Public-Private Partnership Bill Gets Facelift, But Still Has Momentum

Senate Bill 576 on public-private partnership construction was drastically revised, but the core facets of the legislation, opening the door to great public construction opportunities, remains unimpaired. And the bill is gaining momentum as it continues to pass through legislative committees.

The changes in the new bill from the original version include:

1. public entities may contract for P3 projects only with legislative approval or if consistent with local government appropriation process as evidenced by approval of the project in the public entity’s work program;
2. detailed instructions on public notice, opportunity for competing proposals to be submitted on any P3 project, and the manner of selecting among competing proposals (traditional procurement requirements and bid protests don’t apply here);
3. prohibition against the use of state funds unless the project is for a facility owned by the public entity or a facility whose ownership will be conveyed to the public entity;
4. the private entity must provide an investment-grade technical study prepared by a nationally recognized expert detailing the finance plan, including required payment & performance bonds plus, in appropriate circumstances, letters of credit and guarantees from parent companies, lenders and equity partners;
5. the requirement that the P3 agreement ensure a negotiated portion of revenues from fee-generating projects are returned to the public entity over the life of the agreement; and
6. specific provisions addressing the financing of the job, such as the conditions for loans from the public entity for construction, suggestions for innovative finance techniques, and the prohibition against indemnity agreements from the public entity or pledging of security interests in the public entity’s assets.

Although I’m still digesting the comprehensive changes to this statute, they appear to make the process more onerous and limiting than the original version. The revised bill seems to favor large, sophisticated private entities and consortia over smaller ones because of the burdensome financing and solicitation requirements coupled with the limitations on the use of public funds. On the other hand, the increased opportunity to submit competing bids will provide access to P3 jobs to those who lack the creativity and vision to identify potential P3 jobs themselves. The bill is still a much needed boost to the Florida construction industry, as it will increase opportunities for smaller contractors to participate as subcontractors on these jobs. Without a P3 bill, public construction will likely slow down due to a severe lack of funding. Although my preliminary thought about this bill, which I’m still analyzing, is that is it more restrictive and burdensome than the original bill, it nevertheless is a necessary and welcome response to the reduction in available public construction funds.