Introduction to P3 BootcampDoug Koelemay, Virginia P3 Office

Jeremy Becker, JLLBarney Allison, Nossaman LLP

Virginia Office of Public-Private Partnerships (VAP3)

• Adopted Public-Private Transportation Act (PPTA) enabling legislation in 1995

• Public-Private Education & Infrastructure Act (PPEA) followed• Created VAP3 office in 2010 in response to P3 project

experience, new industry practices and growing need for more public engagement drove significant process changes

• Updated PPTA Manual & Guidelines in 2014 to make process more open, transparent, accountable

• General Assembly incorporated some changes into law in 2015

• Set VAP3 goals as building a strategic program, extending Virginia leadership, expanding to non-transportation projects

VAP3 Structure & Resources

Virginia PPTA Project Delivery Framework

*Parties to be notified and briefed upon request after the Oversight Board decision: ‒ Chairs of General Assembly committees ‒ MPO’s ‒ Interested members of General Assembly ‒ Special interest groups ‒ Regulatory Agencies ‒ Public

Briefing Focus: ‒ RFI results (as appropriate) ‒ Schedule ‒ Refresh on the high points from Project Development ‒ Preliminary Procurement documents ‒ Risk Analysis and Value-for-Money ‒ Estimated project cost ‒ Potential public subsidy ‒ Potential economic benefits ‒ Preliminary Business Points ‒ Initial Finding of Public Interest

Briefing Focus: ‒ Detail-Level Screening Report ‒ Desirability as P3 ‒ Feasibility as P3 ‒ HB 2 Prioritization ‒ Duration of P3 development and procurement

Briefing Focus: ‒ Major Business Points‒ Updated Risk Allocation & Management Plan ‒ Statutory Audit results ‒ Final Value-for-Money Analysis ‒ Updated economic benefits ‒ Project bid results ‒ Public subsidy (if required) ‒ Final Finding of Public Interest

Draft and Final Contract Documents posted on P3 Website for review & comment

Final Contract Documents posted on P3 Website

Benefits of New Guidelines

• Aligns political support at project development stage (P3 Advisory Committee includes oversight board members, staff representatives of House and Senate, non-Agency state financial expert)

• Gets oversight board commitment before procurement begins and private sector begins to spend money on proposals (oversight board resolution of approval necessary to advance P3 projects from project development to project procurement)

• Includes regular notifications and briefings to legislature (General Assembly Appropriations, Finance and Transportation Committees)

• Encourages competition (review of RFQ/RFP if project procurement results in a single response)

• Establishes accountability for P3 decision (Commissioner, SecTrans sign Finding of Public Interest document)

• Requires review if material changes in scope, financial terms or risk allocations

High Level Screening Questions

• Can Virginia transfer risk?• Does Virginia have a need for funding requirement?• Can the potential project to raise private capital?• Can the Virginia agency effectively leverage private sector

innovation and expertise?• Is a partnership consistent with Federal requirements? • Can Virginia accelerate project development?• Can a partnership satisfy the public need?• Does the potential project address priorities in state, regional or

local plans?• Are there project efficiencies possible through a public-private

partnership?

Detail Level Screening Questions• Does the project address the needs outlined in the local, regional and state transportation plans? • Will the project enhance the Commonwealth's economic development efforts? • What is the extent of support or opposition for the project?• Are there any legislative concerns about tolling, user fees or use of public funds? • Is the proposed schedule for project completion clearly outlined and feasible? • Is the project’s technical approach based on proven technology? • Is the project consistent with applicable state and federal statutes and regulations?• Is the proposed project consistent with environmental statutes and regulations? • Is the project compatible with local land use and comprehensive plans? • Are public funds required and clearly stated? • Is the preliminary financial plan feasible?• Are there any particular risks unique to the project?• Is the proposed term of concession consistent with market demand? Does it provide a Best Value

solution for the Commonwealth? • Is the proposed term optimal for a whole-life approach? • Does the project include a process for long-term performance management, inventory and hand

back provisions?

