Public Private Partnerships – Statutory Frameworks for Alternative Project Delivery

1. Public Private Partnerships – Statutory Frameworks for Alternative Project Delivery Susan Liberty and Christopher D. LloydJune 4, 2009

2. Virginia Procurement Opportunities • Design-bid-build • Design-build • PPEA

3. Design-Bid-Build • Traditional procurement method allowed under the Virginia Procurement Act • Begins with selection of engineer and design team through competitive negotiations • Selected firm designs project to near complete drawings • Design and bid specifications are put out for bid • Some public entities start with RFQ, then proceed to RFP to help narrow list of potentially qualified contractors • Contractor selection based on lowest responsible bid • Construction is “to the plans”

4. Design-Bid-Build: Pros • Time tested, known process • Forms and contracts are commonly available and terms are well understood • Results in perceived lowest cost • Reduces uncertainty in design and construction methods • No special approvals needed from other governmental entities • Design/engineering firm works DIRECTLY for the public entity • LCSA has strong track record of successful use

5. Design-Bid-Build: Cons • Change orders and budget uncertainty • Slow process – cost escalation and inflation • Subject to significant litigation • All project procurement costs are borne by the public entity • Design/engineering firm works DIRECTLY for the public entity • Multiple contacts – who’s in charge? Who’s responsible when something goes wrong? • Public entity retains all project risks, project oversight

6. Design-Build • Originated in private sector, began public sector use in 1980s/1990s • Design-Build Review Board created in 1996 to grant project specific approvals • Law amended in 2006 to allow one-time board approval to public entities (Loudoun and Alexandria have approvals) • Engineer and contractor propose as a common team with shared risks and rewards • Public entity often uses on-call or in-house expertise to scope project and assist with team evaluation • Widely used by VDOT, about 20-30 other projects statewide

7. Design-Build: Pros • Budget certainty • Qualifications based selection, price is not the sole factor • Reduces project delivery time • Collaboration between engineer and contractor can result in project efficiencies/value engineering • Contract forms (DBIA models) becoming generally accepted • Turnkey project delivery • Single point of contact

8. Design-Build: Cons • Approval process to use design-build by local governments can be lengthy • Design and construction methods often fluid and decisions made “on the fly” • Project price could have significant contingency costs to cover risks shifted from the public entity • Procurement costs are borne by the public entity

9. PPEA • Law passed in 2002 • Based on PPTA (Transportation) of 1995 • Allows for both solicited and unsolicited proposals for development and/or operation of “qualifying projects” • Public entity must adopt guidelines to consider project proposals • 2 phase process – conceptual and detailed • Results in a de facto design-build procurement • Nearly 100 projects completed or underway statewide

10. PPEA: Dispelling the Myths • Not a panacea • Not free money • Not a finance tool • Not secret negotiations • Not necessarily cheaper • Not privatization

11. PPEA: Project Examples • Prince William Service Authority (under construction) • Fredericksburg (5 projects completed) • Stafford County Public Schools – Learning Village • Virginia Department of Corrections – 3 facilities • Regional jails • Public safety centers • Kingstowne Library • Parking (Roanoke, Fredericksburg, Winchester, Wiehle Avenue)

12. PPEA: Process • Public entity solicits for proposals or accepts unsolicited proposals • Minimum of 45 day open competition period for unsolicited proposals • FOIA protections for confidential information are negotiated • Conceptual proposal outlines team qualifications, proposed scope, proposed scope and public benefits • Public entity may levy a proposal review fee on both solicited and unsolicited proposals • Proposal review fee is used to cover procurement costs

13. PPEA: Process • All competing proposals are reviewed, followed by a downselect • Detailed proposals are requested – often relies on recommendations of outside/inside advisors • Detailed proposals start to lock in project scope, costs, schedule • Leads to an interim or comprehensive agreement with one firm • Significant requirements for public notification and hearings

14. PPEA: Pros • Many of the same benefits as design-build • PPEA has a certain “cachet” with state regulatory and funding bodies • No Richmond approvals necessary • Public entity retains right to reject, modify, expand, or contract proposals at any time • Project costs can be covered by proposers • Staff augmentation and single point responsibility

15. PPEA: Cons • Project scope and cost may not be defined until late in the negotiation process • Learning curve for public officials and public • Suspicions about “competitive negotiations” • Did I get the best possible price? • Negotiations can be lengthy and complex

16. PPEA: Why Unsolicited Proposals? • Greater acceptance of use of project review fees • Greater flexibility to develop a project with undefined scope • Opportunity to get “world class” ideas • Opportunity to get the “dream team”

17. PPEA: Why Solicit Proposals? • Public entity is in proactive, not reactive mode • Greater opportunity to narrow or define scope • May increase competition, number of proposals • Reduces requirements for staff time to meet with proposers

18. PPEA Implementation What Makes Projects Go Well • Open and collaborative process between public and private sectors • Atmosphere that encourages innovation and creativity • Include public, press and other stakeholders • Objectives (cost savings, time, limits on risk) are clear from the beginning

19. PPEA Implementation What Makes Projects Go Bad • Unnecessary closed door discussions • Public sector shifts all risk, not willing to pay for it • Staff objections to process • Owner did not establish clear criteria and goals upfront to properly assess performance and success at end • Cost overruns and scope creep • Public sentiment turns away from development • Negotiations never end • Project is overly defined or restricted

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