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Public-Private Partnerships: An Innovative Solution for a Declining Infrastructure
Author(s): Anika Guevara

Source: The Urban Lawyer , Vol. 47, No. 2 (Spring 2015), pp. 309-338
Published by: American Bar Association
Stable URL: https://www.jstor.org/stable/10.2307/26425547
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309
Public-Private Partnerships: An
Innovative Solution for a Declining
Infrastructure
Anika Guevara*
I. Introduction
DETERIORATING INFRASTRUCTURE CONDITIONS IN THE UNITED STATES beg for
an increase in funding, which, due to the current economic conditions,
would be difficult to attain without the help of the private sector.1 Pub-
lic-Private Partnerships (“PPPs” or “P3s”) are a way for federal, state,
and local governments to fund infrastructure projects that they may
not otherwise be able to afford.2 However, PPPs are not likely to
solve the problem of funding infrastructure on the scale that is needed
until there is a statutory definition and regulatory framework for PPPs,
clarifying the nature of these agreements and the associated legal ram-
ifications.3 When implementing PPPs, the following questions arise and
there are no clear answers: (1) are PPPs subject to procurement laws;4
(2) are PPPs subject to prevailing wage laws;5 (3) are PPPs subject to
§ 1983 claims;6 and (4) are PPPs subject to bonding requirements.7
To answer these questions, this article explores the deficiencies in
governmental regulations regarding PPPs and the associated legal
ramifications.8 Part II of this article lays the foundation for
* B.A., Florida International University (2012); J.D., St. Thomas University School
of Law (2015).
1. See Robert W. Burchell, Matthew S. Crosby & Mark Russo, Infrastructure Need
in the United States 2010–2030: What is the Level of Need–How Will It Be Paid For?,
43 URB. LAW 41, 41 (2010) (citing to DELOITTE RESEARCH: CLOSING AMERICA’S INFRA-
STRUCTURE GAP: THE ROLE OF PUBLIC-PRIVATE PARTNERSHIPS 1 (2007), available at
http://worldbank.mrooms.net/file.php/251/docs/optional_readings/Closing_America_
s_Infrastructure_Gap.pdf). According to Deloitte, the ability of government to
properly maintain infrastructure, in order to meet the rates of the rapidly increasing
population in certain states, is virtually nonexistent. DELOITTE RESEARCH, supra.
2. See DELOITTE RESEARCH, supra note 1, at 1.
3. See infra notes 12–19 and accompanying text.
4. See infra Part V.A.
5. See infra Part V.B.
6. See infra Part V.C.
7. See infra Part V.D.
8. See generally U.S. GEN. ACCTG. OFF., GAO/GGD-99-71, PUBLIC-PRIVATE PARTNER-
SHIPS: TERMS RELATED TO BUILDING FACILITY PARTNERSHIPS 13–14 (1999), available at

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310 The Urban Lawyer Vol. 47, No. 2 Spring 2015
understanding PPPs by defining the term and providing a historical

overview of their development.9 Part III serves to explain the
difference between PPPs and privatization, clarifying a common mis-
conception––PPPs are not a form of privatization.10 Part IV explores
the infrastructure crisis facing the United States, explaining why this
crisis is the driving factor responsible for the increase in PPPs across
the nation.11 Part V examines the various legal issues that arise out of
the federal government’s lack of regulation in the area of PPPs,12 in-
cluding the conflict between PPPs and procurement law,13 the effect of
prevailing wage laws and other laws on PPPs, 14 and the applicability
of bonding requirements.15 Finally, this article provides a solution to
the legal issues discussed, recommending that the federal government
enact PPP-friendly legislation that defines the term and sets certain pa-
rameters in order to serve as a framework for future PPP agreements.16
II. Definition and Development of Public-Private

Partnerships (PPPs)
PPPs are contractual agreements between the public and private sec-
tors.17 These agreements allow a governmental agency to contract
with a private entity in order to renovate, construct, operate, and/or
manage a public facility.18 Under this broad definition, PPPs appear
to encompass a wide range of contractual agreements.19 Contrary to
http://www.gao.gov/archive/1999/gg99071.pdf (defining the term PPP as a contractual

arrangement formed between public and private-sector partners that typically involve
a government agency contracting with a private partner to renovate, construct, operate,
maintain, and/or manage a facility or system that provides a public service in whole or
in part). This is one of the only sources in which you will find the federal government
trying to provide a definition for PPPs. See id.
9. See infra Part II.
10. See infra Part III.
11. See infra Part IV.
12. See infra Part V.
13. See infra Part V.A.
14. See infra Part V.B–C.
15. See infra Part V.D.
16. See infra Part VI.
17. U.S. GEN. ACCTG. OFF., supra note 8, at 13–14. According to the federal gov-
ernment, public-private partnerships may also be referred to as public-private ven-
tures. Id.
18. Id.
19. See id. at 3–4. There are three types of public-private partnerships. Id. The first
is the Build-Own-Operate (BOO), in which the private partner builds and operates a
public facility while retaining ownership. Id. The second is the Build-Operate-
Transfer (BOT) or the Build-Transfer-Operate (BTO), in which the private partner
builds the facility to the specifications of the public partner and operates the facility
even after transfer. Id. However, after the term of the partnerships is over, the

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Public-Private Partnerships 311
popular belief, however, not all contractual relationships between pub-

lic and private entities are considered PPPs.20 PPPs differ from ordi-
nary contractual relationships in that all partners are expected to con-
tribute resources to the project, whether it be money, time, or
expertise.21 Furthermore, PPPs involve a sharing of the risks; the pub-
lic sector does not transfer all the risks as is generally done with con-
tractual relationships.
Although their name contains the word “partnership,” PPPs are not
the equivalent of commercial partnerships.22 For one, PPPs are con-
tractual agreements that can only be formed between public- and
private-sector partners.23 Additionally, with PPPs there is generally
no co-ownership; often, the private-sector partner has complete re-
sponsibility over the project, and complete access to the revenues,
for a certain duration of time before handing the project back over
to the public entity.24
Despite the federal government’s failure to provide a statute that
fully defines the term “public-private partnership,” some federal de-
partments attempt to provide what seem to be pseudo definitions for
the term.25 Most of the time these definitions merely mention the
government assumes the management and operation of the facility. Id. The third, and
last, type of public-private partnership is the Buy-Build-Operate (BBO), in which the
government sells the asset to the private partner, and the private partner builds, man-
ages, and operates the facility. Id.
20. Wendell C. Lawther, Privatization of Transportation Systems, in HANDBOOK OF
TRANSPORTATION POLICY AND ADMINISTRATION 371–72 ( Jeremy F. Plant, Van R. John-
ston and Cristina E. Ciocirlan ed., 2007) (expressing the disapproval of other authors’
misconception –– not all relationships between the public and private sector are PPPs).
21. Id. at 372.
22. See LaSalle Partners v. United States, 48 Fed. Cl. 797, 810 (Fed. Cl. 2001)
(holding that a public-private partnership is quite different from a commercial partner-
ship agreement). See generally Coca-Cola Bottling Co. of Elizabethtown, Inc. v.
Coca-Cola Co., 696 F. Supp. 57, 74 (D. Del. 1988) (listing the essential characteristics
which generally are used to support the conclusion that a partnership exists). The first
essential characteristic is the intention of the parties. LaSalle Partners, 48 Fed. Cl. at
810. The second essential characteristic is the co-ownership of the business property.
Id. The third essential characteristic is the sharing of the profits as well as the losses.
Id. The fourth essential characteristic is the “existence of evidence that each alleged
partner participated in the management of the business or had some right to control
the function or conduct of the business.” Id.
23. LaSalle Partners, 48 Fed. Cl. at 809-10.
24. Id. at 810.
25. See National Affordable Housing Act, 42 U.S.C. § 12751 (1990) (stating that
all participating jurisdictions have to make all reasonable efforts to increase the par-
ticipation of the private sector); see also Moving Ahead for Progress in the 21st Cen-
tury Act, 49 U.S.C. § 5315 (2012) (stating that the transportation department must
“better coordinate” public- and private-sector transportation services, etc.).

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term while not fully defining it.26 Without a consistent federal defini-
tion, states are left to create legislation to fully define the term.27 In
Florida, for example, the only statutory definition for the term
“public-private partnership” is found in the Community Workforce
Housing Innovation Pilot Program.28 The Florida Legislature defines
the term as any joint venture or contractual agreement between a gov-
ernmental agency, municipality, city, or otherwise and at least one pri-
vate organization, such as a non-profit or a corporation.29 Texas, on
the other hand, defines the term in its Transportation Code.30 The def-
inition is similar, but the state drastically reduces the availability of
PPPs by specifically defining the sections of highway and interstate
that can become subject to such a contract.31
Private parties have been involved in governmental infrastructure
since the late 1700s.32 After a decline in the late 1800s and early
1900s,33 PPPs have recently resurfaced with great voracity.34 Since
26. See National Affordable Housing Act § 12751; see also NAT’L CONFERENCE OF
STATE LEGISLATURES (NCSL) FOUNDATION FOR STATE LEGISLATURES, NCSL FOUNDATION
PARTNERSHIP: PUBLIC-PRIVATE PARTNERSHIPS (P3S OR PPPS) FOR TRANSPORTATION MEETING
SUMMARY 15 (2009), available at http://www.ncsl.org/documents/transportation/
PPPmeetingsum09.pdf (stating that PPPs have characteristics which are innate to
them). However, this statute does not provide a clear definition of the term.
National Affordable Housing Act § 12751.
27. See, e.g., CONN. GEN. STAT. § 4–255 (2011) (defining PPP as “between a state
agency and a private entity contracting” to maintain a state facility, where the revenue
from the facility will fund the cost to develop and maintain it); TEX. TRANSP. CODE
ANN. § 223.201 (2013) (stating that an agency may use a PPP in order to use both pub-
lic and private money to finance a function described in the section); P.R. LAWS ANN.
tit. 27, § 2601 (2009) (defining PPP as “any agreement between a government entity
and one or more persons, subject to the public policy set forth in this chapter. . .”).
28. FLA. STAT. § 420.5095 (2011).
29. Id.
30. TEX. TRANSP. CODE ANN. § 223.201 (2013).
31. Id.
32. U.S. DEP’T OF TRANSP., REPORT TO CONGRESS ON PUBLIC-PRIVATE PARTNERSHIPS 15
(2004), available at http://www.fhwa.dot.gov/reports/pppdec2004/pppdec2004.pdf.
The first turnpike was chartered in 1792 in Pennsylvania. Id. As a result of the
highway-building boom in the late 18 t h century and early 19 t h century,
approximately fifty construction companies were incorporated in Connecticut and
sixty-seven in New York. Id. This trend was occurring throughout the United
States. Id.
33. Id. The involvement of the private sector declined during this period due to fed-
eral government funding for the construction of roads. Id. Furthermore, the enactment
of the Federal Aid Highway Act of 1916 institutionalized state transportation, which
continued to receive funds from the federal government. Id.
34. See generally EMILIA ISTRATE & ROBERT PUENTES, BROOKINGS-ROCKEFELLER, MOV-
ING FORWARD ON PUBLIC PRIVATE PARTNERSHIPS: U.S. AND INTERNATIONAL EXPERIENCE
WITH PPP UNITS (2011), available at http://www.brookings.edu/~/media/research/
files/papers/2011/12/08%20transportation%20istrate%20puentes/1208_
transportation_istrate_puentes.pdf (providing statistics depicting the increase in the
use of PPPs in the United States).

