marilyn l rivers, cpcu arm aic director of risk and safety city of saratoga springs, ny tools to...
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Marilyn L Rivers, CPCU ARM AICDirector of Risk and Safety
City of Saratoga Springs, NY
Tools to Successfully Establish Public Private Risk Partnerships
• Develop communication strategies to promote your risk management programming within your community’s activities.
• Identify and cultivate relationships with community leaders to assist in managing your public and private risk partnerships.
• Learn to set and achieve expectations minimizing the risk of community programs through the use of mutually beneficial agreements.
Learning Objectives:
Public <--------------> Private
Business Continuum
Public-Private Partnership (PPP) is a “contractual agreement between a public agency (federal, state or local) and a private sector agency. Through this agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public. In addition to the sharing of resources, each party shares in the risks and rewards potential in the delivery of the service and/or facility.”
National Council for Public-Private Partnerships
PPP (P3’s)
“A public sector consortium composed of a contractor, maintenance company, and bank lenders who form a special company to develop, build, maintain and operate a public asset for a contracted period.”
Wikipedia
Special Purpose Vehicle (SPV)
2013 USDOT FHA: Financial Structuring of Public-Private
Partnerships (P3’s) Simple P3 Financing Structure
Lenders
Facility
Equity Investors
Public Sponsor
Concessionaire (SVP)
Funds to build, maintain and operate
Toll Revenue
Dividends
Equity Investments
Shared RevenueAvailability Payment or Subsidy
Repayments
Bonds, loans
• Healthcare• Housing• Infrastructure• Power• Telecommunications• Transportation systems• Water and Sewer
PPP Examples
• Services in kind• Capital budget subsidies• Grants• Revenue subsidies• Tax breaks
Public Entity Contributions to PPP
• Capital• Expertise• Transfer and sharing of risk• Operational and maintenance• Opportunities for innovation• Managerial expertise
Private Entity Contributions to PPP
2013 USDOT Federal Highway Administration Innovative Program Delivery: Risk Valuation and Allocation for Public-Private Partnerships (P3’s)
Source: Virginia DOT’s PPTA Risk Analysis Guidance, September 2011
Risk Traditional (Design-Bid-Build)
Design-Build Design-Build Finance-Operate-Maintain
Change in Scope Public Public Public
NEPA (National Environmental Policy Act) Approvals Public Public Public
Permits Public Shared Private
Right of Way Public Public Shared
Utilities Public Shared Shared
Design Public Private Private
Ground Conditions Public Public Private
Hazmat Public Public Shared
Construction Private Private Private
Quality Assurance/Quality Control Public Shared Private
Security Public Public Shared
Final Acceptance Public Private Private
O&M Public Public Private
Financing Public Public Private
Force Majeure Public Shared Shared
• What is the public purpose of the PPP?• What is the PPP’s contractual time period?• Who will be responsible for the creation?• How will the PPP be managed?• How will procurement and purchasing be managed?• What are the terms and conditions of the PPP?• How will the ROI be communicated?• Who will be responsible for recurring maintenance?
Rules of Engagement
• Public economic development agencies• Private economic development agencies• Regional and local chambers of commerce• Organized business districts• Commercial entities• Traditional and non-traditional financing
Potential PPP Community Partners
• Community public funding gaps• Taxes…taxes…taxes• Integrity of relationships• Global economic pressures• Continuing costs of maintenance• Cost of money• Weighted Average Cost of Capital (WACC)
PPP Concerns
• Transparency in communication• Good governance in public and private• Anti-corruption initiatives and ethics• Alignment of fiduciary responsibilities• Labor relations and legislative mandates
Governance Goals and Initiatives
What is a mutually beneficial agreement?
• Establishment of legal partnerships• Pre-determined revenue and expense sharing• Delineation of contractual responsibilities• Design-Build-Finance-Operate-Maintain• Payment structure• Indemnification and insurance• Regulatory requirements
Contractual Considerations
• Insurance for project assets• Construction “All Risk” (CAR)• Professional Errors and Omissions• Third Party Liability• Property and Casualty• Workers Compensation & Employer’s Liability• Lenders as Co-Insureds• Reinsurance
Insurance Considerations
• Project size• Identified risks• Allocation of risk to public and private entities• Innovation potential• Cost efficiencies and savings• Quality of product and services• Life cycle costs
Project Scope and Complexity Considerations
• Public-private work groups• Standardized communication• Project milestone presentations• Annual reviews and remediation• Financial review and analysis• Community feedback initiatives
Communication Strategies
• Allocate risk according to your tolerance of risk• Manage public-private relationships• Establish clear incentives, contingencies,
performance requirements and milestones• Participate in the design build process• Remain aware of political pressures• Know the ramifications of the private sector’s risk• Understand reputation risk and public perception
Risk Management in the PPP
P3-SCREEN http://www.fhwa.dot.gov/ipd/p3/toolkit/checklists/index.htm
Yes Public-Private Partnerships (P3) Delivery Options Screening Checklist `
No Project Name ________________________________________ Date________________________________________________
Other Name of Assessor____________________________________ Title of Assessor______________________________________
Evaluation Question Response(drop-down menu)
Comment/Mitigation
Legal
Sponsor Authority Does the project sponsor have legal authority to pursue delivery of the project as a P3? Yes
Planning and Environmental
Long Range PlanningIs the project consistent with the project sponsor's and regional long-term transportation goals?
