With the support of Governor Daniels, the state of Indiana passed P3 enabling legislation in 2006. This law permitted private sector firms to participate in the financing, design, construction, operations, and maintenance of roadway facilities on a long-term basis. It also permitted the state to lease existing facilities to private firms, receiving an upfront fee and a commitment of long-term roadway upkeep in exchange for the private firm's right to retain toll revenue collected on the roadway. That same year the state leased the 157-mile Indiana Toll Road to a private investor/operator in exchange for a concession fee of $3.8 billion. Building off of the momentum of this P3 transaction, the state conducted an extensive review of the costs of delivering the East End Crossing project using a P3 compared to traditional methods. It applied available cost estimates and assumptions on funding from state and federal sources, as well as potential revenue from tolling the bridge.
Indiana's P3 enabling legislation required that any potential P3 project be approved by the state legislature and that an analysis of the project's economic impacts be completed before the state could advance the project into procurement. In March 2010 the state legislature passed legislation authorizing the possible use of a P3 procurement on the East End Crossing.
In 2011 the bi-state authority identified two options for implementing the Ohio River Bridges. One was to use a fixed-price contract for the design and construction of the bridges (a "design-build" contract) with funding coming from tax-exempt bonds backed by toll revenue, with a separate contract awarded to an operator for toll collection on the bridges. The second option was a P3 concession model where a private developer would design, build, finance, operate and maintain the bridge for a fixed period in exchange for a combination of milestone construction payments and availability payments over the life of the concession. Availability payments are made to the developer contingent upon meeting certain roadway performance criteria related to "availability" to traffic and its condition.
In late December 2011, the governors and bi-state authority announced that the states had reached an agreement on their preferred delivery methods, with Kentucky pursuing the toll-backed design-build option, and Indiana pursuing the availability-payment P3 concession. In March 2012, the Governors signed a Memorandum of Understanding (MoU) detailing the responsibilities of each state in developing and financing their respective projects. The MoU also stipulated the degree of technical review the two states would have on one another's projects, while limiting the risk of additional interference.
Indiana was attracted to the availability-payment P3 approach because of the opportunities to transfer project risks that the state would normally bear to a private partner. These project risks include construction risk (cost overrun and meeting schedule). The state also would benefit from budgetary certainty during the operations and maintenance phase of the project as a result of the upper limit of the availability payment. The private partner would be held to specified performance standards for operations and maintenance by the availability payment mechanism. The only project risk retained by the state would be achieving expected toll revenues from forecasted traffic levels.