CONFIDENTIALwww.mcguirewoodsconsulting.com

Susan Liberty and Christopher D. Lloyd

June 4, 2009

Public Private Partnerships –

Statutory Frameworks for

Alternative Project Delivery

2

Virginia Procurement Opportunities

• Design-bid-build• Design-build• PPEA

3

Design-Bid-Build

• Traditional procurement method allowed under the Virginia Procurement Act

• Begins with selection of engineer and design team through competitive negotiations

• Selected firm designs project to near complete drawings

• Design and bid specifications are put out for bid• Some public entities start with RFQ, then proceed to

RFP to help narrow list of potentially qualified contractors

• Contractor selection based on lowest responsible bid• Construction is “to the plans”

4

Design-Bid-Build: Pros

• Time tested, known process• Forms and contracts are commonly available and

terms are well understood• Results in perceived lowest cost• Reduces uncertainty in design and construction

methods• No special approvals needed from other

governmental entities• Design/engineering firm works DIRECTLY for the

public entity• LCSA has strong track record of successful use

5

Design-Bid-Build: Cons

• Change orders and budget uncertainty• Slow process – cost escalation and inflation• Subject to significant litigation• All project procurement costs are borne by the

public entity• Design/engineering firm works DIRECTLY for the

public entity• Multiple contacts – who’s in charge? Who’s

responsible when something goes wrong?• Public entity retains all project risks, project

oversight

6

Design-Build

• Originated in private sector, began public sector use in 1980s/1990s

• Design-Build Review Board created in 1996 to grant project specific approvals

• Law amended in 2006 to allow one-time board approval to public entities (Loudoun and Alexandria have approvals)

• Engineer and contractor propose as a common team with shared risks and rewards

• Public entity often uses on-call or in-house expertise to scope project and assist with team evaluation

• Widely used by VDOT, about 20-30 other projects statewide

7

Design-Build: Pros

• Budget certainty• Qualifications based selection, price is not the sole

factor• Reduces project delivery time• Collaboration between engineer and contractor can

result in project efficiencies/value engineering• Contract forms (DBIA models) becoming generally

accepted• Turnkey project delivery• Single point of contact

8

Design-Build: Cons

• Approval process to use design-build by local governments can be lengthy

• Design and construction methods often fluid and decisions made “on the fly”

• Project price could have significant contingency costs to cover risks shifted from the public entity

• Procurement costs are borne by the public entity

9

PPEA

• Law passed in 2002• Based on PPTA (Transportation) of 1995• Allows for both solicited and unsolicited proposals

for development and/or operation of “qualifying projects”

• Public entity must adopt guidelines to consider project proposals

• 2 phase process – conceptual and detailed• Results in a de facto design-build procurement• Nearly 100 projects completed or underway

statewide

10

PPEA: Dispelling the Myths

• Not a panacea• Not free money• Not a finance tool• Not secret negotiations• Not necessarily cheaper• Not privatization

11

PPEA: Project Examples

• Prince William Service Authority (under construction)

• Fredericksburg (5 projects completed)• Stafford County Public Schools – Learning Village• Virginia Department of Corrections – 3 facilities• Regional jails• Public safety centers• Kingstowne Library• Parking (Roanoke, Fredericksburg, Winchester,

Wiehle Avenue)

12

PPEA: Process

• Public entity solicits for proposals or accepts unsolicited proposals

• Minimum of 45 day open competition period for unsolicited proposals

• FOIA protections for confidential information are negotiated

• Conceptual proposal outlines team qualifications, proposed scope, proposed scope and public benefits

• Public entity may levy a proposal review fee on both solicited and unsolicited proposals

• Proposal review fee is used to cover procurement costs

13

PPEA: Process

• All competing proposals are reviewed, followed by a downselect

• Detailed proposals are requested – often relies on recommendations of outside/inside advisors

• Detailed proposals start to lock in project scope, costs, schedule

• Leads to an interim or comprehensive agreement with one firm

• Significant requirements for public notification and hearings

14

PPEA: Pros

• Many of the same benefits as design-build• PPEA has a certain “cachet” with state regulatory

and funding bodies• No Richmond approvals necessary• Public entity retains right to reject, modify, expand,

or contract proposals at any time• Project costs can be covered by proposers• Staff augmentation and single point responsibility

15

PPEA: Cons

• Project scope and cost may not be defined until late in the negotiation process

• Learning curve for public officials and public• Suspicions about “competitive negotiations”• Did I get the best possible price?• Negotiations can be lengthy and complex

16

PPEA: Why Unsolicited Proposals?

• Greater acceptance of use of project review fees• Greater flexibility to develop a project with

undefined scope• Opportunity to get “world class” ideas • Opportunity to get the “dream team”

17

PPEA: Why Solicit Proposals?

• Public entity is in proactive, not reactive mode• Greater opportunity to narrow or define scope• May increase competition, number of proposals• Reduces requirements for staff time to meet with

proposers

18

PPEA Implementation

What Makes Projects Go Well• Open and collaborative process between public and

private sectors• Atmosphere that encourages innovation and

creativity• Include public, press and other stakeholders• Objectives (cost savings, time, limits on risk) are

clear from the beginning

19

PPEA Implementation

What Makes Projects Go Bad• Unnecessary closed door discussions• Public sector shifts all risk, not willing to pay for it• Staff objections to process• Owner did not establish clear criteria and goals

upfront to properly assess performance and success at end

• Cost overruns and scope creep• Public sentiment turns away from development• Negotiations never end• Project is overly defined or restricted

20

Business Expansion | Federal Public Affairs | Strategic Communications & Grassroots MobilizationState & Local Government Affairs | Emerging European Markets

Atlanta • Charlotte • Charlottesville • Chicago • Columbia • Norfolk • Raleigh • Richmond • Springfield • Tyson’s Corner • Washington, D.C. | Bucharest, Romania

www.mcguirewoodsconsulting.com

THE END