During a public-private partnership (P3) conference June 27 in Linthicum, Md., experts on P3s gathered to discuss their advantages, how they can provide savings over the long-term and Maryland’s new P3 law (H.B. 560
) that went into effect July 1. The conference was hosted by the National Council for Public-Private Partnerships
(NCPPP), and was cosponsored by ABC National, ABC Baltimore Chapter, ABC Chesapeake Shores Chapter and ABC Metro Washington Chapter.
The NCPPP defines a P3 as a contractual agreement between a public agency and a private sector entity that enables the skills and assets of each sector to be shared in delivering a service or facility for the use of the general public. In addition, each party shares in the risks and reward in the delivery of the service and/or facility.
Rick Norment, executive director of the NCPPP, noted that there is a rising demand for P3s that can be traced to a number of factors, including deficits at all levels of government, escalating infrastructure and service needs and cuts in services and government programs.
According to Norment the successful recipe for P3s includes:
- a public sector champion
- a favorable statutory environment
- an organized structure
- a detailed business plan
- a clearly defined revenue stream
- stakeholder support
- carefully chosen partners
Maryland found its public sector champion in Maryland Lt. Gov. Anthony Brown, who was the keynote speaker at the conference. Although Maryland had an existing P3 law on its books, it wasn’t comprehensive enough, so Brown began working in 2010 to get a better law passed. The new legislation, signed by Gov. Martin O’Malley April 9, was designed to create a predictable, transparent, and streamlined approach that allows agencies to consider unsolicited proposals and outlines key requirements for competitive processes for both unsolicited and solicited proposals.
“Traditional revenue sources and funding mechanisms are not enough, and that’s where P3s come in,” Brown said.
Another aspect of the Maryland P3 law is that there may be a specialized unit created to handle them. According to Marv Hounjet, vice president and director, U.S. operations, of the Plenary Group, this dedicated unit would be good because the sophistication of the agency makes smaller project more feasible to build with a P3.
According to Brown and his staff, the next steps for Maryland’s law include getting an Executive Order signed by the governor and then promulgating regulations. Then they will identify projects with P3 potential, including the $2.2 billion red and $2.6 billion purple light rail line construction on the horizon in Maryland.
Unfortunately, Maryland’s new P3 law does not specifically address the use of P3s by Maryland counties and cities – markets with the potential for increased P3 demand. However, localities are not prohibited from pursuing P3s or passing local laws to encourage the use of P3s.
Several recurring themes during the conference were that P3s are not right for every project and that a project’s life cycle costs should be considered when deciding if a P3 is appropriate. Specifically, a value for money analysis
should be conducted that involves comparing a public sector comparator with a shadow-bid. The public sector comparator is a model of risk adjusted for hypothetical costs associated with traditional, government-financed delivery of a project and the shadow bid is the best estimate of how private sector proponents will value the project.
To help make P3s more widely available and provide a forum for states to exchange best practices, a representative from the National Governors Association (NGA) announced that the NGA will be creating a State Resource Center on Innovative Infrastructure Strategies. The center is expected to launch this summer with the purpose of providing in-state technical assistance for states ready to begin or expand infrastructure initiative.
ABC has cosponsored similar conferences with NCPPP in Colorado, Texas, Pennsylvania, Virginia, Washington, D.C., New York, and Delaware and will cosponsor a conference in Florida on Nov. 6.