Public-private partnerships (P3s) have been gaining increased favor in the U.S. as a way for the public sector to harness the expertise and efficiencies of the private sector in meeting the infrastructure and social needs of local and state governments. Although P3s have been used for many years for the building of “toll” roads and bridges, they are now gaining popularity for building and repairing a wide array of infrastructures including: water systems; sewer systems; buses running on natural gas, light rail systems, and other transportation; courthouses; jails; affordable living accommodations, mixed use development of retail and housing on government-owned land, dormitories and housing for universities. P3s have been successfully used in Canada and Europe to build all of the above and more, including hospitals, for many years.

Although there is promise for this type of P3 use in the U.S., there are still many barriers and challenges to overcome. This type of creative financing between entities that do not typically partner (i.e., the public and private sectors) presents unique and challenging issues for in-house counsel trying to protect their companies while not killing the deals. Based on our experience counseling clients in these matters, the following is an overview of issues and considerations that in-house counsel should keep in mind when approaching P3 projects.

Structuring the Projects

One of the biggest challenges facing P3 projects in the U.S. is that no two P3 projects or deals are the same. Experts in the industry often joke that “if you have seen one P3 project, you have seen one P3 project.” Thus, formulaic or cookie-cutter approaches do not work. Although many states have shown interest in developing P3 legislation to help address infrastructure needs, currently there are no federal guidelines and only a small number of state statutes addressing P3 projects. Without such guidance, the learning curve for practitioners is very steep when approaching these opportunities.

Structuring a P3 deal is more complex than traditional projects because of the myriad stakeholders, from various departments and staff members within governmental entities, private developers, architects, engineers and firms providing financing, to attorneys representing many of the parties involved in the P3 projects. In-house counsel can play an integral role in making sure the project has all of the appropriate team members needed to get the project started, and to provide the framework and guidance necessary to keep the project on course and moving forward.

RFPs

The first task to be undertaken in the P3 process is the Requests for Proposals (RFP) and Requests for Information issued by the public entities. These set forth the terms and standards of the projects they want to have developed. RFPs and similar processes are the selection tools that public entities use to determine which entities or teams will be awarded the projects. While the responses to these solicitations are typically demanding and voluminous, they are especially daunting in the P3 process due to the “partnership” aspects of the proposed projects. The in-house counsel for the private entity team plays an important role in navigating this selection process.