Public-Private Partnerships Explored in South Florida Sun-Sentinel Article

Many thanks go out to Marcia Heroux Pounds for her very insightful and comprehensive article in yesterday’s Business Section of the South Florida Sun-Sentinel. Marcia explored P3s in the context of the new legislation, equally emphasizing the benefits to both the public and privates sides, as well as the risks of doing them incorrectly or improperly. Check out Marcia’s article for an excellent overview of the current and future states of public construction in Florida.

Governor Signs Florida's New P3 Legislation

Governor Rick Scott signed HB 85 yesterday, creating Florida's new Public/Private Partnership Statute.  Senator Miguel Diaz de la Portilla and Representative Greg Steube, the bill sponsors, deserve great recognition for championing this cause through the difficulties of the legislative session.

However, it was all worth it.  As Representative Steube said, "We must use Florida funds wisely but we must be open to new ideas. My legislation ensures that public benefit comes first. Growth and job creation are important to our state's future. That being said, public and private entities must be accountable for their actions and Floridians will hold projects accountable for the final investment and, more importantly, the results".

The new legislation the responsible public entity to ensure the quality of the private entity's performance and safeguard the most efficient pricing. It addresses the transfer of the private entity's obligations to the investors or public entity if the project agreement, called a comprehensive agreement, is terminated or a material default occurs. Additionally, the public entity must perform an independent analysis of the proposed public-private partnership to ensure the cost-effectiveness and overall public benefit of the job.

Representative Steube said it best when he said, "I want to personally thank the Governor for his support of public-private partnerships in Florida. The signing of this bill will create jobs, encourage economic development and provide infrastructure to taxpayers at little or no taxpayer expense."

Public-Private Partnership Law Creates New Procurement Method

HB 85, passed by the Florida Legislature is expected to be signed into law by the Governor. HB 85 creates a new Florida Statute, Section 287.05712, Public-Private Partnerships. Upon becoming law, Section 287.05712 will usher in a new procurement method in the State of Florida. Namely, the "unsolicited proposal".

Traditionally, public agencies in Florida accept bids by way of an Invitation for Bid, Request for Proposals, or Request for Qualifications. These traditional procurement methods typically define the project for bidders to respond to. In the case of an "unsolicited proposal", it will be up to the bidder to define the project for the public agency's consideration. After the effective date of the new law, public agencies will be authorized to receive and consider unsolicited proposals for a "qualifying project" as defined therein.

Public agencies will be authorized to establish a reasonable application fee which is intended to cover the cost of evaluating the proposal. If the public agency intends to enter into an agreement in relation to an unsolicited proposal, it must provide notice of no less than 21 days and up to 120 days before entering into an agreement in order to allow other bidders to submit a proposal. Thereafter, the new law provides for a more traditional process for the evaluation, ranking and ultimate contract award.

The spirit and intent of the new law has been widely reported on during this past Legislative Session. While the public necessity for the new law is driven by virtue of the need for private funding of much needed public works projects, the codification and authority for public agencies to accept unsolicited proposals is a key component of the process.

Florida Council for Public-Private Partnerships Has Successful Inaugural Conference

The Florida Council for Public-Private Partnerships launched to the public statewide last week at its very successful inaugural conference in Orlando. One hundred thirty attendees, representing an equal mix of public entities, builders, lenders/investors, design professionals and others heard several case studies illustrating how P3 projects have been successfully delivered. Featured projects included the Port of Miami Tunnel, Long Beach Courthouse in California, Palm Beach County Convention Center Hotel and the pending P3 expansion of Seminole State College. Other presenters included William Merck, the CFO of the University of Central Florida, Representative Greg Steube who sponsored the new P3 legislation, and the heads of P3 activities for Balfour Beatty and AECOM.

The Florida Council for Public-Private Partnerships fared well too, as attendees competed for the last founding member positions and the membership drive is now in full swing. Check out the website to learn how FCP3 can benefit you. Jump on board – P3s are hot and are destined to become the future of public construction. Join us now and get lined up for P3s. The momentum for them has been immense over the past few weeks since the legislation passed.

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.