How are Public Private Partnerships (P3’s) helping America Achieve Success by Leveraging Best Practices Through

PARTNERSHIP

And what are some of the Best Practices associated with this delivery

model?

Agenda

• What is AIAI (a brief commercial)• Review of the Infrastructure Deficit• What are P’3s – Fundamentals• Best Practices (AIAI and General)• Q&A

WHAT IS AIAI

AIAI Mission

AIAI Objective

• We believe effective and well planned advocacy can provide government officials with the knowledge they need to make informed decisions about all the benefits of Public Private Partnership-economic development, life cycle cost savings, risk transfer and accelerated project delivery. We intend to work towards the following:– Clear and reliable project pipeline – Achieving a consistent approach for both civil and social projects – Early awareness of legislative & administrative issues for members – Clarity of procurement processes

AIAI Initiatives• The AIAI’s early initiatives include the following:

– New Legislation. Shape and urge passage of new P3 Legislation at the State level for both transportation and social infrastructure projects.

– Facilitative Implementation. Assist and guide agencies and stakeholders on the implementation of existing P3 legislation.

– Best Practices. Coordinate with the National Conference of State Legislators (NCSL) and National Governors Association’s to implement best P3 practices.

– Creative Tax Solutions. Implement innovative solutions on important P3 tax issues, such as preservation of depreciation on toll roads.

– Institutionalized Processes. Institutionalize P3’s to create more concise processes, procedures and documentation to increase deal flow and gain efficiency.

– Informed Decision Making. Advocate for an informed decision making process and stipend recovery program in situations where P3 projects are cancelled.

The Infrastructure Deficit

Infrastructure Deficit• Overall Rating – D+ (American Society of Civil Engineers – 2013

Report Card)

• Value of Deficit - $3.6 Trillion needed by 2020 (American Society of Civil Engineers – 2013 Report Card)

• Sample Categories Aviation & Ports Transit Bridges Dams Drinking Water Energy Rail & Roads

Deficient Bridge Infrastructure

Transit Funding Gap

Infrastructure Deficit

• P3’s are only one delivery solution to the infrastructure deficit (20% +/-)

• There are many others:– Design/Build– Hard Bid– CM to GC– Early Contractor Involvement– Sole source

What are P3’s & How do they Work?

P3 – Public – Private Partnership

• A combination of the most unlikely partners:– Putting together

• ‘The untrusted, greedy private sector with• Government – the arch rival of the private sector noted

for being over budget and behind schedule’

• To create a trusting and collaborative team seeking innovation and long term asset value

• Truly depends on paradigm shift to form a partnership

P3 – Public – Private Partnership

• To be successful:– Requires a cultural shift in thinking about the

relationship between the public and private sectors

– Requires deeper understanding of how the model can be successful in delivering infrastructure

– Requires acceptance and promotion from the top - politically and strategically from agency management

A P3 is What…?

• What is a P3“Any project that takes on additional responsibility and/or

liability beyond design and build. This additional liability could be, but is not limited to: Operation, maintenance, short-term financing, long-term financing, GAP finances, tolling and/or fare box risk, ownership in any component of the completed project, etc.” Design-Build finance projects Availability payment projects Shadow toll projects Comprehensive Development Agreement (CDA) projects Extended warranty or maintenance projects Tolling and/or traffic and revenue projects

P3 – The General Structure

P3 – The Parties

What a Deal Looks Like (yes this is meant to confuse you)

P3 Lifecycle

RFI Stage(8-12 weeks)

RFQ Stage(12-16 weeks)

RFP Stage(32-40 weeks)

Closing(8-12

weeks)

Project Execution

• Announce transaction

• Issue RFQ

• Hold information meeting

• Receive submissions

• Evaluate Submissions

• Conduct interviews

• Short list of 3 Respondents

• Confidential process with short listed Respondents

• Issue RFP

• Open Data Room

• Site visits

• Receive and evaluate (staged) submissions

-Concept/innovations-Technical /financial

• Receive comments on draft Project Agreements

• Issue Final Project Agreement

• Receive and evaluate final submission

• Selection of Proponent

• Execute Project Agreements

• Closing of Financing

Value Components of the Deal

76.1%

5.0%

12.7%6.2%

NPV Influence

Construction Price

Financing

SPV & Rehab

O&M

The FHWA - Public-Private Partnerships

• FHWA encourages the consideration of public-private partnerships (P3s) in the development of transportation improvements.

• Early involvement of the private sector can bring creativity, efficiency, and capital to address complex transportation problems facing State and local governments.