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1985, there have been over 375 PPP infrastructure projects in the
country.35 At least thirty states now have “PPP enabling legislation
for highways, roads, and bridges.”36 Florida, California, and Texas
have been at the forefront of the PPP movement, enacting a large per-
centage of the nation’s total PPPs.37 Those three states, combined with
Colorado and Virginia, are home to a majority of the nation’s transpor-
tation PPPs.38
The traditional view that public highways were to be built and
maintained by the federal government prevented many states from in-
quiring into the involvement of the private sector.39 Since the enact-
ment of the Federal Aid Highway Act of 1956,40 however, many states
began contemplating the idea of involving the private sector in high-
way construction.41 In recent years, approximately thirteen states have
entered into PPPs in furtherance of a variety of transportation proj-
ects.42 Because PPPs have proven successful with the transportation
departments of various states, the United States Department of Trans-
portation has begun to promote and expand the use of PPPs by forming
a Public-Private Partnership Task Force.43 The Task Force is charged
35. Id. at 3.
36. Id. at 12.
37. Id. at 4.
38. Id.
39. U.S. DEP’T OF TRANSP., supra note 32, at 16. However, the States soon realized
that by charging motorists tolls, they could expedite the construction of necessary
highways. Id.
40. Andrew Glass, Federal-Aid Highway Act, June 26, 1956, POLITICO, (June 26,
2012, 4:25 AM), http://www.politico.com/news/stories/0612/77803.html. Enacted
during the Eisenhower administration, the Federal Aid Highway Act allocated $24.
8 billion (equivalent to $164 billion in today’s dollars) to build 41,000 miles of
interstate highways. Id.
41. U.S. DEP’T OF TRANSP., supra note 32, at 17. After the enactment of this Act, the
law has changed because the states decide many, if not most, of the transportation and
infrastructure issues. Id. The law requires any state receiving aid from the federal gov-
ernment to fund infrastructure projects to refrain from charging toll fees. Id. Thus, the
involvement of private parties is limited. Id. at 16. Despite the limitation set forth by
the federal government, private entities have participated in the construction and
maintenance of public highways. Id. at 17.
42. EDUARDO ENGEL, RONALD FISCHER & ALEXANDER GALETOVIC, Public-Private
Partnerships to Revamp U.S. Infrastructure, THE HAMILTON PROJECT 11 (2011), avail-
able at http://www.ncppp.org/wp-content/uploads/2013/03/PS-Feb2011-
HamiltonProject.pdf. The States that have entered into PPP agreements are: Texas,
Colorado, Florida, Virginia, Indiana, Illinois, California, Nevada, Massachusetts,
Alabama, South Carolina, New York, and New Jersey. Id. Many of those projects
are still under construction. Id. Additionally, many of these projects were awarded
to a private entity via competitive bidding as a result of PPP state regulations. Id.
43. U.S. DEP’T OF TRANSP., supra note 32, at 33–34. The taskforce seeks the expan-
sion and analysis of the three different approaches to PPPs; the three different ap-
proaches are (1) private contracting, (2) joint development, and (3) turnkey procure-
ment. Id. at 34-38.

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with assisting states in implementing PPPs to solve their infrastructure

needs.44
III. Differences between Public-Private Partnerships

and Privatization
PPPs and privatization have one thing in common –– the involvement
of the private sector in public infrastructure.45 Privatization refers to
the transfer of ownership, specifically ownership in government
owned or operated infrastructure,46 from a public entity to a private
entity.47 Such occurred in 1998 when the federal government sold
its naval petroleum reserve to a private company, deciding they no
longer needed to be in the oil business.48 Privatization removes gov-
ernmental control; the government ceases to own and oversee the pri-
vatized enterprise.49 Consequently, privatizing a public sector brings
great risk both legally and financially, especially for the private
party.50 Preventative maintenance, wear and tear control, and compli-
ance costs are examples of financial risks and obligations transferred
to the private entity whenever a service or project is privatized.51
44. Id. at 33-34.

45. See generally CA. DEBT & INV. ADVISORY COMM’N, Privatization vs. Public-
Private Partnerships: A Comparative Analysis, ISSUE BRIEF 4, 12-21 (2007), available
at http://treasurer.ca.gov/cdiac/publications/privatization.pdf (explaining the
difference between PPPs and Privatization). But see Graeme A. Hodge & Carsten
Greve, Public-Private Partnerships: An International Performance Review., 67 PUB.
ADMIN. REV. 545, 547–48 (2007), available at http://www.jstor.org/stable/pdfplus/
4624596.pdf?acceptTC=true (describing how the legislature intentionally refrains
from using the word or term “privatization” in order to get votes from those who
do not support privatization).
46. See CA. DEBT & INV. ADVISORY COMM’N, supra note 45, at 5.
47. BLACK’S LAW DICTIONARY 1316 (9th ed. 2009).
48. See CA. DEBT & INV. ADVISORY COMM’N, supra note 45, at 7.
49. See generally Office of Mgmt. & Budget, Exec. Office of the President, Perfor-
mance of Commercial Activities, N O . A-76 (2003), available at http://www.
whitehouse.gov/sites/default/files/omb/assets/about_omb/a76_incl_tech_correction.
pdf. See generally CA. DEBT & INV. ADVISORY COMM’N, supra note 45, at 11–19. In a
PPP arrangement, the government retains control of the enterprise in order to ensure
that it is meeting the public’s needs. CA. DEBT & INV. ADVISORY COMM’N, supra note
45, at 13. If at any time the private entity is not living up to the expectations of its
public partner, the public entity may retake control of the enterprise. Id.
50. See CA. DEBT & INV. ADVISORY COMM’N., supra note 45, at 11–19. Risk refers to
the financial and legal obligations that both partners undertake as a result of the con-
tractual agreement. Id. at 18. While risk is allocated between both partners in a PPP
agreement, the private entity bears all the risk when an enterprise is privatized. Id.
One of the risks of privatization is that the public agency loses control of the asset
or enterprise, which may lead to the deterioration of said asset and enterprise. Id. at
6. The potential loss of public employment is another risk associated with privatiza-
tion. Id. at 7
51. Id. at 19.

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PPPs differ in the amount of control and ownership that is turned

over to the private sector.52 With PPPs, ownership remains with the
public agency but they contract out control of the enterprise for a cer-
tain duration of time.53 For example, the City of Indianapolis pur-
chased a water company and contracted out the management, mainte-
nance, and customer service to a private company.54 If the private
partner does not abide by the contractual agreement, it can be re-
scinded.55 Additionally, the structure of PPP contracts can allow the
public entity to stay more involved with the enterprise, unlike with
privatization.56
PPPs present a novel solution to the current infrastructure crisis the
United States faces today without privatizing the public asset or enter-
prise.57 PPPs provide numerous benefits.58 First, they allow for rapid
completion of infrastructure projects.59 Second, PPPs’ track record of
on-time and on-budget completion is unparalleled.60 Third, PPPs
transfer some of the projects’ financial risks to the private sector.61
52. Id. at 12-13.

53. Id. at 13.
54. Id.
55. Id.
56. Id. at 13-14.
57. Lawther, supra note 20, at 372-73 (listing the benefits of PPPs); CA. DEBT &
INV. ADVISORY COMM’N., supra note 45, at 8 (defining PPPs as partnerships in which
there is “cooperation between the public and private sectors in one or more areas of
the design, development, construction, operation, ownership or financing of infrastruc-
ture assets, or in the provision of services”). Essentially, a PPP is a contractual agree-
ment between a public and private partner in which the roles, duties, and responsibil-
ities of each party is spelled out. See CA. DEBT & INV. ADVISORY COMM’N, supra note
45, at 8. In a PPP agreement the public sector retains ownership of the asset while in
privatization the asset is completely owned and operated by the private partner. Id. at
12-13. Thus, PPPs can facilitate and expedite building new projects, which will oth-
erwise be delayed due to a lack of government funds. See Lawther, supra note 20, at
372-73. Overall, PPPs are a great mechanism to increase the revenue for building and
maintaining new infrastructure projects. See Lawther, supra note 20, at 372. See DAR-
RIN GRIMSEY & MERVYN K. LEWIS, PUBLIC PRIVATE PARTNERSHIPS: THE WORLDWIDE REV-
OLUTION IN INFRASTRUCTURE PROVISION AND PROJECT FINANCE 55–57 (2004) (explaining
the difference between privatization and PPPs).
58. DELOITTE RESEARCH, supra note 1, at 1.
59. Id. at 7. Compared to the pay-as-you-go method, PPPs enable infrastructure
projects to be initiated years sooner. Id. at 6-7. PPPs also allow the cost of investment
to be spread out over the lifetime of the asset. Id. at 10.
60. Id. at 1.
61. Id. See, e.g., JAIME RALL ET. AL., PUBLIC-PRIVATE PARTNERSHIPS FOR TRANSPORTA-
TION: A TOOLKIT FOR LEGISLATORS, NCSL 2 (2010), available at http://www.ncsl.org/
documents/transportation/PPPTOOLKIT.pdf. “[PPPs] enable[] the public sector to
reduce its own risk and potential financial losses on a project.” RALL, ET. AL., supra
at 2. “[A]llocating risk to the party best able to manage it makes it less likely that
each project risk will materialize.” Id. at 10.

