A Primer on Virginia’s PPEA Christopher D. Lloyd Warrenton Town Council June 3, 2010

Presentation Overview Legislative History of Public Private Partnerships How the PPEA Works Implementation of the PPEA Recent Project Examples Pitfalls and Lessons Learned

PPEA Overview What is it? - An alternative procurement tool that allows public entities to more efficiently develop infrastructure and achieve better value for the taxpayer - Vehicle to use design-build practices What it is NOT? - A panacea that resolves all procurement issues - A way to get something for nothing - Privatization

PPP Legislative History Built on the successes of the PPTA (895, 288, 28, Coalfields Expressway) Design-Build Review Board created in 1996, overly cumbersome process Passed General Assembly in 2002 Model Guidelines issued in October 2002, state guidelines in December First comprehensive agreement signed July 1, 2003 (Stafford County) Amendments occur every year since 2002 Growing acceptance by legislature as a valid project delivery tool

Why Use PPP Alternative Procurement? Faster, better, cheaper (sometimes) through achieving benefits of design-build procurement Single point of responsibility Shift of risk away from public sector Distances rate making/price setting decisions from the politics Lack of faith in the public sector Easier framework for inter-governmental, multi-jurisdictional collaboration

PPEA: Process Governing body adopts PPEA guidelines 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 cost, proposed scope and public benefits Public entity may levy a proposal review fee on both solicited (rare) and unsolicited proposals (always) to cover project review costs

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

Evolution of Virginia’s PPEA Creation of interim agreement concept Increased public input and transparency Development of “best practices criteria” Creation of legislative oversight panel Expansion to technology projects and services

PPEA Implementation - Finance Nearly all PPEA projects have relied on traditional municipal finance to cover construction costs Private financial participation usually takes form of land, tax overlay districts, joint use, and bridge financing PPEA does not create “new” financing structures but permits combinations of financing tools in a predictable, repeatable process Current recession is encouraging communities to more closely evaluate alternative financing options

PPEA Finance - Alternatives Use of IDA as conduit Partnering with other potential users to share costs Tax overlay and service districts Bridge loans and contractor financing (3rd party) Historic tax credits Leverage federal and state resources

PPEA Implementation Over 100 projects statewide Over 50 jurisdictions have adopted PPEA guidelines Project sizes from $800,000 to $1.5 billion Ideal project size no less than $5 million More frequent use in small-to-mid-sized communities

PPEA: Project Examples Parking – Fredericksburg, Roanoke, Winchester, Fairfax Public Safety – Winchester, Fredericksburg, Roanoke County, Stafford County, DFS NoVA Forensic Lab Jails – Virginia DoC, Rappahannock Regional Jail, New River Valley Regional Jail Schools – Stafford, Chesterfield, Bedford, Northumberland, Cumberland, Fredericksburg Water and Sewer – Prince William, Bedford, Fredericksburg, HRSD, Caroline, Augusta Government facilities – Chesapeake CSB Mental Health – Eastern State Hospital, Western State Hospital

PPEA: Pros Many of the same benefits as design-build PPEA has a certain “cachet” with state regulatory and funding bodies No state approvals of procurement process 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

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

Pitfalls and Lessons Learned PPEA should not be used as a “fishing expedition” PPEA should not proceed unless there is both board and staff buy in Public and other stakeholders must be included in the process Promises of “free money” never materialize PPEA is not right for every project

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