Public-Private Partnerships in Connecticut
What potential private investors, contractors need to know
By William S. Wilson II
The opportunity and need for the private sector to partner with the government in repairing, maintaining, and developing our state’s infrastructure has never been greater. With the passage of the jobs bill in October 2011 (“An Act Promoting Economic Growth and Job Creation in the State”), Connecticut joined many other states in enacting legislation for public-private partnerships.
What Is a Public-Private Partnership?
A public private partnership, or P3, is a relationship between a private entity and a state agency to design, develop, finance, construct, operate, or maintain a state-owned facility. Essentially, the private partner provides funding to build or upgrade a facility and operate and maintain it at an agreed-upon profit margin throughout the term of the agreement at little or no cost to the state. The state continues to own the facility and gets operational control of it at the end of the agreement.
The P3 law, among other things, authorizes state executive branch agencies, including quasi-public agencies, to enter into P3 agreements with private entities after certain conditions have been satisfied. Up to five P3 projects can be approved through January 1, 2015.
The law contemplates several types of projects, including educational, health, early childcare, transportation systems, and any other project proposed by the legislature. In other states, P3 projects typically have included parking garages, university student housing, ports, stadiums, toll roads, and toll bridges.
Key Provisions in the Law
Some of the provisions of the law governing P3 agreements require a close look by potential investors. For example:
- Each P3 project will be subject to either the state prevailing wage requirements or rates established in a project labor agreement.
- A P3 agreement cannot include non-compete provisions limiting the ability of the state to perform its functions, and it cannot include additional user fees allowed beyond those specified in the P3 contract.
- The state cannot waive sovereign immunity or grant sovereign immunity to a contractor or private entity. This means that the private P3 partner will have to get permission from the State Claims Commissioner to bring any action against the state under the P3 agreement or otherwise.
- The P3 law also subjects agreements to the state’s environmental policy, set-aside laws for small contractors, and state and local permitting and inspection requirements.
- The state has strong remedies if a contractor defaults under a P3 agreement.
P3 agreements extend over a long period of time, up to 50 years under Connecticut’s new law, and must be flexible enough to respond to a changing landscape, including technological advancements. It’s imperative that a P3 agreement clearly define the goals of the project and the roles each party will play to achieve them. Proper collaboration between the public and private entities in a P3 partnership, as well as between the private investor and its team of local professionals: including lawyers, architects, engineers, and construction companies: is essential for the success of any P3 agreement.
Information on potential P3 opportunities should be well-publicized by the state agency proposing the P3 project well before proposals are solicited. The agency will likely establish its own prequalification process, and only those parties prequalified will be able to submit proposals.
Prequalification requires a private proposer to show that it has the financial resources, experience, and capabilities to carry out a P3 project. The proposing agency will use either a competitive bidding or negotiation process similar to the processes that the state has used to handle other state projects. A P3 project should be an opportunity not only for potential investors and developers but also for other service and material providers common to any construction project.
William S. Wilson is a partner in the law firm of Halloran & Sage LLP in Hartford. He can be reached at firstname.lastname@example.org.
Read the provisions of Connecticut’s P3 law here and see sections 80-88.
For information on potential P3 opportunities, call the state Department of Economic and Community Development (DECD) at 860.270.8000.
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