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Fourth, PPPs can lower the costs of infrastructure.62 Fifth, the con-
tractual nature of PPPs allows for the implementation of certain sat-
isfaction standards, thus, ensuring higher customer and consumer
satisfaction.63 Sixth, PPPs allow the public sector to better and
more quickly achieve the social value and benefits they are seek-
ing.64 Although PPPs are not the sole solution to the infrastructure
crisis, when combined with government funds, these partnerships be-
come the key to financing many infrastructure projects.65
The country’s current economic conditions have led to an increasing
gap between the funds available and the amounts needed to build and
maintain infrastructure.66 PPPs have been successful in many states
and have facilitated the construction of projects, which wouldn’t
have been built as quickly, or at all, without additional funds from
the private sector.67 Thus, PPPs are an innovative solution to build,
62. DELOITTE RESEARCH, supra note 1, at 2. See, e.g., RALL, supra note 61, at 2. The
reduction of total costs comes from the reduction of construction costs and overall life-
cycle costs. DELOITTE RESEARCH, supra note 1, at 1. “PPPs often result in significant
cost savings and time savings compared to traditional procurement.” RALL, supra
note 61, at 9. Savings are derived from “direct incentives to the private contractor
for on-time delivery; use of warranties or performance-based contracting; competition
among bidders; transfer of risk to the private sector for cost and schedule overruns or
revenue shortfalls; and lifecycle efficiencies.” Id.
64. Id.
65. RALL, supra note 61, at 2 (quoting former Governor of Kansas, Bill Graves).
“PPPs are one of the many tools that can be used to help address America’s infrastruc-
ture deficiencies. PPPs, however, are not the panacea for infrastructure funding.” Id.
66. See BUILDING AMERICA’S FUTURE, FALLING APART AND FALLING BEHIND: TRANSPOR-
TATION INFRASTRUCTURE REPORT 15–20 (2011), available at http://www.bafuture.com/
sites/default/files/Report_0.pdf; D ELOITTE R ESEARCH , supra note 1, at 5; Edward
Fishman & James B. McDaniel, Major Legal Issues for Highway Public-Private
Partnerships, in 51 L EGAL R ESEARCH D IGEST 1 (National Cooperative Highway
Research Program 2009), available at http://onlinepubs.trb.org/onlinepubs/nchrp/
nchrp_lrd_51.pdf.
The growth rate of the population in the United States has caused the already suf-
fering infrastructure to deteriorate at a rapid rate. DELOITTE RESEARCH, supra note 1, at
4. Infrastructure deficits pose a huge burden on society, and the implementation of
PPPs is the best way to bridge the gap between the funds the federal government pro-
vides and the funds necessary to solve the crisis. DELOITTE RESEARCH, supra note 1,
at 4. The lack of funding from the federal government is a major problem because
many projects are not being properly maintained. Fishman & McDaniel, supra at 1.
Federal government investment on American infrastructure has remained stagnant
since 1968. BUILDING AMERICA’S FUTURE, supra at 17. The amount of the nation’s
GDP going towards infrastructure is merely 1.7%. Id. The federal government com-
mitment has been lacking for the past several decades. Id.
67. ENGEL ET AL., supra note 42, at 9–12 (describing the most important PPP funded
projects of the past recent years); Fishman & McDaniel, supra note 66, at 9–17 (listing
some of the major projects which have been the result of successful PPPs). Between
1991 and 2010 approximately twenty-one PPP projects went into construction. ENGEL
ET AL., supra note 42, at 11. The projects were: IH 365 Managed Lanes in Texas; Eagle

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maintain, and improve certain aspects of infrastructure such as trans-

portation, bridges, and mass transit.68
IV. Infrastructure in the United States

Infrastructure refers to the permanent facilities on which commerce
moves and people travel; some examples of infrastructure are public
roads, bridges, airports, seaports, and public waterways.69 It has be-
come extremely difficult to bridge the gap between the infrastructure
needs in the United States and the money that the government has
available and is willing to allocate for updating, fixing, and renovating
infrastructure.70 The United States is in desperate need of money in
Commuter Rail Project in Colorado, Port of Miami Tunnel in Florida; North Tarrant
Express in Texas; I 595 Corridor in Florida; I 495 Beltway HOT Lanes in Virginia; SH
130 Segment 5–6 in Texas; Northwest Parkway in Colorado; Pocahontas Parkway in
Virginia; Indiana Toll Road in Indiana; Chicago Skyway in Illinois; Southbay Ex-
pressway (SR 125) in California; Las Vegas Monorail in Nevada; Rte. 3 Boston in
Massachusetts; Foley Beach Expressway in Alabama; Greenville Southern Connector
in South Carolina; JFK Terminal 4 in the New York/New Jersey area; Camino Colom-
bia Toll Road in Texas; Dulles Greenway in Virginia; and Orange County SR 91 Ex-
press Lanes in California. Id.
States such as Utah and Oregon have also found ways to incorporate PPPs into suc-
cessful infrastructure projects and upcoming developments. Fishman & McDaniel,
supra note 66, at 11, 17–18. While all these projects have served as a demonstration
of PPP success stories, a few of them get more attention than others. Id. at 9–11, 13,
16–17. The expansion of the Indiana toll road serves as an example of a PPP which
resulted out of severe governmental constraints. ENGEL ET AL., supra note 42, at 9. In-
diana received $3.8 million from a private partner to upgrade, maintain, and operate
the Indiana toll road in exchange for receiving the revenue generated from the tolls for
a period of seventy-five years. Id. As a result, the Indiana government was able to dis-
tribute the funds, which would have otherwise gone to the operation of the toll road, to
schools. Id. The Chicago Skyway PPP is very similar in nature to the expansion of the
Indiana Toll Road project. Fishman & McDaniel, supra note 66, at 10. The city of
Chicago entered into a partnership agreement with a private entity in which the city
was provided with $1.83 billion for the operation and maintenance of the skyway
in exchange for the revenues generated by the tolls for a period of 99 years. Id.
68. See Lawther, supra note 20, at 372.
69. See THE HERITAGE FOUNDATION, HOW PRIVATIZATION CAN SOLVE AMERICA’S INFRA-
STRUCTURE CRISIS 1 (Edward L. Hudgins & Ronald D. Utt, 1992); see also Burchell,
supra note 1, at 41 (defining infrastructure as “long-term physical components of sys-
tems, such as those that channel traffic, provide drinking water, handle wastewater,
operate electrical communication grids nationally, provide recreational opportunities,
systems of dams and levees . . . navigable channels of water and rail, light rail, bus
transit, parks, state forests, recreational parks of all types, and response vehicles
needed for police, fire, and EMS activities”).
70. DELOITTE RESEARCH, supra note 1, at 1. The ability of government to properly
maintain infrastructure, in order to meet the rates of the rapidly increasing population
in certain states, is virtually nonexistent. Id. For example, North Carolina faces a def-
icit of $28 billion over the next twenty-five years in bridge and highway funding and
Wisconsin needs $26 billion to update their transportation system. Id. at 3. Similarly,
Arizona will have to turn to “non-traditional” funding in order to build and maintain
new highways and other transportation projects. Id. at 4.

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order to meet the pressing needs for infrastructure maintenance and

development.71 PPPs might be the solution to the infrastructure prob-
lem, but the United States has not been as quick to adopt them as other
countries.72
PPPs have excelled globally.73 The European Union, Canada, South
America, Australia, and Asia are examples of this global trend.74 In
the past twenty years, more than 1,300 partnerships were formed
and are now valued at approximately $250 billion.75 The United States
is falling behind in the implementation of PPPs.76 Many countries,
particularly countries in the European Union,77 have enacted statutory
frameworks that regulate and define PPPs.78 The United Kingdom, for
example, has experienced great infrastructure improvements after en-
acting PPP-friendly legislation.79
Overall, “America’s Infrastructure G.P.A.” is currently a D+.80 If
the United States wants to fix its infrastructure crisis, then it needs to
71. See Burchell, supra note 1, at 1.

73. See Tom Souzzi, How About a Partnership Stimulus? To help rebuild Ameri-
ca’s roads and airports, let’s tap the billions of dollars of private capital looking
for safe returns, W ALL S T . J., Nov. 11, 2010, http://online.wsj.com/article/
SB10001424052748704635704575604563679175190.html.
74. Id.
75. Id.
76. Id.
77. Dominique Custos & John Reitz, Public-Private Partnerships, 58 AM. J. COMP.
L. 555, 557 (2010) (discussing the UK model of 1992); GRIMSEY, supra note 42, at 6–7
(listing the countries in which PPPs were born).
78. See generally Government Resources and Accounts Act, 2000, c. 20, § 17, sch.
16 (Eng.) (defining the term “Public-Private Partnerships”).
79. See DELOITTE RESEARCH, supra note 1, at 7 (stating that the United Kingdom has
become the pioneer for PPP investment in infrastructure). In the UK, typically one
hundred PPP projects are started and completed each year. Id. Additionally, PPP proj-
ects make up ten to thirteen percent of the UK’s infrastructure investment. Id. The
American Recovery and Reinvestment Act of 2009, which was signed into law by
President Obama, included $80.5 billion to fix bridges, road, mass transit, and water-
ways. Burchell, supra note 1, at 41. President Obama also included $72.5 billion for
transportation spending. Id. However, according to the American Society of Civil En-
gineers, of the $2.2 trillion that is needed to repair infrastructure in the United States,
only seven percent has currently been authorized. Id. This $2.2 trillion figure, how-
ever, does not include the costs of new projects such as high-speed rails and aviation
adaptations. Id.
80. See AM. SOC’Y OF CIVIL ENG’RS, REPORT CARD FOR AMERICA’S INFRASTRUCTURE
(2013) [hereinafter ASCE], http://www.infrastructurereportcard.org/a/#p/grade-sheet/
gpa. According to the ASCE, “each category was evaluated on the bases of
capacity, condition, funding, future need, operation and maintenance, public safety
and resilience,” and awarded a grade. Id. The grades are as follows: Aviation – D;
Bridges – C+; Dams – D; Drinking Water – D; Energy – D+; Hazardous Waste –
D; Inland Waterways – D-; Levees – D-; Ports – C; Public Parks and Recreation –
C-; Rail – C+; Roads – D; Schools – D; Solid Waste – B-; Transit – D; and
Wastewater – D. Id.

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spend approximately $3.6 trillion by the year 2020,81 a goal that increas-
ingly appears impossible to achieve. There are approximately 4.07 mil-
lion miles of road in the United States, and only half of these roadways
are paved.82 Currently, about 1/3rd of these roads are in poor or mediocre
condition, costing U.S. motorists an average of $320 per year on operat-
ing costs and repairs.83 The roads’ poor condition not only causes in-
creased costs for motorists but also poses serious safety concerns––the
poor road conditions cause one-third of all traffic accidents in the United
States.84 Similarly, mass transit, or public transit, is in desperate need of
upgrading.85 “[D]eficient and deteriorating transit systems cost the U.S.
economy $90 billion in 2010.”86
Similarly, obsolete and dysfunctional bridges account for one-third
of the nation’s bridge total, adding to the current infrastructure crisis
facing the U.S.87 The average age of a bridge in the United States is
42 years old, leading to 1 in 9 being classified as structurally-
deficient.88 Although the condition of the nation’s bridges may not
be as dire as that of the roads or public transit systems, the current
funding that the states receive from the federal government is not suf-
ficient to repair or replace the nation’s largest bridges, which carry
most of the traffic.89 The United States is currently spending
81. Id. For example, the amount of money needed to fund surface transportation
alone is $1.7 trillion. Id. However, the government is only able to provide $877 bil-
lion, leaving a gap of $846 billion. Id. Similarly, airports need $134 billion for fund-
ing. Id. However, the government is only able to provide $95 billion, thus, leaving a
gap of $39 billion. Id. In general, the United States seems to be having problems
bridging the gap, and $1.6 billion dollars is the amount needed to bridge the gap. Id.
82. BUREAU OF TRANSPORTATION STATISTICS, Table 1-4: Public Road and Street Mile-
age in the United States by Type of Surface(a) (Thousands of miles), U.S. DEP’T OF
TRANSP., http://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/national_
transportation_statistics/html/table_01_04.html (last visited Apr. 5, 2015).
83. See ASCE, supra note 80.
84. Id. Safety concerns are one of the most motivating factors for updating infra-
structure. Id. These accidents cost the U.S. approximately $230 billion dollars a
year. Id. The ASCE has stated that improving median barriers and widening lanes
and shoulders could help to reduce the number of car accidents significantly. Id.
85. Id. The U.S transit system is far from comprehensive––approximately 45% of
Americans do not have access to public transit. Id.
86. Id. Despite the increase in funding (from the federal government to the transit
system) the increase in ridership has caused an increase in fares. Id. The number of
riders is expected to continue increasing. Id.
87. Id.
88. Id.
89. Id. The bridges which remain classified as inoperable or structurally-deficient
are the larger bridges. Id. The number of structurally-deficient bridges has been declin-
ing over the past few years. Id. However, the funding that has been used to maintain
and repair existing bridges has depleted the funds available to fix some of the nation’s
large-scale urban bridges. Id. The maintenance of these bridges is important because
they carry the highest percentage of traffic in the cities they are located. Id. The lack of