• The Office of IPD (Innovative Program Delivery) provides information and expertise in the use of different P3 approaches, and assistance in using tools including the SEP-15 program, private activity bonds (PABs), and the TIFIA Federal credit program to facilitate P3 projects

Project Examples – The United States

• Design Build Finance– 95 Express - Miami, Florida– I-4 / Selmon Expressway Connector - Tampa, Florida– I-485 Charlotte Outer Loop - Charlotte, North Carolina– Innerbelt Eastbound Bridge - Cleveland, Ohio– I-75 Roadway Expansion (iROX

) - Collier and Lee Counties, Florida– Northwest Corridor - Atlanta, Georgia– U.S. Route 460 Corridor Improvements Project - Petersburg

to Suffolk, Virginia

– Highway 183 - Texas

Project Examples – The United States

• Design Build Finance Maintain– Goethals Bridge Replacement - Staten Island, New York to Elizabeth New, Jersey

• Design Build Finance Operate Maintain (Real Toll)– 91 Express Lanes - Orange County, California– Downtown Tunnel / Midtown Tunnel / MLK Extension - Cities of Norfolk and Portsmouth,

Virginia– Dulles Greenway - Loudoun County, Virginia– I-495 Capital Beltway HOT Lanes - Fairfax County, Virginia– I-95 HOV/HOT Lanes - Fairfax, Prince Williams, and Stafford Counties, Virginia– IH 635 Managed Lanes - Dallas County, Texas– North Tarrant Express Segments 1 and 2A - Dallas-Fort Worth Metroplex, Texas– North Tarrant Express Segments 3A and 3B - Dallas-Fort Worth Metroplex, Texas– SH 130 (Segments 5-6) - Austin, Texas Metropolitan Area– South Bay Expressway (formerly SR 125 South) - San Diego County, California– Southern Connector - Greenville, South Carolina– Teodoro Moscoso Bridge - San Juan to Carolina, Puerto Rico– U.S. 36 Managed Lane/Bus Rapid Transit Project: Phase 2 - Denver Metro Area, Colorado

Project Examples – The United States

• Design Build Finance Operate Maintain (Availability Payment)– Eagle Project - Denver Metro Area, Colorado– I-4 Ultimate - Orlando, Florida– I-595 Corridor Roadway Improvements - Broward

County, Florida– I-69 Section 5 - Bloomington to Martinsville, Sout

hwest Indiana– Ohio River Bridges East End Crossing - Southern I

ndiana/Louisville, Kentucky– Port of Miami Tunnel - Miami, Florida– Presidio Parkway (Phase II) - San Francisco, Califor

nia

Canadian Snapshot Summary

Sector Number Value ($ millions)*Transportation 49 31,405 Hospitals & Healthcare 82 22,418 Justice/Corrections 19 5,458 Energy 6 4,458 Education 11 1,746 Recreation & Culture 17 1,380 Environmental 24 1,229 Real Estate 4 944 Defence 1 867 Government Services 4 482 IT Infrastructure 2 1 Total 219 70,388

* includes only costs of projects where costs have been finalized and released.

States and Territories with P3 Enabling Legislation

• Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Nevada, North, Carolina, North Dakota, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin, Puerto Rico.

P3 Historical - North America

Best Practices – Lessons Learned – Public Sector

• Know priorities and objectives• Understand best financing solution for

proposed project• Clear pre-procurement barriers (legal,

financial, political and public)• Proper risk allocation• Form true partnerships with private sector

Best Practices – Lessons Learned – Private Sector

• High cost to pursue – be selective• Team early• Clear team leadership• Goals and objectives clearly defined, but room for innovation• Challenge everything, explore alternatives• Only enter deals with Transparency and fair procurement process• Develop risk allocation matrix – review throughout the bid• Public and community relations are critical throughout the process

• Construction Price (usually) wins the deal

AIAI BEST PRACTICES RECOMMENDATION

• P3-enabling legislation should be broad-based, providing flexibility in the procurement processes that will facilitate submission of innovative and comprehensive proposals in support of public infrastructure needs.

AIAI BEST PRACTICES RECOMMENDATION

P3 legislation should include definitions which are based on generally-accepted, industry standards in order to facilitate clarity and alignment in the procurement guidelines.

AIAI BEST PRACTICES RECOMMENDATION

• Proposed P3 legislation should clearly outline public agency procurement processes and methodologies for soliciting, reviewing and evaluating proposals and selecting teams with which the responsible public entity partners to develop public infrastructure.

AIAI BEST PRACTICES RECOMMENDATION

• The responsible public entity should be authorized to pay a stipend to an unsuccessful bidder or proposer

that has reached the pre-qualified bidder stage.

AIAI BEST PRACTICES RECOMMENDATION

• In order to generate sufficient and appropriate responses to solicitations for proposals for public infrastructure projects, every effort should be made to exclude any provision for a submission fee.

AIAI BEST PRACTICES RECOMMENDATION

Securities for P3s are required to satisfy the needs of financial institutions, owners, subcontractors and suppliers. A combination of both liquid securities and performance and payment bonds provides the flexibility needed to reach financial close. Flexibility should be provided to require the appropriate level of security.

Summary

Thank you very much!

Q&A