Update on Public-Private Partnership Legislation

SB 84 and HB 85, as amended to reflect the merger with a competing bill, continues to pick up momentum. The House Bill passed the Government Operations Subcommittee three days ago by a vote of 11 to 1 and the Senate Bill is set for the Governmental Oversight and Accountability Committee today. Many interested parties have raised very good suggestions for changes in the statutory language and we’re addressing as many of them as we can. We’re excited that this legislation has garnered so much attention, as that indicates people are preparing themselves to implement it upon passage. Keep up the support!

I was recently interviewed by Carolina Bolado at Law360 about the legislation and the portion of her article addressing it is reprinted below. In the meantime, the newly formed Florida Council of Public-Private Partnerships is putting the final touches on our P3 conference set for May 16 and 17 in Orlando, which will coincide with the statewide launch of that trade association to the public. If you want to be on the e-mailing list to receive notice of the seminar when registration opens shortly, let me know.

In the meantime, keep up the P3 momentum! Here is the segment of the Law360 article on P3:

Focus on Public-Private Partnerships
All eyes are on S.B. 84 and H.B. 85, a public-private partnership bill that has been gaining momentum and has passed its first Senate committee with unanimous support, according to the bill's drafter Lee Weintraub of Becker & Poliakoff PA.

The bill establishes a uniform method for public-private partnerships throughout the state, which provides the stability that lenders have been looking for, Weintraub said.

It also allows private companies to pitch unsolicited proposals to government entities. Once an agency has accepted a proposal, a competitive bidding process is opened up to other companies, according to Weintraub.

Supporters say the bill could open up the state to investors and help fund some critical infrastructure needs, particularly to the state's aging water and sewer systems, Weintraub said.

“We haven't done [public-private partnerships] much because we've been a wealthy country so we've had enough money to fund this stuff,” Weintraub said. “But now we're facing a budget crunch. It's been going on as a beautiful system in Europe, Canada and Australia.”

P3 - The Evolution of Public Procurement

Historically, public agencies have had the funds to construct public works. They usually procured plans prior to hiring a contractor as well. Considering ongoing budgetary constraints, public agencies continue to look for ways to streamline the procurement process. As a result, traditional procurement methods continue to evolve.

In the past, public agencies in Florida typically used a three step - "design-bid-build" model for construction of public works. Following this model, an agency first hires a design professional to create plans, and then advertises for bids from contractors. The contractor which submits the low price and is otherwise "responsive and responsible" would typically win the contract. Over time, agencies began to use the "design-build" model, which combined, the responsibility for design and construction into one contract.

In both of the above models, however, the public agency usually paid for all of the costs up front. Nowadays, public agencies are looking for ways to finance projects or bring in private partners to make up for a lack of capital improvement funds. Thus, the era of the "public private partnership" is upon us. The partnership may range from assistance with financing, and up to and including outright privatization of a project or services.

In order to compete in the marketplace for public contract awards, contractors will need to evolve with the changing procurement methods and be prepared to engage public agencies in longer term relationships to assist with the funding and operation of public works and improvements. In turn, the contractors may realize their profit from operational costs or user fees associated with the public improvement instead of being paid up front

Ruminations on Pending P3 Legislation

As the legislative session is only a week away, our pending public/private partnership bill looks like it’s full steam ahead. All industry participants of whom I’m aware are on board, with only a few concerns having been raised thus far, none of which appear strong enough to derail the momentum. The bill has already passed its first Senate committee unanimously and the sponsors of a competing bill agreed to merge theirs into ours in exchange for changes that will make ours a stronger bill than before.   They include the appointment of a task force to create guidelines for a public agency receiving and processing P3 proposals, added flexibility in determining the amount of time for competitive bidding after an unsolicited proposal has been received, and authorizing discretionary interim agreements where appropriate, whereby the private entity can be compensated during the due diligence phase of the project as a means of ensuring issues like zoning, environmental mitigation, design, etc. are properly aligned for the job.

Keep an eye on this spot as we continue tracking SB 84 and the companion HB 85. The newly formed Florida Council for Public/Private Partnerships is planning on conducting a P3 seminar focused largely on how to implement the new legislation on May 16 and 17 in Orlando. Put this on your calendar and contact me if you wish to be notified when conference registration is available.

P3 Means Jobs

Crestview, a city in Florida’s panhandle, provides a good illustration of how public-private partnerships can provide a win-win to both communities and businesses.

Crestview’s News Bulletin reports on how a P-3 initiative has led to recent construction of a new administrative building for L3 Crestview Aerospace at Crestview’s Bob Sikes Airport. L3 Crestview Aerospace is a division of L3 Integrated Systems. The company is a provider of aircraft modification and aerostructure fabrication and assembly. L3 Integrated Systems’ parent, L3 Communications is a prime system contractor in command, control, communications, intelligence, surveillance and reconnaissance systems.