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$12.8 billion per year on bridge maintenance and improvements while

$20.5 billion is needed.90 Meanwhile, “[a]t the state level, 22 states
have a higher percentage of structurally deficient bridges than the na-
tional average, while five states have more than 20% of their bridges
defined as structurally deficient.”91
Not only are roads, bridges, and mass transit slowly deteriorating,
the railroad system has also felt the ripple effects of inadequate infra-
structure funding.92 Due to an increase in both energy efficient freight
service and city-to-city passenger travel, federal and local govern-
ments have increased the amount of funding available to railroads.93
However, despite the federal government’s efforts to fund railroads,
a gap between the amount given and the amount needed remains.94
If the condition of the nation’s infrastructure system continues to de-
teriorate, the strain placed on the national economy will continue to
increase.95
funding available to maintain urban bridges will lead to the eventual deterioration of
the overall bridge condition in America. Id.
90. Id.
91. ASCE, supra note 80. Pennsylvania is at the top of the 22 state list––a total of
24.4% of its bridges are structurally-deficient. Id. Twenty-one percent of the bridges in
Iowa and Oklahoma are classified as structurally-deficient. Id. The nation’s capital, the
District of Columbia, tops the list of structurally-deficient and functionally obsolete
bridges, combined. Id. A total of 77% of D.C.’s bridges fall into at least one of
those categories. Id.
92. Id.
93. Id. (“Since 2009, capital investment from both freight and passenger railroads
has exceeded $75 billion, actually increasing investment during the recession when
materials prices were lower and trains ran less frequently.”); see also Press Release,
President Obama, Vice President Biden to Announce $8 Billion for High-Speed
Rail Projects Across the Country ( Jan. 28, 2010) (on file with author). Eight billion
dollars was the initial federal government investment to fund thirteen new high-
speed rail corridors across the country. Press Release, President Obama, supra. The
major corridors of the project are: Florida, California, Chicago-St. Louis-Kansas
City, Madison-Milwaukee-Chicago, Charlotte-Raleigh-Richmond-Washington, DC,
Eugene-Portland-Seattle, Detroit-Chicago, Ohio, and Northeast. Id.
94. See CAMBRIDGE SYSTEMATICS INC., NATIONAL RAIL FREIGHT INFRASTRUCTURE CA-
PACITY & INVESTMENT STUDY ES-1 (2007), available at http://www.camsys.com/pubs/
AAR_Nat_%20Rail_Cap_Study.pdf. The United States D epartment of
Transportation (“DOT”) estimates that the use of freight railroads will increase
88% by 2035. Id. An estimated $148 billion is needed for infrastructure expansion
and maintenance in order to meet DOTs projections and expectations by 2035. Id.
Without these funds, the railroad system will be operating above capacity, which
could lead to an increase in congestion in the already congested railroads. Id. at
ES-2.
95. AM. SOC’Y OF CIVIL ENG’RS, FAILURE TO ACT ECONOMIC STUDIES, http://www.asce.
org/failure_to_act_economic_studies/. It is estimated that by 2020 there will be a $1.1
trillion gap in the investment funds needed and the amount available. Id. As a result,
households will have to shoulder an additional $611 billion in costs, and the burden
placed on businesses will be $1.2 trillion. Id. If this deficit is not prevented, it will

200.10.244.14 on Mon, 03 Jun 2019 00:36:23 UTC
An example of a state that currently has average-rated infrastructure

that is predicted to decline in the coming years without proper invest-
ment is Florida. Florida’s infrastructure condition is not far above the
national average with a “report card grade” of C-.96 Transit is one of
the better infrastructure components of the state, and it is likely to see
improvement as the economy improves.97 Additionally, Florida’s
roads and highways are in slightly above-average condition,98 but
the current funding is not sufficient to meet long-term transportation
needs.99 Similarly, the condition of the state’s bridges is currently
above average; however, their condition is predicted to decline to av-
erage within the next few years.100 Many of Florida’s other infrastruc-
ture areas received grades ranging from mediocre to poor.101
In order to compensate for the lack of funding from the federal gov-
ernment, states have turned to unorthodox methods in order to bridge
the gap between the funding received and the funding needed to oper-
ate and maintain their infrastructure.102 While several state legislatures
result in a $3,100 drop in household disposable income per year, cost the country
3.5 million jobs, and result in a $3.1 trillion loss in GDP.
96. See generally ASCE, supra note 80 (providing a breakdown of key facts and
statistics about Florida’s infrastructure). The breakdown of the grades of the different
subcategories is: Aviation- B-; Bridges- B; Coastal Areas- D-; Education- D+; En-
ergy- D; Flood Control- D+; Ports- C; Roads- C; Transit- C; Urban Runoff- C; and
Wastewater- C. Id.
97. Id. Due to a decrease in transit ridership, availability has decreased and fund-
ing for transit projects has been reduced. Id. Service availability will increase once the
economy improves and unemployment levels decrease. Id. A new project, Sun Rail,
was approved and is moving forward. Id.
98. Id.
99. Id. The revenue available to Florida for transportation has significantly de-
creased. Id. The transportation revenue sources have been diverted from transportation
to non-transportation projects. Id. Thus, the main component that needs to be ad-
dressed is the establishment of a stable funding source. Id. Without such action, the
condition of the highways will deteriorate, and thus, fall below average. Id.
100. Id.
101. Id. Coastal areas are in dire need of maintenance. Id. There are approximately
398 miles out of 825 miles of beach that are severely eroded. Id. Although regional
efforts are on their way, poor inlet management and depleted off shore resources
could severely limit the number of beach nourishment projects. Id. Similarly, the con-
dition and capacity of our water structure storage facilities and lakes is considered to
be poor, or failing. Id. Although the main structures (canals, rivers, levees, and dikes)
are in overall good condition, approximately $750 million dollars are needed in the
next ten years. Id. Schools are another area that is in dire need of funding. Id. Cur-
rently, the state appropriates $650 million in its budget for schools. Id. However, ap-
proximately $3 billion is needed to meet the full implementation of class size reduc-
tion. Id.
102. NCSL, STATE LEGISLATIVE INFRASTRUCTURE PRIORITIES 2012–2013 4 (2012),
available at http://www.ncsl.org/documents/transportation/Infrastructure_
Priorities2012.pdf (listing the different methods that states have been using in order
to increase the funds available to infrastructure). Among the several funding
methods were: bonding taxes, gas taxes, vehicle taxes, PPPs, tolls, sales taxes, and

200.10.244.14 on Mon, 03 Jun 2019 00:36:23 UTC
have increased vehicle, sales, and gas taxes, others have turned to
PPPs as a source of funding for infrastructure projects.103 Currently,
according to the Transportation Funding and Finance Legislation Da-
tabase,104 there are thirty-five bills that have been enacted in sixteen
states allowing various types of PPP agreements.105 Instead of provid-
ing a uniform method for the enactment of PPP agreements, the bills
enacted by said states are fragmented bits of what has the potential to
be a full statutory section on its own, much like the UCC.106 While
uniform and comprehensive legislation would provide a stable, clear
governing body of law, the bills passed by these states are under-
encompassing, to say the least.107 The Alabama bill, for example, al-
lows the public and private sector to enter into agreements for construct-
ing public improvements, but it does not specify the type of agreement
or the method of operation.108 Similarly, the Indiana bill only addresses
PPPs in regards to public mass transportation.109 While the thirty-five
bills that were passed indicate a positive trend, the work is far from
complete as fragmentation in legislation continues.110
V. Legal Issues with Public-Private Partnerships

The United States’ law governing PPPs is extremely fragmented, with
departmental-specific definitions and regulations existing in various
federal agencies.111 As a result, some states, including Florida,
VMTs. Id. 47.9% of the states used PPPs, while more than 70% of the legislatures
used taxes to gather the funds. Id.
103. Id.
104. NAT’L CONFERENCE OF STATE LEGISLATURES, TRANSPORTATION FUNDING AND FI-
NANCE L EGISLATION D ATABASE (2013), available at http://www.ncsl.org/issues-
research/transport/ncsl-transportation-funding-finance-legis-database.aspx.
Transportation Funding and Finance Legislation Database is an up-to-date source for
transportation funding and finance legislation introduced in all 50 states and the
District of Columbia since 2013. Id. This website provides lists and information on
the legislation, which the states have enacted with respect to transportation. Id.
Here, you may also find the most recent legislation on PPPs. Id.
105. Id. (selecting “All States” and “Public-private partnerships” from the search
section located at the bottom of the page; then click “Search.” Results accurate as
of Mar. 15, 2015). Id. The states with bills supporting, or enacting, some type of
PPP agreements are: Arkansas, Florida, Georgia, Kentucky, Massachusetts, Maryland,
Maine, Minnesota, North Carolina, New Jersey, New Mexico, Ohio, Oregon, Texas,
Virginia, and West Virginia. Id.
106. See generally id. (providing a short description of the above-referenced bills).
107. Id.
108. Id.
109. Id.
110. Id.
111. Custos, supra note 77, at 557. The United States is different from other coun-
tries in regards to adoption of a central statutory framework for PPPs. Id.

