The Public Private Education Facilities and Infrastructure Act of
2002
Construction Owners Association of America, Inc. – Virginia ChapterSpring Seminar
Chris LloydMcGuireWoods Consulting
March 24, 2004
Presentation Overview
• History of the PPEA• PPEA Overview and Process• Financing and Deal
Structures• Virginia Experience –
Examples• Pitfalls and Opportunities• What’s new
• VMS - Contract for maintenance of 25% of Virginia’s interstate lane miles
• Interstate 895 - $325 million, connecting suburbs to Richmond International Airport
• Route 288 - $236 million, 17.5 mile beltway around Richmond, support Capital One expansion
• Route 28 - new interchanges on access road serving Dulles International Airport
• Coalfields Expressway - new road for SW Virginia, leverages dedicated federal funds
• Interstate 81 – tolls and federal funds
PPTA Success Stories
What are the components of a successful proposal?
• Delivers something citizens want• Private sector shares in the risk• Minimizes impact on state/local debt
model• Faster, better, and cheaper• Broad political support• Open and inclusive process that
keeps the public informed• Strong partnership between staff and
elected body
Public-Private Education Facilities and Infrastructure Act of 2002
What is it?- An alternative procurement tool that allows public entities to more efficiently develop infrastructure and achieve better value for the taxpayer
What it is NOT?- A panacea that resolves all procurement issues- A way to get something for nothing- A way to steal ideas from the private sector
Public-Private Education Facilities and Infrastructure Act of 2002
• Allows for solicited and unsolicited proposals to acquire, design, construct, improve, renovate, expand, equip, maintain, or operate a qualifying project
• A qualifying project is:– education facility (public school and higher
ed)– “any building or facility for principal use by a
public entity”– equipment to enhance public safety and
security at public buildings– utility and telecommunications infrastructure– recreational facilities – Technology infrastructure
Public-Private Education Facilities and Infrastructure Act of 2002 - provisions
• Public body must also determine that the project “serves the public purpose” by demonstrating:– Public need– Cost is reasonable in relation to similar
facilities– Will result in timely delivery of the
project
• Public body may charge a reasonable fee to cover processing costs including fees for attorneys and financial and other advisors
Public-Private Education Facilities and Infrastructure Act of 2002 - process
• Public body adopts PPEA guidelines• Private entity submits proposal to public
body • Public body makes a written
determination whether the project is developed using competitive bid or competitive negotiation
• Competitive negotiation can proceed if the public body determines that this method is “likely to be advantageous” because of the “probable scope, complexity or urgency of the project” or “risk sharing, added value, an increase in funding or economic benefit from the project that would not otherwise be available”
Public-Private Education Facilities and Infrastructure Act of 2002 - process
Structures• Design-build• Design-build-O&M• Build-own-operate• Build-own-revert• Sale-leaseback• Lease-purchase• Long-term O&M
contracts• Various
development agreements
Funding/Value• Traditional government
sources (GF/NGF)• User fees• Service contracts• Lease payments• Commercial revenues• Private activity bonds• Depreciation and other
tax credits for private entities
• Leverage funding streams
Public-Private Education Facilities and Infrastructure Act of 2002 - funding
Potential deal structure• Team offers “turn-key” project delivery• Contractor willing to assume project
delivery risk• Life-cycle maintenance is included• Other revenue-generating activities are
suggested• Team members provide free services that
benefit government entity even if project does not proceed
• Achieves cost savings through design-build and financing
• Financing vehicles use solely local funds or 63(20) structure
Public-Private Education Facilities and Infrastructure Act of 2002 - funding
What is happening across Virginia?• Education facilities in Falls Church,
Fredericksburg, Chesterfield and Stafford County (2) - agreements signed
• Pending school proposals in Manassas Park, Warren County, and City of Winchester
• Longwood University dorm facilities• Public safety facilities in Roanoke,
Stafford, and Frederick Counties (others in the works)
• Capitol Square redevelopment• Prison construction program• Downtown Fredericksburg parking deck
Public-Private Education Facilities and Infrastructure Act of 2002 - implementation
Roanoke County Public Safety Project• Northrop Grumman first in door, leads 3 day ‘visioning’
session with county staff• NGMS presents white paper to county administrator,
includes 30% design – all at no cost to the locality• Plan includes building and equipment, routine
technology refresh, lease structure• Roanoke County accepts white paper as an unsolicited
proposal (June 29, 2003), advertises for 75 days• Two competing proposals were filed by September 15• Staff recommends that only 2 of the 3 proposals move
forward, board wants additional information on all three (October 28, 2003)
• County issues RFP for design review (December 2003)• PR effort to county citizens begins (February 2004)
Public-Private Education Facilities and Infrastructure Act of 2002 - implementation
Stafford School Construction Project• County issues a solicitation for 3 new schools
on county owned land, some design has been completed, includes a wish list (February 11, 2003)
• 7 firms respond in 30 days, narrowed to 2 in one week
• Detailed proposals were requested with one month turnaround
• Each team had revenue generating opportunities
• Haskell team is selected, derives revenue from sale of land for senior living center, joint uses of facilities, exchange of developer proffers
• Comprehensive agreement signed July 1, 2003 • County will finance using VPSA bonds
Public-Private Education Facilities and Infrastructure Act of 2002 - implementation
Who are the major players?• Haskell Company• Donley’s• Northrop Grumman Mission Systems• Centex Construction• Clark Construction• English Construction• Moseley Architects• Morgan Keegan• Eastridge Development• HSMM• Ricketts Construction• Kahn Construction• Trammell Crow
Public-Private Education Facilities and Infrastructure Act of 2002 - implementation
Trends - How Are Local Governments Reacting?
• Implementation of PPEA guidelines becoming more widespread
• “Smart” firms are actively looking for good projects
• “Smart” local governments are seeking maximum leverage
• Deals are closing quickly• Public input is sometimes lacking• Creative financing has not been
embraced• Board vs. staff debates
Public-Private Education Facilities and Infrastructure Act of 2002 - implementation
Potential pitfalls• Too much work goes to out-of-state
companies or large conglomerates• Cost savings are hard to define• Process seems rushed, appearance of inside
deals• Debt capacity is compromised• Voters feel left out of the process• Non-performance by a contractor (picked the
wrong team)• Board vs. staff debates cause long term
problems
Public-Private Education Facilities and Infrastructure Act of 2002 - implementation
Anticipated growth areas• Water and wastewater • Public safety• Colleges and universities with
small/unsophisticated endowments• Courthouses and other local
government buildings• Local/regional jails• Technology procurement• Performance contracting/energy
conservation• Parking structures
Public-Private Education Facilities and Infrastructure Act of 2002 - implementation
What’s New?
• Technology infrastructure added in 2003 session
• AGC opposition continues (2003/2004 amendments)– Requires payment, performance and
maintenance bonds for construction aspects of a project
– Requires a local government to hire outside help or affirmatively rule that such services will be provided in-house