A Primer on Virginia’s PPEA

1. A Primer on Virginia’s PPEA Christopher D. Lloyd Warrenton Town CouncilJune 3, 2010

2. Presentation Overview • Legislative History of Public Private Partnerships • How the PPEA Works • Implementation of the PPEA • Recent Project Examples • Pitfalls and Lessons Learned

3. PPEA Overview What is it? - An alternative procurement tool that allows public entities to more efficiently develop infrastructure and achieve better value for the taxpayer - Vehicle to use design-build practices What it is NOT? - A panacea that resolves all procurement issues - A way to get something for nothing - Privatization

4. PPP Legislative History • Built on the successes of the PPTA (895, 288, 28, Coalfields Expressway) • Design-Build Review Board created in 1996, overly cumbersome process • Passed General Assembly in 2002 • Model Guidelines issued in October 2002, state guidelines in December • First comprehensive agreement signed July 1, 2003 (Stafford County) • Amendments occur every year since 2002 • Growing acceptance by legislature as a valid project delivery tool

5. Why Use PPP Alternative Procurement? • Faster, better, cheaper (sometimes) through achieving benefits of design-build procurement • Single point of responsibility • Shift of risk away from public sector • Distances rate making/price setting decisions from the politics • Lack of faith in the public sector • Easier framework for inter-governmental, multi-jurisdictional collaboration

6. PPEA: Process • Governing body adopts PPEA guidelines • 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 cost, proposed scope and public benefits • Public entity may levy a proposal review fee on both solicited (rare) and unsolicited proposals (always) to cover project review costs

7. 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

8. Evolution of Virginia’s PPEA • Creation of interim agreement concept • Increased public input and transparency • Development of “best practices criteria” • Creation of legislative oversight panel • Expansion to technology projects and services

9. PPEA Implementation - Finance • Nearly all PPEA projects have relied on traditional municipal finance to cover construction costs • Private financial participation usually takes form of land, tax overlay districts, joint use, and bridge financing • PPEA does not create “new” financing structures but permits combinations of financing tools in a predictable, repeatable process • Current recession is encouraging communities to more closely evaluate alternative financing options

10. PPEA Finance - Alternatives • Use of IDA as conduit • Partnering with other potential users to share costs • Tax overlay and service districts • Bridge loans and contractor financing (3rd party) • Historic tax credits • Leverage federal and state resources

11. PPEA Implementation • Over 100 projects statewide • Over 50 jurisdictions have adopted PPEA guidelines • Project sizes from $800,000 to $1.5 billion • Ideal project size no less than $5 million • More frequent use in small-to-mid-sized communities

12. PPEA: Project Examples • Parking – Fredericksburg, Roanoke, Winchester, Fairfax • Public Safety – Winchester, Fredericksburg, Roanoke County, Stafford County, DFS NoVA Forensic Lab • Jails – Virginia DoC, Rappahannock Regional Jail, New River Valley Regional Jail • Schools – Stafford, Chesterfield, Bedford, Northumberland, Cumberland, Fredericksburg • Water and Sewer – Prince William, Bedford, Fredericksburg, HRSD, Caroline, Augusta • Government facilities – Chesapeake CSB • Mental Health – Eastern State Hospital, Western State Hospital

13. PPEA: Pros • Many of the same benefits as design-build • PPEA has a certain “cachet” with state regulatory and funding bodies • No state approvals of procurement process 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

14. 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

15. Pitfalls and Lessons Learned • PPEA should not be used as a “fishing expedition” • PPEA should not proceed unless there is both board and staff buy in • Public and other stakeholders must be included in the process • Promises of “free money” never materialize • PPEA is not right for every project

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