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Virginia, and Maryland, have begun enacting, or have enacted, PPP-

friendly legislation.112 The importance of PPP legislation lies in the
creation of a set of rules by which public and private partners may
reach an agreement that is equally beneficial, taking into account all
relevant legal and financial matters.113 Enacting a federal statute
that fully defines and regulates PPPs could serve as guidance to the
states, helping them determine how they should deal with the legal is-
sues that arise out of PPP contracting.114 The fragmented system cur-
rently in place has created confusion in the area of procurement
law,115 but it has also increased litigation116 involving prevailing
wage law117 and constitutional law.118
112. See DELOITTE RESEARCH, supra note 1, at 7; TRANSPORTATION FUNDING AND FI-
NANCE LEGISLATION DATABASE supra note 104; Souzzi, supra note 73.
113. See HIROYUKI ISEKI ET AL., TASK B-2: STATUS OF LEGISLATIVE SETTINGS TO FACIL-
ITATE PUBLIC PRIVATE PARTNERSHIPS IN THE U.S. 2 (Cal. Partners for Advanced Transit &
Highways 2009), available at http://www.path.berkeley.edu/PATH/Publications/PDF/
PRR/2009/PRR-2009-32.pdf. Although states develop their own contract law,
Congress may facilitate the creation of infrastructure, which is common amongst all
states. Id. at vii. Many states are in disagreement about things such as a non-
compete clauses. Id. at ix-x. Legislation is the highest hierarchical instructional
setting, and thus, the enactment of PPP statutes aid in determining the types of
contracts that transportation agencies and private firms may enter into. Id. at iii.
114. See Julia Paschal Davis, Public-Private Partnerships, 44 PROCUREMENT LAW 9,
9 (Fall 2008) (discussing how procurement law applies, or should apply to PPPs). By
and large, it is in the general public’s interest to abide by the protection of procure-
ment laws. Id. The restrictions in procurement laws not only create rights, but they
also define risks and preserve open competition opportunities. Id.
115. See infra Part V.B–C.
116. See generally Roland Nikles, “Is It Public, Or Is It Not?” What To Watch For
When Public And Private Become Entwined, and Why It Matters, 46 PROCUREMENT
LAW 3, 5 (2011) (explaining that the real challenge to PPPs is the difficulty in char-
acterizing the project as “public” or “private”). The failure to establish whether a proj-
ect is public or private has become common. Id.
117. See United States v. Binghamton Const. Co., 347 U.S. 171, 176-77 (1954)
(“[t]he language of the Act and its legislative history plainly show that it was not en-
acted to benefit contractors, but rather to protect their employees from substandard
earnings by fixing a floor under wages on Government projects”). See generally
Erie Cnty. Indus. Dev. Agency v. Roberts, 94 A.D.2d 532, 534 (N.Y. App. Div.
1983) (discussing prevailing wage requirements to the development of bond projects);
Frank Bros., Inc. v. Wisconsin Dep’t. of Transp., 409 F.3d 880, 886–87 (7th Cir. 2005)
(discussing the history of the Davis-Bacon Act and how it relates to preemption and
state law); Bd. of Trade Inc., v. State, Dept. of Labor, Wage and Hour Admin., 968
P.2d 86, 92–93 (Alaska 1998) (finding that working in close geographic proximity
to a large construction project is enough to meet the “on site” requirement of Alaska’s
Little Davis-Bacon Act). See generally Hunter v. City of Bozeman, 700 P.2d 184
(Mont. 1985) (exemplifying the existence of wage prevailing acts at state level).
118. See infra Part V.C.

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A. Procurement Contract Law

There is a misconception that all PPPs are free from the constraints of
procurement law.119 That, however, is not always the case.120 United
States procurement law is heavy-handed when it comes to the issuance
of government contracts.121 Although federal procurement law does
not directly affect state contract law,122 PPP construction projects
have been challenged for failing to comply with stringent procurement
procedures.123 Private companies, when entering into contracts with
other private companies, are not obliged to comply with the rigorous
competitive bidding processes required by federal procurement law.124
On the other hand, public entities are severely restricted by procure-
ment laws and stringent contract bidding procedures.125 Thus, when
the contract is one between a public and private entity, that contract
is generally subject to procurement law and contract bidding.126
Procurement laws, however, usually only apply to projects that
are government funded, making it unlikely that privately funded
PPPs would be subject to procurement law.127 Unfortunately, the
119. Davis, supra note 114, at 9.

120. Id.
121. See 41 U.S.C. § 3301 (2011); 41 U.S.C. § 3701 (2011); 41 U.S.C. § 3703
(2011). Criteria for awarding contracts: the agency shall award the contract to the re-
sponsible “source whose proposal is most advantageous to the Federal Government.”
41 U.S.C. § 3703(c). An executive agency shall obtain “full and open competition
through the use of competitive procedures.” 41 U.S.C. § 3301(a)(1).
122. See Davis, supra note 114, at 9.
123. See id.
124. Nikles, supra note 116, at 7 (stating that private entities may enter into con-
tracts freely).
125. 41 U.S.C. § 3703 (2011) (“[t]he executive agency shall award the contract
with reasonable promptness to the responsible source whose proposal is most advan-
tageous to the Federal Government, considering only cost or price and the other fac-
tors included in the solicitation”); H.B. 85, 115th Gen. Assemb., Reg. Sess. (Fla. 2013)
(stating that in order for a solicited proposal to be awarded it must undergo a bidding
process). After the bidding process, only the proposal which is most beneficial to the
public and most economically feasible to the governmental agency will be selected. H.
B. 85, 115th Gen. Assemb., Reg. Sess. (Fla. 2013).
126. See, e.g., Miller v. McKinnon, 124 P.2d 34, 38 (Cal. 1942); J&J Contractors v.
Idaho Transp. Bd., 797 P.2d 1383, 1384 (Idaho 1990); Nikles, supra note 116, at 7. In
Miller v. McKinnon, the California Supreme Court held that a contract made in vio-
lation of a statute, which requires competitive bidding, is void and unenforceable. Mil-
ler, 124 P.2d at 34. Similarly, in J&J Contractors v. Idaho Transp. Bd., the Idaho Su-
preme Court found that a party could not recover under quantum meruit because the
contract was in violation of competitive bidding laws. J&J Contractors, 797 P.2d at
1384. Thus, when a contract is between a public partner and a private partner, and
it fails to abide by the applicable procurement procedures governing the state or fed-
eral agency, that contract is void. Nikles, supra note 116, at 7.
127. See DELOITTE RESEARCH, supra note 1, at 8; Davis, supra note 114, at 10.

200.10.244.14 on Mon, 03 Jun 2019 00:36:23 UTC
determination is generally not that easy.128 The first step in determin-

ing whether procurement laws apply to any given PPP is to figure out
if the project in question involves the construction of a facility for pub-
lic purposes and whether it was built with government/public funds.129
The fragmentation of PPP regulation has led to various interpreta-
tions by the courts in determining whether the infrastructure in ques-
tion is or was constructed for a public purpose and with public
funds.130 Some courts have turned to the body of the contract agree-
ment in order to determine if it was a public work built with public
funds.131 Other courts look solely to the source of funding and whether
funding comes from governmental or nongovernmental sources.132
Agency is another way in which the private partner may be subject
to procurement laws.133 If a court finds that the private entity is an
128. See DELOITTE RESEARCH, supra note 1, at 8. The determination of whether a

PPP serves either a public or private purpose depends largely on the amount of private
sector involvement in financing the infrastructure project. Id. There are approximately
seven types of PPPs. Id. The “Build-Transfer” model allows the government to enter
into a contract with a private party in order to aid in the building or maintenance of a
facility under government supervision. Id. Once the facility has been built, the govern-
ment assumes responsibility for maintaining it. Id. The second model is “Build-Lease-
Transfer,” which is virtually identical to the build-transfer model except that upon
completion, the facility is leased to the government until it has fully paid the private
partner for the lease. Id. The third model is the “Build-Transfer Operate” in which the
private sector owns the facility during the building stage. Id. After that, title is trans-
ferred to the government. Id. The fourth model is “Build-Operate Transfer,” in which
at the end of the building phase, the government assumes the operation of the facility.
Id. The fifth model is the “Build-Own-Operate-Transfer,” in which the government
grants the private party a franchise to finance, design, build, and operate a facility
for a specific period. Id. The sixth model is the “Build-Own-Operate” in which the
government grants a private entity the rights to finance, design, build, operate and
maintain a project; the private sector retains ownership of that project. Id. The seventh
model is the “Design-Build-Finance-Operate/Maintain,” which is very similar to the
Build-Own-Operate with the exception that the private entity does not retain owner-
ship over the facility. Id. Thus, the more money the private sector invests, the more
likely the PPP will not be subject to procurement laws. Id.
129. See Davis, supra note 114, at 10.
130. See id.
131. See Decker v. Kan. Dep’t of Soc. Rehab. Ctr., 942 P. 2d 667 (Kan. Ct. App.
1997). This case involves a lease agreement between plaintiff and defendant. Id. Re-
solved in light of the pertinent statute, the court turned to the body of the contract in
order to determine whether it was subject to procurement. Id.
132. See Associated Subcontractors of Mass., Inc. v. Univ. of Mass. Bldg. Auth.,
810 N.E.2d 1214, 1221 (Mass. 2004). The plaintiffs claimed that the contract in
which they entered into with the defendant was free from procurement laws. Id. at
1214. The contract was to build a housing complex at the university using the
money paid by the students to the university. Id. at 1217. The court concluded that
even though the university is a public entity, the monies used to finance the project
was that of the students, and the students were private individuals who were paying
to live on campus. Id. at 1221. Thus, the funds were nongovernmental, and in turn,
the contract was not subject to procurement laws. Id. at 1222.
133. See DEL. CODE ANN. tit. 16, § 9605 (1995); D.C. CODE § 32–305 (2007).

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agent of the public entity, the private entity will be subject to procure-
ment laws.134 Finally, the courts of various jurisdictions have said that
delegation of projects from the public partner to the private partner
does not avoid procurement and competition procedures.135
Due to the complexity of procurement laws and the wide variety of
PPP models, it is difficult to apply the existing procurement regula-
tions to modern and emerging PPPs.136 The enactment of a universal
regulatory body would do away with the fragmentation of PPP inter-
pretation amongst the different states and agencies.137 Such regulatory
body would make PPP contract law more predictable and easier to
follow.138
B. Prevailing Wage Laws
The confusion surrounding PPPs has also left private partners wonder-
ing whether they are subject to prevailing wage laws.139 The Davis
Bacon Act140 requires employers to pay their employees prevailing
wages, as established by the Secretary of Labor, when engaged in con-
struction, alteration, repair, and maintenance of public buildings or
public works.141 Although the Davis Bacon Act applies to works in
which the federal government is a party,142 all states have adopted pre-
vailing wage laws of their own.143 Therefore, given the pseudo-
134. Achen-Gardener, Inc. v. Superior Court, 809 P.2d 961, 967 (Ariz. Ct. App.
1990), vacated on other grounds, 839 P.2d 1093 (Ariz. 1992) (“Municipalities may
enter into development agreements with private corporations by resolution or ordi-
nance. A.R.S. § 9–500.05(A). By entering into a development agreement with a mu-
nicipality to perform public improvements financed from public funds, the private cor-
poration stands in the shoes of that municipality and becomes an ‘agent’ under A.R.S.
§ 34–101”).
135. Id. at 969 (noting that if the works are to be paid for by the public, then they
are public in nature, and the public entity simply cannot delegate its duties in such a
way as to avoid competitive bidding procedures) (citing Central Ariz. Water & Ditch-
ing Co. v. City of Tempe, 680 P.2d 829, 831-32 (Ariz. Ct. App. 1984)).
136. Davis, supra note 114, at 11. PPPs are hybrid in nature. Id. They are the result
of the combination of the public and private sectors for public and private purposes.
Id. Jurisdictions are split as to whether to apply procurement law to PPPs; and if so, to
which kinds of PPPs. Id.
137. See supra Part V.
138. Id.
139. Nikles, supra note 116, at 5.
140. Univ. Research Ass’n v. Coutu, 450 U.S. 754, 756 (1981) The Act was “de-
signed to protect local wage standards by preventing contractors from basing their bids
on wages lower than those prevailing in the area.” Id. at 771.
141. 40 U.S.C. § 3142 (2006) (originally enacted as Act of Mar. 3, 1931, ch. 411,
§ 46 Stat. 1494).
142. Id.
143. E.g., CAL. LAB. CODE §1771 (West 2013) (stating that employees, which are
employed for public works, shall not be paid less than the prevailing wages); DEL.
CODE ANN tit. 29, § 6962(6)(c) (West 2013) (stating that contracts which fail to

