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Virginia WaterJAM 2010Christopher D. Lloyd

September 22, 2010

Public Private Partnerships –

Statutory Frameworks for

Alternative Project Delivery

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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 certain public entities (localities over 100,000)

• 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

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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

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Design-Build: Cons

• Authority would have to seek approval from the Virginia Design-Build Review Board

• Design and construction methods often feel 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

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PPEA

• Law passed in 2002• 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

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PPEA: Dispelling the Myths

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

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PPEA: Project Examples - Utilities

• Bedford County Public Service Authority (completed)• Prince William Service Authority (completed)• City of Fredericksburg (completed)• Southampton County (under construction)• Virginia Beach pump stations (rejected)• Northampton County/Cape Charles (rejected)• Prince Edward County (entering IA phase)• Petersburg pump station (pending)• Augusta County Service Authority (under

construction)• Hampton Roads Sanitation District (pending)

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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

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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

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PPEA: Pros

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

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

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

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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

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Mitigating PPEA Risks

• Use of strong outside advisors with PPEA experience

• Two step solicitation process• Establishing clear goals, particularly related to

price• Use of interim agreement process• Circulate proposed comprehensive agreement at

detailed review phase• Prepare contingency budgets and plans that share

risk and rewards

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