original owners sell to a different breed of buyer, those look- ing for a more stable asset. “The profile, from a risk perspective, changes,” Dormsjo said. “It’s the maturation of the asset.” As a preview of what Dormsjo expects to happen in the United States, one must look no further than Canada, a coun- try with perhaps the most well-defined P3 industry in the world. SNC-Lavalin, the largest engineering firm in Canada, announced this summer that it had agreed to sell five assets for about $208 million to BBGI, a Luxembourg-based in- vestment company. Even as the secondary market in domestic P3s begins to take shape, the foundation of the P3 industry in the United States will remain on uneven ground for a long time to come. With no federal standard, each state that has P3 legislation has its own law. As a result, companies looking to do business in P3s must navigate a labyrinth of obstacles, including legal, political, and labor, from state to state. “The market is very fractured,” Dormsjo said “You have many pipelines. It injects a whole bunch of risk in going after projects.” A good example of how state and local politics can affect P3s happened in Colorado in 2014 when Gov. John Hick- enlooper had to pass an executive order adopting more P3 transparency measures — but only after vetoing a previous proposal that would have been so restrictive, it would have imposed “unworkable substantive limitations on future P3 transactions.” The legislative uproar was sparked by the state’s first P3, U.S. 36 in metro Denver.
Proactive outreach As expensive projects with concepts and arrangements that differ from traditional project delivery, P3 projects can be controversial and garner negative public attention. For successful P3 implementation, public outreach is important, facilitating open communication and minimizing misconceptions among all parties. Competitive environment Creating quality competition during the procurement phase is vital. Public agencies benefit the most when multiple bidders submit quality proposals generating robust competition between the most capable private firms. This increases the likelihood that the winning bid will be the best choice for delivering a project that achieves public goals. Stipend The bidders’ willingness to invest in high-quality bids depends on the expected return. As such, a public agency that reimburses unsuccessful bidders reduces bidding costs and thereby encourages high-quality proposals. Paying a stipend to reimburse at least a portion of the cost of unsuccessful, yet compliant, bids is therefore an effective way of fostering robust competition. Monitoring Public agencies are heavily involved in monitoring the performance of contractors under conventional delivery methods, including DB. In a P3, although some of the monitoring roles will be carried out by the public agency, the private concessionaire will primarily monitor its own performance and report periodically to the public agency. Nonetheless, the public agency can ensure that the private partner is performing as promised by independently verifying the reports. Therefore, establishing a system for monitoring P3 performance that includes a role for both the public agency and the private partner is a factor of success for P3s. NCPPP Members of The National Council for Public-Private Partnerships (legal, contracting, public, private) include the following:
Megan Barry Nashville Mayor
• Arcadis U.S. Inc. • Ballard Spahr LLP • Bostonia Partners LLC • CH2M • City and County of Denver • Deloitte
A big litmus test for P3 is likely to take shape this year, and beyond, in Nashville, one of the most explosive markets in the country. Nashville Mayor Megan Barry has proposed a $5.2 billion transit and infrastructure plan. Facing a huge upturn in population and subsequent congestion, Nashville is looking for as much as 26 miles of light rail, a tunnel under downtown for the transit lines, and rapid bus routes. Voters are supposed to head to the polls in May to either approve or reject increases in the city’s sales tax, hotel- motel tax, car rental tax, and the business and excise tax, revenue sources that would fund the historic program. Last year, Tennessee lawmakers passed P3 legislation, albeit with restrictions. Under Tennessee law, P3s cannot be used for
• George Mason University • Herzog Contracting Corp. • K&L Gates • Miami-Dade County • Nossaman LLP • Port Authority of New York and New Jersey
Thirty-four states; Washington, D.C.; and Puerto Rico have P3 legislation. Sources: Successful Practices for P3s, U.S. Department of Transportation; The National Council for Public-Private Partnerships (https://www.ncppp.org); National Conference of State Legislatures
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csengineermag.com
january 2018
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