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governmental nature of PPPs, courts are forced to determine whether

PPPs are subject to prevailing wage laws, and if so, whether federal or
state prevailing wage laws apply.144 The second issue is easier to re-
solve. If a public federal entity and a private entity form a PPP, that
particular PPP is subject to federal prevailing wage laws.145 Similarly,
when a public state entity and a private entity form a PPP, said PPP
will be subject to state prevailing wage laws.146
Determining whether any prevailing wage law even applies can be
more difficult. When deciding if and which prevailing wage laws
apply, beyond looking at whether the PPP involves a state or federal
public entity, the court must look at the nature of the project to deter-
mine whether it is “public” or “private” in nature.147 Many states have
specified that the partnerships must serve a “public purpose” or be for
a “public use” for a PPP to even exist.148 The federal government has
enacted similar requirements.149 Absent a clear and specific regulatory
definition for PPPs, courts have established three factors to help iden-
tify which projects are public, and thus, subject to prevailing wage
laws.150 First, courts look at the nature of the entity awarding the
abide by prevailing wage laws will be void); N.J. STAT. ANN. §34:11 (2007) (stating
that any contract for public works shall ascertain the prevailing wage from the com-
missioner and pay the employees nothing less than the prevailing wage); tit. 16 PA.
CONS. STAT. § 5001(e)(1) (2011) (stating that all public contracts should abide by
the Pennsylvania Prevailing Wage Act); TEX. GOV’T CODE ANN. § 2258.021(a)(1)
(West 2013) (stating that a worker employed for public work or on behalf of the
state or political subdivision should not be paid less than the prevailing rate of per
diem); WASH. REV. CODE § 39.12.20 (2007) (stating that every employee working
under a public building service maintenance contract shall be paid no less than the pre-
vailing rate of wage).
144. Davis, supra note 114, at 9, 11 (stating that PPPs are hybrid in nature).
145. See 40 U.S.C. § 3142 (2014) (stating that every contract over $2,000 and to
which the United States is a party, for construction or maintenance of a public build-
ing, the workers must be paid according to the prevailing wage laws that the Secretary
of Labor determines). See generally LaSalle Partners v. United States, 48 Fed. Cl. 797,
798 (Fed. Cl. 2001) (stating that a contract between the United States General Services
Administration and two private entities is a PPP).
146. See supra note 143 and accompanying text.
148. See generally CONN. GEN. STAT. § 4–258(4) (2011) (stating that evaluation and
determination criteria should include a determination of which PPP proposals serve a
public purpose); LA. REV. STAT. ANN. § 48:2084.13 (2006) (stating that in order to de-
termine which proposal gets selected, the public entity must consider whether or not
the proposal serves a public purpose); MD. CODE ANN., STATE FIN. & PROC. § 10A–103
(2013) (stating that a public-private partnership may be established “in connection
with any public infrastructure. . . .”). But see ALA. CODE § 6–5–710 (2013) (stating
that PPPs may be entered into in order to remodel, construct, or maintain any public
or private infrastructure).
149. See 40 U.S.C. § 3142 (2006).
150. Id.

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contract.151 Second, courts look at the source of funding.152 Third,

courts examine the nature of the use.153 Together these factors may
help a court determine what is public use or purpose.154
In addition to the three factors that courts commonly use, the “end
use” or “end purpose of the project” test is often applied in determin-
ing whether a project serves a public purpose.155 Generally, when a
contractual agreement exists between public and private entities and
the end use of the infrastructure, property, or services is for commer-
cial purposes, the courts have not found a public purpose.156
151. Hardin Mem’l. Hosp., Inc. v. Land, 645 S.W.2d 711, 714 (Ky. Ct. App. 1983).
In this case, the court concludes that Hardin is, without question, a public entity be-
cause it is a public hospital owned by a public entity. Id. The county owned the
land on which the hospital was built and retained ultimate control of the hospital’s op-
erations, the hospital was an agent or authority acting on behalf of the county, and
thus, it constitutes a public agency. Id.
152. See People ex rel. Bernardi v. Illini Cmty. Hosp. (Bernardi), 163 Ill. App. 3d
987 (Ill. App. Ct. 1987). See also Lycoming Cnty. Nursing Home Ass’n, Inc. v. Com-
monwealth, Dept. of Labor & Indus., 627 A.2d 238, 242 (Pa. Commw. Ct. 1993) (stat-
ing that in order to be considered a public body, a private entity must be funded by a
public entity). But see Nw. Ohio Bldg. & Constr. Trades Council v. Ottawa Cnty. Im-
provement Corp., 122 Ohio St.3d 283, 2009 -Ohio- 2957, 910 N.E.2d 1025 (holding
that a private for-profit company which applies for a loan from the government does
not qualify as a public entity). In Bernardi, the court found that an Illinois not-for-
profit hospital was a public body because it received funds from Pike County based
on an act, which authorized counties to levy taxes for the purpose of maintaining
non-sectarian hospitals. Bernardi, 163 Ill. App. 3d at 988. This court looked at the leg-
islative intent by examining the plain meaning of the language of the pertinent legis-
lature. Id.
‘Public body’ means the State or any officer, board or commission of the State
or any political subdivision or department thereof, or any institution supported in
whole or in part by public funds, authorized by law to construct public works or
to enter into any contract for the construction of public works, and includes
every county, city, town, village, township, school district, irrigation, utility, rec-
lamation improvement or other district and every other political subdivision, dis-
trict or municipality of the state whether such political subdivision, municipality
or district operates under a special charter or not. Id. at 989.
153. Opportunity Cent. of Se. Ill., Inc. v. Bernardi, 204 Ill. App. 3d 945, 949 (Ill.
App. Ct. 1990) (holding that if something is publicly funded, it constitutes as public
use). The statute in question specified that public works referred to all fixed works
constructed for public use and by a public body. Id. The court interpreted this to
mean that if a company was constructing fixed works and that the government or a
governmental agency funded the company, then the nature of the work was public. Id.
154. See Nikles, supra note 116, at 5.
156. See L. Suzio Concrete Co., Inc. v. New Haven Tobacco, Inc., 611 A.2d 921,
925 (Conn. App. Ct. 1992); Rhode Island Bldg. & Const. Trades Council v. R.I. Port
Auth. and Econ. Dev. Corp., 700 A.2d 613, 615 (R.I. 1997); James J. O’Rourke, Inc.
v. Indus. Nat. Bank of R.I., 478 A.2d 195, 197–98 (R.I. 1984). In Suzio Concrete, the
court held that despite the contract clause requiring the purchaser to build a foundation
before title would be transferred, the sales agreement was, at its core, a land sales
agreement, not a construction contract. Suzio Concrete, 611 A.2d at 926. Thus, the ul-
timate use of the property was private and not public. Id. A building used for private

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Alternatively, if the end use of a project is public in nature, the court is

likely to find that it serves a public purpose and is therefore subject to
prevailing wage laws.157
C. Constitutional Issues
Another legal issue that arises with PPPs is whether the private partner
can be subject to § 1983 claims. Title 42 U.S.C. § 1983 provides a
cause of action against a state actor depriving individuals of rights
guaranteed by the Constitution.158 Generally, to prevail on such a
claim against a private entity in a PPP, the challenging party must
prove that the private entity acted in place of the government.159 In
other words, the conduct of the private entity will be considered gov-
ernment action if the depravation of the constitutional right can be
fairly attributed to the state.160
Another way to find a private partner satisfied § 1983’s state action
requirement is if the private entity exercises powers traditionally and
purposes, such as the operation and occupation of a private company, is considered

private despite being built on public land. Rhode Island Bldg. & Const. Trades Coun-
cil, 700 A.2d at 615. Even if a public entity owns the land, issued the bonds, and held
the general contract for construction, the operation of a meatpacking plant is not con-
sidered to serve a public-purpose. See O’Rourke, 478 A.2d at 198.
157. Contra O’Rourke, 478 A.2d at 195; Rhode Island Bldg. & Const. Trades
Council, 700 A.2d at 615; Suzio Concrete, 611 A.2d at 926.
158. 42 U.S.C. § 1983 (2015).
159. United States v. Jacobsen, 466 U.S. 109, 113 (1984). In a § 1983 claim for a
violation of the Fourth Amendment, the challenging party must show that the private
entity acted as an agent of the government and with the government’s knowledge. Id.
Otherwise, the state action against the private entity is wholly inapplicable. Id. In this
case, a private freight carrier company opened a suspicious package to find that it con-
tained cocaine. Id. Consequently, the freight carriers proceeded to call the federal
agents and informed them of the contents of the package. Id at 111. The federal agents
searched and seized the package. Id. Despite the fact that a person’s package is subject
to a legitimate expectation of privacy, the private party with whom the government
had no connection conducted the warrantless search. Id at 122. Thus, due to a lack
of connection between the governmental agency and the private entity, the private
party was not subject to the § 1983 claim because they did not violate the Fourth
Amendment. See id.
160. Lugar v. Edmonson Oil Co., 457 U.S. 922, 937 (1982) (holding that the depra-
vation of a right must be fairly attributable to the state); Jackson v. Metropolitan Ed-
ison Co., 419 U.S. 345, 349 (1974) (stating that the Fourteenth amendment does not
shield people from private action, no matter how discriminatory, wrongful, or perva-
sive); Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 173 (1972) (holding that racial
discrimination by a private entity does not violate the Equal Protection Clause).
Fair attribution has a two-part test. Lugar, 457 U.S. at 937. First, “deprivation must
be caused by the exercise of some right or privilege created by the [s]tate or by a
rule of conduct imposed by the state or by a person for whom the [s]tate is responsi-
ble.” Id at 937. Second, “the party charged with the deprivation must be a person who
may fairly be said to be a state actor.” Id at 937.

