Successful Practices for P3s A review of what works when delivering transportation via public-private partnerships March 2016 Table of Contents 1 Introduction: the U.S. P3 Experience .................................................................................... 1 1.1 Background ........................................................................................................................... 1 1.2 Audience and Structure of the Report .................................................................................. 2 1.3 P3 Structures ......................................................................................................................... 4 1.4 Most Common Project Revenue Mechanisms ...................................................................... 5 1.5 Current Transportation P3 Experience in the U.S. ................................................................ 6 1.5.1 U.S. DBFOM Projects ............................................................................................................. 6 1.5.2 Federal Involvement and Financing Mechanisms ................................................................. 7 2 Legislation and Policy ............................................................................................................ 9 2.1 P3 Legislation ...................................................................................................................... 10 2.1.1 Allow for a Variety of P3 Options in Legislation .................................................................. 11 2.1.2 Create a Centralized Unit with Specialized Skills to Implement P3 Transactions ............... 13 2.1.3 Enable P3 Authority to Set Policy and Contract Terms ....................................................... 16 2.1.4 Establish Upfront Legislative Involvement and Approvals for P3 Projects ......................... 17 2.2 P3 Policy .............................................................................................................................. 18 2.2.1 Educate Stakeholders and Cultivate Political Support ........................................................ 18 2.2.2 Seek Early Public Approvals and Stakeholder Input ........................................................... 20 2.2.3 Create a Pipeline of P3 Projects .......................................................................................... 21 2.2.4 Involve All Relevant Departments of the Public Agency Early ............................................ 22 3 P3 Project Development ..................................................................................................... 24 3.1 Project Definition ................................................................................................................ 24 3.1.1 Select P3 Projects from Long-Range Transportation Plans ................................................. 24 3.1.2 Inform the P3 Process with Data from NEPA Analysis and Inputs from the Public Involvement Process ........................................................................................................... 26 3.2 Project Evaluation ............................................................................................................... 29 3.2.1 Conduct Multi-Level Screening to Evaluate Projects on Suitability for P3 Delivery ........... 29 3.2.2 Conduct Economic, Financial and/or VfM Analysis before Proceeding to Procurement ....................................................................................................................... 31 3.2.3 Assess Retained Public Liabilities ........................................................................................ 33 3.3 Public and Industry Outreach ............................................................................................. 34 3.3.1 Use a Proactive Public Outreach Strategy .......................................................................... 34 3.3.2 Further Develop Projects with Industry Input .................................................................... 36 3.4 Unsolicited Proposals .......................................................................................................... 38 ii 3.4.1 Accept Only Those Proposals that Support Stated Transportation Goals .......................... 38 3.4.2 Provide a Dedicated Timeframe for Submission of Unsolicited Proposals ......................... 39 3.4.3 Institute an Unsolicited Proposal Review Fee ..................................................................... 40 3.4.4 Initiate a Competitive Procurement after Approval of an Unsolicited Proposal ................ 41 4 P3 Procurement .................................................................................................................. 44 4.1 Competitive Environment ................................................................................................... 45 4.1.1 Shortlist Qualified Bidders .................................................................................................. 45 4.1.2 Use a Draft RFP with a Consultative Process to Reach the Final RFP ................................. 46 4.1.3 Allow for Alternative Technical Concepts ........................................................................... 47 4.1.4 Pay a Stipend to Unsuccessful Bidders that Submit a Compliant Bid ................................. 50 4.2 Bid Evaluation ..................................................................................................................... 51 4.2.1 Evaluate Based on “Best Value” .......................................................................................... 51 4.2.2 Minimize Negotiations after Selection of the Preferred Bidder ......................................... 52 5 Monitoring and Oversight ................................................................................................... 55 5.1 Performance Monitoring .................................................................................................... 56 5.1.1 Define Output-Based Performance Metrics ....................................................................... 56 5.1.2 Establish a System for Monitoring P3 Performance ........................................................... 59 5.1.3 Provide Performance Incentives through a Payment Mechanism ..................................... 60 5.2 Long-Term Partnership ....................................................................................................... 61 5.2.1 Establish a Collaborative Working Relationship between the Public Agency and the Private Entity ....................................................................................................................... 62 6 Cross-Cutting Themes ......................................................................................................... 64 6.1 Ensure the P3 Option Creates Value for the Public ............................................................ 64 6.2 Maintain Transparency and Conduct Outreach throughout the P3 Process ...................... 64 6.3 Foster Fair Competition and Long-term Partnership .......................................................... 64 6.4 Build a Strong P3 Program with Adequate Resources ........................................................ 65 Appendix A. Participating Organizations ............................................................................................... A-1 Appendix B. References ......................................................................................................................... B-1 Appendix C. U.S. P3 Projects in Operation or Construction ................................................................... C-1 iii Table of Figures and Tables Figure 1-1: Phases of a P3 Project ................................................................................................................. 3 Figure 1-2: Value and Number of U.S. DBFOM Projects in Operation or Construction................................ 7 Figure 1-3: Total Lending by TIFIA for P3 Projects, by Primary Revenue Pledge .......................................... 8 Figure 2-1: State Adoption of P3-Enabling Legislation ............................................................................... 11 Figure 4-1: P3 Procurement Process ........................................................................................................... 44 Table 2-1: Legal Issues Commonly Addressed Through Legislation, Policy, or Contract ............................ 10 Table 2-2: Typical Roles for Public Agencies and Consultants in Administering P3s .................................. 14 Table 3-1: Typical Analyses Completed for P3 Projects .............................................................................. 31 Table 3-2: ADOT Estimated Detailed Review Fee Table ............................................................................. 41 Table 4-1: Approaches to Incorporating ATCs ............................................................................................ 49 Table 5-1: Example of Performance Failure Tables (Availability Faults) from I-4 ....................................... 58 Table 5-2: Example of Performance Failure Tables (O&M Violations) from I-4 ......................................... 59 iv 1 Introduction: the U.S. P3 Experience 1.1 Background For many transportation agencies in the United States (U.S.), public-private partnerships (P3s) offer an opportunity to tap new financing sources and transfer certain project delivery risks.