No
Environmental Review Will the required NEPA decision document be completed within 2 - 3 years? Other
Public Support
Local Support Is there consensus among local and regional stakeholders to pursue the project?
Political Support Is there political support for delivering the project?
Organizational Capacity
Technical Capacity
Does the sponsor have access to sufficient internal and external technical resources to successfully manage all phases of the P3 delivery option (development, procurement, negotiation and long-term contract oversight) in the public interest?
Policy GuidelinesHas the project sponsor established guidelines and regulations for procuring and managing P3 projects?
Project Scope & Complexity
SizeIs the project size and scope suitable for delivery via P3 (generally costing more than $100 million) ?
Risk Have project risks been identified?
Risk AllocationIs there potential to allocate risks to the party more capable of managing those risks by delivering the project as a P3?
InnovationIs there potential to derive benefits from technological or other types of innovation through private sector delivery of the project?
Efficiency Is there potential to achieve cost/schedule savings by delivering the project as a P3?
Quality Is there potential for higher quality product/service delivery with a P3?
Life-Cycle Costs Have the life-cycle costs of the proposed project been determined?
Affordability
Near and Long Term Financial Capacity
Does the project sponsor have the financial capacity to meet the project’s lifecycle costs using conventional public funding and financing sources?
Revenue PotentialDoes the project have the revenue generation potential to repay any or all of the project costs?
Industry Interest
Industry Capacity Do three or more private sector firms have the capability to deliver the project as a P3?
Industry InterestHave three or more private entities demonstrated interest in the project to suggest the opportunity exists for a competitive process?
Other
Land Acquisition (example) Are land acquisition issues likely to threaten the project?
Conclusion
Criteria
Summary Analysis:
Sustainable solutions?
1. Appoint a Public Sector Champion2. Establish a Statutory Environment3. Dedicate a Public Sector Organized Structure4. Execute a Detailed Business Plan5. Clearly Define Revenue Streams6. Engage Stakeholder Support7. Pick Your Partner Carefully
Keys to Successfully Managing PPP’sDeveloped by the National Council for Public-Private Partnerships
“Testing Tradition: Assessing the Added Value of Public-Private Partnerships”
• World Health Organization (WHO) financed by the United Nations
• US Food and Drug Administration White Oak Campus ( www1.eere.energy.gov/femp/financing/superespcs_fda.html)
• Chicago O’Hare International Airport Consolidated Joint Use Facility Project http://www.fhwa.dot.gov/ipd/project_profiles/il_ohare.htm
• Presidio Parkway, San Francisco, CA (www.presidioparkway.org)
PPP Examples
Questions?
“Testing Tradition: Assessing the Added Value of Public-Private Partnerships,” The National Council for Public-Private Partnerships, 2012, [email protected], www.ncpp.org(http://www.ncppp.org/wp-content/uploads/2013/03/WhitePaper2012-FinalWeb.pdf )
“The Hamilton Project: Public-Private Partnerships to Revamp U.S. Infrastructure,” Eduardo Engel, Ronald Fischer, and Alexander Galetovic, February 2011, (http://cowles.econ.yale.edu/~engel/pubs/efg_revamp.pdf)
“Public-Private-Partnerships: Risks to the Public and the Private Sector,” Najja Bracey, Sonia Moldovan, and The Louis Berger Group, Inc., 6th Global Conference on Business and Economics, Boston, MA, (http://www.louisberger.com/Insights/~/media/Files/LBG/PDF/Insights/ppps_conference_10-9-06.pdf )
FEMA, “Public-Private Partnerships: Building Better Resiliency – Together,” (http://www.fema.gov/public-private-partnerships-1)
US Department of Transportation Federal Highway Administration, “Public Private Partnerships”(http://www.fhwa.dot.gov/ipd/p3/index.htm)
Public-Private Partnerships: “In the Public Interest: A Comprehensive Resource Center on Privatization and Responsible Contracting,” (http://www.inthepublicinterest.org/node/576)
“PPP In Infrastructure Resource Center,” The World Bank, (http://ppp.worldbank.org/public-private-partnership/)
Reference and Resource Documents