Addressing Risks for P3 Projects

Project Development

Comprehensive Agreement (CA)

Executed

Unsolicited P3 Projects

Detail-Level Screening with

Recommendations

Policy Review with Recommendations

Solicited P3 Projects

High-Level Screening with

Recommendations

Project ImplementationDesign and

Construction

Project ImplementationOperations and Maintenance

Project Handback

P3 Project Procurement

Part 1: Screening and Identification

Phase

Initial RiskWorkshop and

Discussions

Part 2: Project

Development Phase

Part 3: Procurement

Phase

Part 4:Construction

Phase

Part 5:Operations

Phase

Initial Risk Register

Initial Risk Management

Plan

Interim Risk Register

Interim Risk Management

Plan

Interim RiskWorkshop

Final CA Risk Register

Final CA Risk Management Plan

Final RiskWorkshop

Handoff from VAP3 to the Agency

FHWA P3 Toolkit

VAP3 Lessons Learned

• Permanent office acts as champion, catalyst, guide• P3 leaders and program managers have vision, discipline &

imagination; are pragmatic & collaborative by nature• Consistent, detailed guidelines facilitate closure, realization of public

benefits• Continuous reviews of assumptions and conclusions improve project

decisions• Effective P3 communications focus on benefits produced, broad policy

goals advanced• Steady flows of information to agencies, officials, planners, media

build understanding and trust• Competition is growing as other states, provinces, countries develop

great ideas

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Alternative Finance & Delivery

• Governance and oversight• Performance monitoring• Compliance audits• Financial audit• Contract management:

– Variation– Dispute resolution– Renegotiation– Capital costing and controls– Asset transfers

• Reporting/reporting systems• Liability management and

budgeting• Reporting and public accounting• Program and project management

• Policy & regulatory framework• Operating procedures and

P3 guidelines• Project screening/pipeline

development (including prioritization criteria)

• Asset optimization and monetization assessments

• Funding and delivery options analyses

• P3 institutional framework• Program risk identification and

mitigation strategies• Strategic communications &

stakeholder outreach• P3 program management and

monitoring systems

• Project scoping and structuring

• Feasibility and business case

• Scoring / accounting considerations

• Risk allocation

• Financial structuring

• Performance standards

• Economic regulation

• Investor targeting

• Procurement strategy

• Selection criteria

• Investor sounding

• Procurement documents

• Procurement management

• Proposal review and selection

• Award protest management

• Contract negotiations

• Commercial and financial close

• Transition assistance

• Permits and licensing

• Employee transfers (when applicable)

• Design/set-up of governance structures

Deal Structure Deal Execution Deal Closure

P3 Program Management

Funding/Financing Options

PSC and Value-for-Money Analysis

Affordability Analyses

Change Management/Stakeholder Outreach

Human and Institutional Capacity Development

Framework Transaction Partnership

We know partnerships.

NCPPP P3 2015 CONNECT

BOOTCAMP

July 20, 2015

Barney Allison, Esq.

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IGNORANCE OF THE LAW IS NO EXCUSE

Before thinking great thoughts, Read the Statute!

Applicability of general contract code provisions to the P3

Prepare a detailed roadmap; always be 2 steps ahead in your planning

No deal is ENTIRELY free from protest

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TRANSPARENCY VS THE NEED FOR CONFIDENTIALITY

How to deal with State public records act requirements

Bidders expect confidentiality for certain information

What to release, when to release it and to whom

Submissions in writing vs One-on-one Meetings

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STIPENDS

Stipends paid if: the Agency cancels the procurement; losing bidders submit compliant bid

Demonstrates the Agency’s commitment to the procurement

Not intended to completely cover the bidders’ pursuit costs

Consideration paid for intellectual property Get authorization to pay before issuance of final

RFP

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Developing the Technical Provisions

Critical part of the RFP and a “contract document” vs reference information

Performance Based (outcomes) vs Prescriptive (means and methods)

Role of the Standard SpecsAvoid the passive voiceApprove vs review and comment

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P3’S ARE ABOUT INNOVATION

Be Flexible—Focus on goals/outcomesGive bidders the opportunity to highlight

their strengthsThe ATC processEncourage innovation in financing

structures

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TIMING OF THE PROCUREMENT AND THE ENVIRO/PERMITTING PROCESS

Equity/Lenders will RARELY take on environmental approval risk

Pass through of mitigation measures to the private sector

How much is the permit dependent on final design?

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THE CLOSING IS JUST THE BEGINNING

35 year+ relationship It’s not your contractor, it’s not your

scheduleWhere did everyone go?Complexity of contract administration—

claims, CO’s, signoff on milestone payments/availability payments

Noncompliance points