Crestview’s News Bulletin also reports that work on an 80,000-square foot hangar on L3’s local campus will begin later this year. The construction is a result of a public-private partnership among Okaloosa County’s Economic Development Council, local government and business. It is believed L3’s expansion will bring 340 new jobs to L3, while enabling the company to also retain 80 positions. The expansion represents a capital investment of $13.7 million. The EDC is a non-profit, independent organization funded by private business owners.

The paper further reports that “EDC has 20 active projects, including four in the Crestview area that together could provide nearly 1,500 new jobs."

The original article in Crestview’s News Bulletin can be found here.

Could Fiscal Cliff Talks Provide Fuel for Public/Private Partnerships?

The Wall Street Journal reported today that, among the talking points for fiscal cliff avoidance, the government is considering removing the tax exempt status of municipal bonds, which would severely limit the borrowing power of local governments. If this happens, the cost of private capital to fund public facilities and infrastructure would not be so out of whack compared to the cost of public borrowing. This would encourage more public/private partnerships. Currently, when considering alternatives for financing public construction, public agencies compare the higher costs of private capital to the lower costs of issuing municipal bonds. That is one of the factors that could weigh in favor of traditional procurement techniques over public/private partnerships. However, if the tax exempt status of municipal bonds is removed, this would no longer be a factor in favor of traditional procurement.

Keep an eye on this. If in fact public financing becomes less attractive and the pending public/private partnership bill passes in Florida, P3s in Florida may become much more prevalent in future public construction.

P3 and Cybersecurity

Robert D. Rodriguez, founder of the Security Innovation Network, will open the Complex Adaptive Systems Conference, to be held November 14-16 in Washington, D.C., with a discussion on the application of public-private partnerships to online security.  The conference, which is sponsored by Lockheed Martin, Tata Consultancy, the Missouri University of Science and Technology and others, and features presentations on computational intelligence, big data analytics and the "Smart Grid" will include discussions by several leaders in the complex systems area.  On the conference site,  the abstract of Robert Rodriguez's presentation refers to both the Manhattan Project and Silicon Valley as examples of public-private partnerships.

The subject of Rodriguez's presentation seems especially timely as The Economic Times has just reported that Shivshankar Menon, the National Security Advisor to the Prime Minister of India, has recommended that a permanent mechanism be set up for the use of public-private partnerships in the development of online security in India.  The report, titled Recommendations of Joint Working Group on Engagement with Private Sector on Cyber Security states, "one of the primary challenges facing both government as well as industry is to ensure the security of their computer networks and systems.  Cyber security cannot be achieved in isolation by either government or industry alone.  It requires joint efforts and collaboration."

As cybersecurity has become a key component of both national and industrial security, it is critical that the public and private sectors work closely together in innovative ways to achieve the online infrastructure that is necessary to protect both national and business assets.  Based on the subject of the opening presentation at this year's Complex Adaptive Systems Conference and the recommendation of India's National Security Advisor, it appears this is an area ripe for public-private partnerships both nationally and globally.

P3 Could be a Competitive Advantage for US Manufacturing

Public-Private Partnerships help the public sector develop various projects and improve infrastructure in ways that benefit the public at large.  These projects and infrastructure improvements, which always raise economic and financing issues, can be particularly challenging during difficult economic times. While P3’s contribution to making capital improvements and similar initiatives a reality is well recognized, we might consider other areas of our nation’s economy that could also be assisted through the joint initiative of the public and private sectors.  One other area to consider is manufacturing.

Rebecca O. Bagley, CEO of Nortech, a regional nonprofit focused on technology based economic development in Northeast Ohio, recently wrote on Forbes.com that “collaborative public-private partnerships have emerged as an important component in this new era of American manufacturing.”  In support, Bagley describes her recent attendance at a Department of Energy/NIST roundtable, which focused on American manufacturing.  An assertion made at the roundtable was that P3 could play an important role as the US manufacturing sector transitions into what is now a highly innovative and globally driven manufacturing marketplace.  As an illustration, Bagley points to the recent announcement of a 30 million dollar federal grant made to the National Center for Defense Manufacturing and Machining in order to establish a National Additive Manufacturing Innovation Institute in the Techbelt (described as the Cleveland to Youngstown to Pittsburgh corridor).  In Bagley’s piece, Carnegie-Mellon President, Jared L. Cohon, says the “new manufacturing institute is about industry teaming with university partners…”.

As Bagley points out, solutions and innovation are to be found not only in the technology and processes we as a nation develop, but in the creativity we use in making these things happen (e.g. through P3), which in itself represents a competitive advantage.  Bagley’s piece, “Are Public-Private Partnerships The 'Secret Sauce' To A Resurgence In American Manufacturing?” can be found at
http://www.forbes.com/sites/rebeccabagley/2012/09/04/are-public-private-partnerships-the-secret-sauce-to-a-resurgence-in-american-manufacturing/