Texas Public and Private Facilities and Infrastructure Act of 2011

1. Texas Public and Private Facilities and Infrastructure Act of 2011 Texas Water Development BoardChristopher D. LloydAugust 11, 2011

2. Presentation Overview • Why a new procurement tool? • About the PPP law • Project development process • Challenges and opportunities • Project examples

3. Why A New Procurement Tool? • Creates a consistent, repeatable, predictable process for alternative project delivery • Ensures transparency and accountability to the public • Increases competition and value delivery • Signals legislative support for the process • Checks and balances to reduce project delivery problems • Spur innovation and creative project approaches

4. Texas PPP: Dispelling the Myths • Not a panacea • Not free money • Not a finance tool • Not secret negotiations • Not privatization

5. Texas PPP - Qualified Projects • State and local governments, political subdivisions and authorities, and higher education can use • Water supply facility, public work, water treatment facility, or other similar facility currently available or to be made available to a governmental entity for public use • Excludes transportation or IT/communications facilities

6. Texas PPP – Getting Started • No public body can solicit proposals or accept unsolicited proposals until guidelines are adopted • Guidelines outline what goes into a proposal and how they are reviewed/ranked • Accelerated review allowed for priority projects • Create oversight panel to review proposals • Establish process for hiring of outside advisors • Sets standards regarding small/minority business participation

7. Texas PPP: 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

8. Texas PPP: Process • Affected local jurisdictions review and comment on proposals (60 days) • 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

9. Texas PPP – Interim Agreements • Allows for team selection without project commitment • Permits continuation of project design, survey, environmental review and permitting, and funding ahead of construction • Reduces cost risks by shrinking contingencies and answering unknowns • Cost sharing between public and private entites

10. Texas PPP – Comprehensive Agreements • Final contract for project development • Guaranteed Maximum Price/Guaranteed Schedule • Assigns risks and oversight responsibilities • Sets fees, rates of return, and outlines any revenue sharing • Establishes damages for failures to comply • Existing laws regarding payment and performance bonds are preserved • Often paired with EJCDC/DBIA general/supplemental conditions contracts

11. Texas PPP – Stakeholder Involvement • Copies of guidelines are public documents • Copies of solicitations are public documents • Copies of proposals received are public documents • Oversight panel meetings are public • Public hearing on the project must be held prior to contract execution • Negotiated, but not executed, contract must be made public for 30 days

12. Texas PPP: Pros • Many of the same benefits as design-build • Provides opportunities for creative and innovative approaches to addressing infrastructure needs • Public entity retains right to reject, modify, expand, or amend proposals at any time • Project costs can be covered by proposers • Staff augmentation and single point responsibility • Complements existing funding programs to speed project delivery

13. Texas PPP: 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 • Currently not an authorized procurement vehicle for USDA funding programs

14. Mitigating PPP Risks • Use of strong outside advisors with PPP experience • Two step solicitation process • Establishing clear goals, particularly related to price • Elected officials and staff should be “on the same page” • Use of interim agreement process • Circulate proposed comprehensive agreement at detailed review phase • Prepare contingency budgets and plans that share risk and rewards

15. Texas PPP: 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”

16. Texas PPP: 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

17. PPP 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

18. PPP Implementation What Makes Projects Go Badly • 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

19. Advantages of PPP – Practical Examples • Prince William Service Authority – avoided bad experiences with low bid contractors, use of outside experts to guide process • Hampton Roads Sanitation District – tap world class expertise for one-time, bet the organization project • City of Fredericksburg – outsource stakeholder management and project risks • Bedford County PSA – include developer financial contributions

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