Public Private Partnerships Presented by Jerry Fay, PE
Public Private PartnershipFHWA Definition A public-private partnership is a contractual agreement formed between public and private sector partners, which allows more private sector participation than is traditional.
Another Definition A public-private partnership exists when public sector agencies (federal, state, or local) join with private sector entities (companies, foundations, academic institutions or citizens) and enter into a business relationship to attain a commonly shared goal that also achieves objectives of the individual partners.
Typical Uses Contracting with a private company to: • Renovate • Construct • Operate • Maintain • And/or Manage A facility or system
History • Goes back to the earliest construction in the United States • Used extensively in Europe and other countries • Significant renewed interest in the 1980s • FHWA Legislation, ISTEA (1991), SAFETEA-LU (2005)—SEP 15
Why Traditional funding sources are not keeping pace with infrastructure investment needs and the growing public demand for services.
Why In short, P3 is a tool that can help governments meet demands for the development of modern and efficient facilities, infrastructure and services while providing value for taxpayers.
Benefits • Expedited project completion • Project cost savings • Improved quality • Use of private resources • Access to new sources of private capital
Four Basic Dimensions of P3 Although each is unique, all P3’s include four basic characteristics: • Shared goals • Shared resources (time, money, expertise, people) • Shared risks • Shared benefits
Typical Funding Sources • Tolls • Tax Increment Finance • Fees • Grants • Loans • Bonds • Other Revenue Streams
Getting Started • How do you create one? • How do you implement one? A Public entity’s perspective of finding and contracting with the best private sector partner.
Two Major Steps • Crafting the Partnership • Implementing the Partnership IMPLEMENTATION CRAFT
P3 Project Management CRAFT IMPLEMENTATION GENESIS FEASIBILITY OPERATE PLAN & TEST PROCURE IMPLEMENT
2. Feasibility 3. Plan & Test 4. Procure 5. Implement 6. Operations Six Distinct Phases 1. Genesis
2. Feasibility 3. Plan & Test 4. Procure 5. Implement 6. Operations 1. Genesis
Genesis • What’s the need • What’s driving the need, rationale • Facility non-compliance, natural disaster, budget deficit • Is there a need for a Public/Private Partnership? • Preliminary Project Definition
1. Genesis 3. Plan & Test 4. Procure 5. Implement 6. Operations 2.Feasibility
Feasibility • Is a Public/Private Partnership feasible, not only financially, but practically? Can it be done? • Market Research • Economic/Financial Analysis • Program, Budget and Schedule • Risk Analysis
1. Genesis 2. Feasibility 4. Procure 5. Implement 6. Operations 3. Plan & Test
Plan and Test • Final project definition • What is the best way to complete the project? • Has the plan been thoroughly tested to assess market demand, public and stakeholder feedback and economics?
Plan and Test • Master Schedule/Budget • Political Climate • Any potential “fatal flaws” that could derail the project?
1. Genesis 2. Feasibility 3. Plan & Test 5. Implement 6. Operations 4. Procure
Procurement and Contracting • How do you choose and contract with the best-value private partner? • What’s the best delivery method? • Design-Bid-Build • Design-Build • Finance-Design-Build • What do current statutes allow?
Procurement and Contracting • Procurement Approach • Sole Source, RFP, Low Bid • Risk Allocation between Public and private Partners • Structuring of Contract/Risks and Rewards
1. Genesis 2. Feasibility 3. Plan & Test 4.Procure 6. Operations 5.Implement
Implement • Environmental • Design • Permitting • Construction • Commissioning and Administration
1. Genesis 2. Feasibility 3. Plan & Test 4. Procure 5. Implement 6. Operations
Operate • Startup • Monitoring • Assessment • Enhancement • Contract Modifications • Contract Renegotiations
P3 Program Management Summary GENESIS FEASIBILITY PLAN & TEST PROCURE IMPLEMENT OPERATE • Prelim Project Definition • Seed Funding • Objectives Register • Alternatives Index • Prelim Schedule/ Budget • Prelim Economic/ Financial Analysis • Qualitative Analysis • Fatal Flaw Analysis • Process Map & Strategy • Feasibility Report/ Project Approval • Asset/System Evaluation • Site Selection/ Analysis • Environmental/ Permitting Analysis • Final Project Definition • Master Schedule/ Budget • Political Climate Assessment • Procurement Strategy • Prelim Business Plan • Public/Vendor Outreach & Stakeholder Consultation • Business Plan • Risk Assessment/ Allocation • Delivery Methodology • Commercial Terms • /Contract Principles • Deal Structuring • Concept Design/ Performance Specs • Procurement Documents • Vendor Pre- Qualification • Vendor Proposal Evaluation • Contract Negotiations • Design Compliance • Construction Oversight • Commissioning Administration • Startup • Monitoring • Assessment • Enhancement • Contract Mods • Contract Renegotiations
Conclusion Questions and Discussion