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exclusively reserved to the states.161 However, it is important to note

that very few actions have been traditionally and exclusively reserved
to the states.162 One such area is the implementation and regulation of
elections,163 another example is the use of eminent domain.164
A good example of the aforementioned analysis occurred in Stark v.
Seattle Seahawks, in which the private partner was sued pursuant to a
§ 1983 action for the alleged violation of the plaintiffs’ constitutional
rights.165 Here, the plaintiffs challenge the pat-down searches required
by the National Football League (“NFL”) as a condition to enter the
stadiums.166 The plaintiffs claim that such pat-downs are a “violation
of the Fourth Amendment, pursuant to 42 U.S.C. § 1983, and Art. 1,
§ 7 of the Washington State Constitution.”167 To examine this issue,
the court first looked at the relationship between the private party
161. Jackson, 419 U.S. 345 at 352 (citing Nixon v. Condon, 286 U.S. 73 (1932);
Terry v. Adams, 345 U.S. 461, 473 (1953); Marsh v. Alabama, 326 U.S. 501, 508
(1946); Evans v. Newton, 382 U.S. 296, 299 (1966)). Although petitioner argues
that state action is present because the respondent provides an essential public service
as specified by a Pennsylvania statute, the Pennsylvania courts have determined that,
for the purposes of the statute, furnishing utility services is neither a state function nor
a municipal duty. Jackson, 419 U.S. at 352.
162. Flagg Bros., Inc. v. Brooks, 436 U.S. 149, 157-8 (1978). Accord Campbell v.
United States, 962 F.2d 1579, 1582 (11th Cir. 1992) (citing Shelley v. Kraemer, 334
U.S. 1, 13 (1948); Blum v. Yaretsky, 457 U.S. 991, 1003 (1982)). The Constitution
only protects individuals from the government. Campbell, 962 F.2d 1579, 1582.
Thus, it does not affect the relationship between two private parties no matter how
wrongful or discriminatory. Id. In Campbell, a mother is suing a physician for wrong-
ful birth alleging that he failed to perform the necessary tests to determine whether the
fetus was healthy, or if the child would be born with some mental incapacity. Id. How-
ever, the state of Georgia does not have a wrongful birth statute. Id. The challenging
party argues that Georgia’s failure to remedy this wrong constitutes an unconstitu-
tional state act due to the physician’s actions, or lack thereof. Id. Although the Su-
preme Court of the United States does not delve into the nature of Georgia’s failure
to provide remedy through a wrongful birth statute, it holds that said failure does
not make the party’s act unconstitutional. Id.
163. Flagg, 436 U.S. 149, 158.
164. Jackson, 419 U.S. at 353.
165. Stark v. Seattle Seahawks, No. C06-1719JLR, 2007 WL 1821017 (W.D.
Wash. June 22, 2007).
166. Id. at *1 (“[t]he Fourth Amendment prohibits only unreasonable searches con-
ducted by the government or its agents.” Id. at *3 (quoting United States v. Jacobsen,
466 U.S. 109, 113 (1984)).
167. Stark, 2007 WL 1821017, at 1 (W.D. Wash. June 22, 2007). Civil action for a
depravation of rights gives private individuals the right to seek a remedy in equity and
an action at law against any governmental agency that deprives them of any rights,
privileges, or immunities secured by the laws of the Constitution. 42 U.S.C. § 1983
(2015). The Washington Constitution provides that “[n]o person shall be disturbed
in his private affairs, or his home invaded, without authority of law.” WASH. CONST.
art. 1, § 7 (2015).

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(Football Northwest) and the public party (Stadium Authority).168 In

order for a private party to be subject to the § 1983 action, the chal-
lenging party must prove that the act attributed to the private party
is governmental in nature.169 Thus, the private party and the public
party must be engaging in joint activity.170
There are two ways in which the courts have imputed state action
due to joint activity.171 The first is when there is concerted or conspir-
atorial activity between a state and private actor, and the second is
when there is a symbiotic relationship between the actors.172 To deter-
mine whether a symbiotic relationship exists, the court looks at the in-
tertwined nature of the relationship between the public entity and the
private entity.173 The government must have inserted itself into a po-
sition of interdependence with the private entity.174 In Stark, after ex-
amining the contractual relationship between the parties, the court de-
termined that despite the beneficial nature of the relationship between
the public entity and the private entity, it fell short of a symbiotic re-
lationship.175 As a result, the private entity was not a state actor and
was not subject to the § 1983 claim.176
168. Stark, 2007 WL 1821017, at *1-2 (W.D. Wash. June 22, 2007). First and
Goal, one of the defendants in the suit, contracted with the Stadium Authority to con-
struct a new field for the Seahawks after threats that they were going to get sold to Los
Angeles. Id. Qwest Field, the stadium, is a public entity because it belongs to the Sta-
dium Authority. Id at 2. Moreover, the funds to build the stadium came mostly from
public funds. Id. After the field was completed, First and Goal became the master ten-
ant of the stadium. Id. The agreement, which the parties entered into, resembles two of
the seven different PPP models. DELOITTE RESEARCH, supra note 1, at 8. The agreement
between the parties in this case resembles the “Build-Own-Operate-Transfer,” in
which the government grants the private party a franchise to finance, design, build,
and operate a facility for a specific period of time, and the “Build-Own-Operate” in
which the government grants a private entity the rights to finance, design, build, op-
erate and maintain a project; the private sector retains ownership of that project. Id.
169. See Stark, 2007 WL 1821017, at *3.
170. Id.
171. Id. at *4.
172. Id.
173. Id.
174. Burton v. Wilmington Parking Auth., 365 U.S. 715, 725 (1961) (holding that
the exclusion of a person of color from a restaurant, which is operated by a private
owner under lease in a building financed by public funds, is a violation of the Four-
teenth Amendment). The Supreme Court found that the government had placed itself
into a position of interdependency with the restaurant. Id. As a result, the private en-
tity’s actions were not considered purely private and were thus attributable to state ac-
tion. Id.
175. Stark, 2007 WL 1821017 at *4.
176. See id. at *8.

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The nature of the contractual agreement will determine whether a

private actor is subject to a § 1983 claim.177 The determination of
whether the agreement creates an interdependent relationship between
the parties, to the point that it becomes difficult to distinguish
between the public and private entity, is crucial.178 The enactment of
a general statutory definition for PPPs will do away with much litiga-
tion, such as the kind that took place in Stark v. Seattle Seahawks.179
D. Bond and Lien Rights
The lack of a statutory definition for PPPs also affects the remedies
available to contractors in the event of default.180 Bonds and liens
are remedies that may be available to contractors in order to secure
payment.181 Generally, unpaid contractors may assert a construction
lien on a property in order to secure payment.182 However, due to gov-
ernmental immunity, this remedy is not available for public works.183
Therefore, in order to determine which remedies are available to the
injured party it is crucial to determine whether a project is public or
private, but more importantly, if it is considered “public works” for
the purposes of bond rights and remedies.184
In an attempt to secure payment and protect unpaid public workers
and subcontractors, Congress enacted the Miller Act in 1935,185 which
177. Davis, supra note 114, at 11.

178. See Stark, 2007 WL 1821017 at *3.
179. See id. at *4.
181. BRIAN A. WOLF, FLORIDA CONSTRUCTION LAW AND PRACTICE § 14.2 (The Florida
Bar 7th ed. 2013).
182. See F.D. Rich Co., Inc. v. United States Indus. Lumber Co., Inc., 417 U.S.
116, 121–22 (2002) (holding that a mechanics lien is a remedy available to a supplier
of labor or materials only on a private construction project). See also WOLF, supra note
181, at § 14.2 (stating that contractors and subcontractors may assert a lien against the
private owners of a property as a way of securing payment).
183. F.D. Rich, 417 U.S. at 122.
184. See The Miller Act, Pub. L. No. 86–135, § 1, 73 Stat. 279 (1959) (codified as
amended in 40 U.S.C. § 3133(b)(4)) (2006). See also Nikles, supra note 116, at 8 (stat-
ing that the correct determination as to whether a project is public or private greatly
impacts the remedies available to the injured party).
185. 40 U.S.C. § 3133(b)(4) (2006) (amending 40 U.S.C. § 270a(a) (2002)); WOLF,
supra note 181, at § 14.2. The Miller Act required the contractor to post two bonds.
WOLF, supra note 181, at § 14.2. The first provided the government with protection in
the event of contractor default. Id. The second provided the subcontractors security for
the contractor’s payment obligations. Id.

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was later amended in 1959,186 1994,187 1999188 and 2002.189 Most

states have mirrored the Miller Act by enacting similar statutory per-
formance and payment bond requirements, which are often called
“Little Miller Acts.”190 The purpose of the Miller Act and the Little
Miller Acts is to secure payment for unpaid workers working on gov-
ernment projects by establishing separate funds for these pay-
ments.191 Under the Miller Act, and its state counterparts, the
186. The Miller Act, Pub. L. No. 86–135, § 1, 73 Stat. 279 (1959) (codified as
amended in 40 U.S.C. § 3133(b)(4)) (2006); WOLF, supra note 181, at § 14.2. In
1959 Congress amended the Act. WOLF, supra note 181, at § 14.2. This amendment
provided that no lawsuit was to be commenced once one year had passed after the
day “on which the last of the labor was performed or material was supplied.” 40
U.S.C. § 3133(b)(4).
187. Brooks Architect Engineer Act, Pub. L. No. 103–355, § 5, 108 Stat. 3243
(1994) (codified as amended in 40 U.S.C. § 3131(b) (2006)); WOLF, supra note
181, at § 14.2. This 1994 amendment added a new section to the Miller Act. WOLF,
supra note 181, at § 14.2. The new section provided that section five of the Miller
Act does not apply to contracts that fall short of $100,000. 40 U.S.C. § 3131(b).
188. Construction Industry Payment Protection Act of 1999, Pub. L. No. 106–49,
§ 2, 113 Stat. 231 (1999).
189. Codifying Title 40 of the United States Code, Pub. L. No. 107–217, § 1, 116
Stat. 162 (2002); WOLF, supra note 181, at § 14.2. The modern and expanded version
amended the original Act in several ways. WOLF, supra note 181, at § 14. Although
previous versions of the Miller Act required a cap to be placed on bonds, the new ver-
sion states that the general contractor must furnish a bond for an amount that is equiv-
alent to the total value of the contract. Id. Additionally, the amendments of the Act
provide that any claimant may provide notice of a bond claim through any third
party carrier system that provides written verification. Id.
190. ARIZ. REV. STAT. ANN. § 28–7656 (2004) (“[t]he county shall pledge all or any
part of the bridge construction revenues to be received and the county’s rights in the
bridge construction intergovernmental agreement to the payment of an amount of the
bonds secured by bridge construction revenues.”); COLO. REV. STAT. ANN. § 32–11–561
(2013) (“the proceeds of taxes, pledged revenues, and other moneys, including without
limitation proceeds of bonds to be issued or reissued after the issuance of interim deben-
tures, and bonds issued for the purpose of securing the payment of interim deben-
tures. . . .”); FLA. STAT. § 255.05 (2012) (“[a] person entering into a formal contract
with the state or any county, city, or political subdivision thereof, or other public authority
or private entity, for the construction of a public building, for the prosecution and com-
pletion of a public work, or for repairs upon a public building or public work shall be
required, before commencing the work or before recommencing the work after a default
or abandonment, to execute and record in the public records of the county where the im-
provement is located, a payment and performance bond with a surety insurer authorized
to do business in this state as surety.”); IND. CODE § 36–1–12–13.1 (2012) (“the appropri-
ate political subdivision or agency . . . shall require the contractor to execute a payment
bond to the appropriate political subdivision or agency, approved by and for the benefit of
the political subdivision or agency, in an amount equal to the contract price if the cost of
the public work is estimated to be more than 200,000.”); N.J. STAT. ANN. § 2a:44–143
(West 2013) (“[w]hen public buildings or other public works or improvements are
about to be constructed, erected, altered or repaired under contract, at the expense of
the State or any contracting unit . . . [t]he contracting unit or school district, shall require
delivery of the payment and performance bond . . . as provided for by law, with an ob-
ligation for the performance of the contract and for the payment by the contractor for all
labor performed or materials, provisions, provender or other supplies. . . .”).

