value of Public-Private Partnerships,” The National Council for Public-Private Partnerships, 2012, ncppp@ncppp.org, www.ncpp.org (http://www.ncppp.org/wp-content/uploads/2013/03/WhitePaper2012-FinalWeb.pdf) “The Hamilton Project: Public-Private Partnerships to Revamp U.S. Infrastructure,” Eduardo Engel, Ronald Fischer, and Alexander Galetovic, February 2011, (http://cowles.econ.yale.edu/~engel/pubs/efg_revamp.pdf) “Public-Private-Partnerships: Risks to the Public and the Private Sector,” Najja Bracey, Sonia Moldovan, and The Louis Berger Group, Inc., 6th Global Conference on Business and Economics, Boston, MA, (http://www.louisberger.com/Insights/~/media/Files/LBG/PDF/Insights/ppps_conference_10-9-06.pdf) FEMA, “Public-Private Partnerships: Building Better Resiliency – Together,” (http://www.fema.gov/public-private-partnerships-1) US Department of Transportation Federal Highway Administration, “Public Private Partnerships” (http://www.fhwa.dot.gov/ipd/p3/index.htm) Public-Private Partnerships: “In the Public Interest: A Comprehensive Resource Center on Privatization and Responsible Contracting,” (http://www.inthepublicinterest.org/node/576) “PPP In Infrastructure Resource Center,” The World Bank, (http://ppp.worldbank.org/public-private-partnership/)

  25. Thank you! Marilyn L Rivers, CPCU ARM AIC City Saratoga Springs, NY Marilyn.Rivers@Saratoga-Springs.org Tel: 518.587.3550

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