A number of legal issues should be addressed by enabling state and/or local legislation when developing the capability to use PPPs for transportation projects. These are summarized in Exhibit 20.
Exhibit 20 - Statutory-Based Legal Issues Associated with Transportation PPPs
| • Legal capacity of parties and legal requirement of sponsor to provide services • Ability of private firms to be more involved in infrastructure development and control, including the nature and extent of participation by foreign firms • Existence and legal basis of cost recovery and tolling (if applicable) • Authority to regulate toll rates, exemptions to tolling, and services • Dispute resolution and liability provisions • Competition and anti-trust regulations • Avoiding conflicts of interest among private and public parties to a PPP • Special provisions associated with use of Federal funds - Davis-Bacon, Buy-America, Section 13(c) of the Federal Transit Act, etc. • Public sector borrowing restrictions/debt limitations • Tax and accounting liabilities • Adequacy of procurement and selection procedures • Contract provisions and surety requirements • Property and intelligent property laws protecting proprietary technologies and know-how • Authority of other government entities over infrastructure assets and access rights • Property issues of land acquisition - condemnation, use, and disposal |
Given the many legal considerations associated with PPPs, it is suggested that PPP-authorizing statutes should allow transportation agencies the following capabilities:
• Bundle a wide range of services from pre-development through long-term operations;
• Allow various project delivery systems, including DB, DBOM, DBFO and concessions;
• Use qualifications-based procurement, such as two-stage "best value" procurements;
• Apply selection criteria that result in the choice of the best developer able to provide the greatest value to the project sponsor;
• Use alternative forms of financial security; and
• Negotiations with private partners during early planning stages of project development.
Those legal issues most likely to be addressed during the contract negotiation process are summarized in Exhibit 21.
Exhibit 21 - Negotiation-Based Legal Provisions of Transportation PPP Contracts
| • Administrative coordination • Adequacy of oversight and monitoring procedures • Ability and restrictions over transfer of private sector contract duties to other parties • Contract re-negotiation, re-financing, hand-back provisions, and assignment of rights • Provisions regarding the ability of the public sector or other parties to build or expand competing facilities • Treatment of "windfall" profits due to traffic growth or congestion pricing • Public control or limitations on private refinancing of project debt • Currency and profit repatriation rules • Authority over advertising or facility branding rights and treatment of proceeds • Ability to provide guarantees • Changes in design standards or construction specifications during development • Shifts in public policy towards PPPs or technology changes that impact project viability |
Among the legal issues listed in the two exhibits above, those listed in Exhibit 22 deserve particular attention given their potential influence over the viability of a PPP approach for a particular project from both the public sponsor and private provider perspectives.
Exhibit 22 - Key Legal Considerations in Developing Surface Transportation PPPs
| • Procurement methodologies - Acceptance of solicited or unsolicited proposals - Selection criteria, such as traditional low-bid or best value • Surety bonding requirements - Level of bonding requirements - Application of financial security requirements to some or all private partners - Application of surety bond requirements to more than construction-related functions included in the PPP contract • Flexibility in project delivery process - Level of responsibility and risk that the private partner can assume - Opportunity to apply innovative alternative approaches that provide comparable or better performance more cost-effectively - Breadth of functions that can be performed by the private partner, beyond design, construction, and construction management and inspection - Ability for private partners to share in the project's revenue stream or value capture commensurate with their level of responsibility, risk, and investment • Applicability of federal statutory and regulatory requirements - Labor protection (Davis-Bacon Act6/Section 13(c) of the Federal Transit Act 7) - Buy America Act 8 restrictions on buying materials from firms outside the U.S. - Environmental clearance and permitting requirements - Flexibility allowed by FHWA's SEP-15 Program and FTA's PPP Pilot Program |