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contractor issues two sureties, one for guarantee of performance (per-

formance bond) and one for guarantee of payment (payment
bond).192 A performance bond is the contractor’s guarantee of the
timely completion of a construction project in the event of default.193
Conversely, a payment bond is a surety given to subcontractors as a
guarantee that they will receive payment in the event that the general
contractor defaults.194 When entering into a contract, public entities
are required to verify the existence and rating of the bonds, failure to
do so could render the public entity or individual government officers
liable.195 Thus, in the event that one of the parties fails to comply
with the sureties, the injured party may seek remedy under the Miller
Act.196
Little question remains as to the applicability of the Miller Act
when the federal government owns or finances a building, or contracts
to construct or repair a government building.197 However, due to the
recent resurgence of PPPs, the question of whether a project is a “pub-
lic work” within the requirement of the Miller Act has become harder
to answer.198 In order for a contract to be subject to the Miller Act, a
public work must be undergoing construction, alteration, or repair.199
In several cases, the federal courts have discussed which projects are
considered “public works” under the Miller Act.200 Generally, the
courts have found that contracts for the sale and disposal of govern-
ment property do not constitute “public works” for the purposes of
192. 40 U.S.C. § 3131(b) (2006).

195. Nikles, supra note 116, at 7 (stating that when public entities or government
officials fail to ensure the validity of a bond, they may be liable to pay claims that
would have otherwise been covered under the payment and performance bonds).
196. Id.
197. Patrick J. O’Connor, Statutory Bonds or Common Law Bonds: The Public-
Private Dilemma, 29 TORT & INS. LAW J. 77, 78 (1993).
198. Id. at 78–79. Due to budget restrictions and reductions, there is an intensifying
movement toward PPPs. Id. In addition to questioning the “public work” aspect of the
Miller Act, PPPs also question the “federal character” of the project. Id. The activity
and work being performed should be carefully examined in order to determine
whether they are outside the scope of the Miller Act. Id.
199. 40 U.S.C. § 3131(b) (2002).
200. See United States ex rel. Warren v. Kimrey, 489 F.2d 339, 342 (8th Cir. 1988)
(holding that a contract for sale of government property is not a contract covered by
the Miller Act); Chi. Rigging Co. v. Uniroyal Chem. Co., 718 F. Supp. 696, 700 (N.D.
Ill. 1989) (holding that a contract for demolition of a government building is not cov-
ered by the Miller Act). But see United States ex rel. Shlager v. MacNeil Bros. Co., 27
F. Supp. 180, 181 (D. Mass 1939) (holding that the contract for salvaging a sunken
ship should survive a motion to dismiss for lack of meeting the requirements of the
Miller Act).

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the Miller Act.201 On the other hand, the courts have found that a proj-
ect for the recovery of a sunken ship is considered “public work”
within the meaning of the Miller Act.202
Statutory absence in respect to PPPs has made it extremely difficult
for courts to determine whether something is public or private.203
Thus, in an attempt to solve the “public works” dilemma, the Supreme
Court of the United States has provided some guidance.204 In United
States ex rel. Noland Co. v. Irwin, the Supreme Court concluded that
the actual language found in the Miller Act provided little guidance as
to what was considered public works for the purposes of the Act.205
As a result, the Miller Act was expanded through common law to mirror
the language of the National Industrial Recovery Act, which, in the
Court’s opinion, did not leave room for speculation as to what constitutes
public work.206 Thus, the Court concluded that public works were
defined as “projects of the character heretofore constructed or carried
on . . . with public aid to serve the interests of the general public.”207
In general, PPPs makes it challenging to accurately apply current
laws and regulations on bonds.208 The Miller Act and the Little Mil-
ler Acts are important when determining the remedies available to
injured parties.209 If a project is a PPP and it involves “public
works” then the parties may seek compensation pursuant to the Mil-
ler Act or the Little Miller Act of the pertinent State.210 Again, stat-
utory regulation and a standard definition of PPPs will do away with
some of the confusion regarding procurement remedies, such as
those provided by the Miller Act.211
201. See Warren, 489 F.2d at 340. This case involved a contract between a buyer of
government buildings and a contractor. Id. The buyer and contractor entered into a
contract for the demolition of said buildings. Id. The contractor was fired, at a later
date, and brought suit against the contractor for the performance bond. Id. at 341.
202. Shlager, 27 F. Supp. at 180. In this case, a company entered into a contract
with the United States for the removal of a sunken ship. Id. The company executed
a bond conditioned upon expedited payment to the workers. Id. at 181. Without
fully elaborating on its reason(s), the court found that this type of contract constituted
“public works” for the purposes of the Miller Act. Id.
203. See supra Part V.
204. United States ex rel. Noland Co. v. Irwin, 316 U.S. 23, 30 (1942) (discussing
the similarities between the Miller Act and the National Industrial Recovery Act).
205. Id. at 29.
206. Id. at 30.
207. Id.
209. Id.
210. Id. at 7.
211. Custos, supra note 77, at 557 (stating that the United States has not enacted a
central statutory framework for PPPs).

200.10.244.14 on Mon, 03 Jun 2019 00:36:23 UTC
VI. Conclusion
The present-day infrastructure conditions of the United States depict a
very dark and gloomy picture.212 As a result, the current dynamics of
the modern economy call for the implementation of PPPs, an innova-
tive method to advance, restore, revamp, construct, and finance infra-
structure projects.213 The unavoidable truth is that the U.S. needs to
invest a significantly large amount of money in order to improve the
country’s infrastructure.214 The government, however, does not have
the economic means to do so.215 Thus, many states, local govern-
ments, and federal agencies have found that by entering into PPP
agreements they can fund projects which would have otherwise
never been completed due to a lack of funds.216
The key to developing said framework is to provide a standard def-
inition for the term “Public-Private Partnership,”217 that lays down a
proper foundation on which to build. This definition should be
drawn from general terms in the area of contracts and business asso-
ciations.218 To date, the term “partnership” is defined as: “A voluntary
association of two or more persons who jointly own and carry on a
business for profit.”219 Similarly, “public” is defined as “of, relating
to, or involving an entire community, state, or country[; or] open or
available for all to use, share, or enjoy,”220 and “private” is defined
as: “of, relating to, or involving an individual, as opposed to the public
or the government.”221 Drawing from the aforementioned discussions
and definitions, PPPs would ideally be defined as: A contractual agree-
ment, typically done by the association of two parties, of which at least
one is a public party and one is a private party, formed in furtherance
of achieving a public purpose that is owned by government and pri-
vately operated.222
The implementation of this definition alone does not solve the prob-
lems presented by the lack of regulatory legislation of PPPs, but it’s a
start. From there, legislation must be drafted to encompass the issues

213. See supra notes 43–44 and accompanying text.
218. See infra notes 223–225.
219. BLACK’S LAW DICTIONARY (10th ed. 2014).
222. See supra notes 223–225.

200.10.244.14 on Mon, 03 Jun 2019 00:36:23 UTC
raised in this article; particularly, this legislation should discuss and

address the procurement requirements of PPPs,223 impact on prevail-
ing wage laws,224 constitutional issues dealing with governmental im-
munity,225 and bond and lien rights,226 amongst any other contractual
issues. The creation of said legislation would be the necessary step-
ping stone to advance PPPs, which would, in turn, lead to the resolu-
tion of the infrastructure crisis. As such, the ideal legislation would in-
corporate some version of the aforementioned definition, provide
guidelines and factors in order to help determine what consists of a
public purpose, as well as provide specifics regarding the dynamics
of a privately operated, government owned entity.227 Such framework
has the potential to drastically alleviate the infrastructure crisis the
United States faces today.228 The implementation of such framework
would reduce litigation and would facilitate the formation of PPPs,229
which would, in turn, lead to the rebirth of America’s infrastructure.
223. See supra Part V (A).

224. See supra Part V (B).
225. See supra Part V (C).
226. See supra Part V (D).
228. Id.
229. Id.

200.10.244.14 on Mon, 03 Jun 2019 00:36:23 UTC
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Public-Private Partnerships: An Innovative Solution for a Declining Infrastructure

Author(s): Anika Guevara

Stable URL: https://www.jstor.org/stable/10.2307/26425547

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understanding PPPs by defining the term and providing a historical

II. Definition and Development of Public-Private

http://www.gao.gov/archive/1999/gg99071.pdf (defining the term PPP as a contractual

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popular belief, however, not all contractual relationships between pub-

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with assisting states in implementing PPPs to solve their infrastructure

III. Differences between Public-Private Partnerships

44. Id. at 33-34.

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PPPs differ in the amount of control and ownership that is turned

52. Id. at 12-13.

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maintain, and improve certain aspects of infrastructure such as trans-

IV. Infrastructure in the United States

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order to meet the pressing needs for infrastructure maintenance and

71. See Burchell, supra note 1, at 1.

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$12.8 billion per year on bridge maintenance and improvements while

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An example of a state that currently has average-rated infrastructure

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V. Legal Issues with Public-Private Partnerships

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Virginia, and Maryland, have begun enacting, or have enacted, PPP-

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A. Procurement Contract Law

119. Davis, supra note 114, at 9.

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determination is generally not that easy.128 The first step in determin-

128. See DELOITTE RESEARCH, supra note 1, at 8. The determination of whether a

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governmental nature of PPPs, courts are forced to determine whether

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contract.151 Second, courts look at the source of funding.152 Third,

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Alternatively, if the end use of a project is public in nature, the court is

purposes, such as the operation and occupation of a private company, is considered

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exclusively reserved to the states.161 However, it is important to note

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(Football Northwest) and the public party (Stadium Authority).168 In

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The nature of the contractual agreement will determine whether a

177. Davis, supra note 114, at 11.

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was later amended in 1959,186 1994,187 1999188 and 2002.189 Most

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contractor issues two sureties, one for guarantee of performance (per-

192. 40 U.S.C. § 3131(b) (2006).

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