Professional Documents
Culture Documents
PARTNERSHIPS (P3)
ISSUES, SOLUTIONS AND
WHATS NEXT?
Chet Mitrani, Executive Vice President
Willis North America
2
WHAT IS A PPP?
A Public-Private Partnership is a
contractual agreement between a public
agency (federal, state or local) and a
private sector entity. Through this
agreement, the skills and assets of
each section (public and private) are
shared in delivering a service or facility
for the use of the general public. In
addition to the sharing of resources, each
party shares in the risks and rewards
potential in the delivery of the service
and/or facility.
$700 Million
2. CDA procurement
Unsolicited
Independent Proposals submitted at TxDOTs request
Technical
Project Characteristics P3 Contract
Terms
P3 or Conventional Legal
Toll Concession
Pre-Development Agreement
Asset Lease
CONSTRUCTION O&M
SUPPLIER
SUPPLIER
CONTRACTOR CONTRACTOR
Sub-Contractor Sub-Contractor
Sub-Contractor Sub-Contractor
Developer
Designs and builds the project
Assumes integration of design and construction and other development
risks conventionally retained by public agencies
Finances the owner's shortfalls in cash flow
Provides debt financing via one or more mechanisms (i.e., deferred
payment schedule, contractor loan, subordinated debt, financing of change
orders)
Assumes interest rate risk on its financing
Guarantees price / completion
Results In:
Greater price certainty with a lump sum price I guaranteed delivery date
Cost and time efficiencies
Provides owner cash flow financing, as needed
Examples
Florida DOT
1-75 Road Expansion Project ($430M)
95 Express ($122M)
SR-5 (US-1) Project ($112M)
Michigan DOT
1-69 Reconstruction in St. Clair County ($38M)
1-75/M-21 (Corunna Road) Bridge ($7.3M)
Examples
Florida DOT - 1-595
Florida DOT - Port of Miami Tunnel
British Columbia MOT - Sea to Sky Highway
TOLL CONCESSION
Suitable When
Project will directly generate revenues
Traffic and revenue risk can be efficiently transferred to private
sector
Political support exists for private sector toll collection and
enforcement
Public Owner - Same as AP Concession, except:
Contributes no or limited public funds to project costs
Decides on toll rate setting mechanism over contract life
Relieved of all or most toll revenue risk
May receive share of toll revenue as/when benchmarks met
Possibly receives upfront payment from the developer
TOLL CONCESSION
Examples
TxDOT - SH 1307 Segments 5 and 6
TxDOT- North Tarrant Express
TxDOT - I-635
Virginia DOT - I-95/395 HOT Lanes
PRE-DEVELOPMENT AGREEMENTS
Suitable When
Project not yet completely defined
Financial feasibility not yet determined, but preliminarily has good
potential
Public owner seeks private sector innovation in defining and
accelerating an optimally feasible project
Environmental analysis is in the early stages
PRE-DEVELOPMENT AGREEMENTS
Initial Phase
Public and private partners "co-invest" in pre-development activities
Public owner retains complete control over environmental clearance process,
with Developer performance of technical studies
Developer participates in project planning and design
Developer prepares master financial plan and master development plan
Developer may absorb some or all of its initial phase work - "sweat equity"
If project proves feasible, Developer has right of first negotiation for the
agreement(s) covering the implementation phase
If unable to reach agreement, public owner retains right to separately procure
Implementation phase agreements can take form of:
Design-Build-Finance
Availability Payment Concession
Toll Concession
ASSET LEASE
Public Owner
Leases existing asset to private partner
Gets up front payment from private partner (monetizes the asset)
Gets facility back at the end of the lease
Private Partner
Gets right to any revenues (e.g., fees, tolls) from the facility
Implements fees I tolls in accordance with lease requirements
Maintains the facility in accordance with lease requirements
Examples
Indiana Toll Road ($3.8B up front payment; 75 year lease)
Chicago Skyway ($1.8B up front payment; 99 year lease)
Pocahontas Parkway (Pay off $500 M of existing debt, upgrade facility and cover other
VDOT expenses; 99 year lease)
Asset leases have been particularly controversial
Assign to Owner
CDAs DELEGATE
RISK TO THE Assign to Developer
PARTIES BEST ABLE
TO MANAGE IT. Shared Risk
Railroads
3 North Tarrant Express Ft Worth Seg 3 A and 3 B Concession and 500 million
D/B/B
4 The Horseshoe Dallas I 35 I 30 Design / Build or 600 million
interchange Concession
5 Border Highway Loop 375 Design Build
Note: American Water Works Association identified the need for $1 Trillion over 25 years in the drinking water sector and waste water.