Morris Manning & Martin, LLP

Georgia Passes Expansive Public-Private Partnership (P3) Legislation

04.09.2015

On April 2, 2015, the Georgia General Assembly joined a growing number of states in passing expansive public-private partnership (or P3) legislation for all forms of P3s.  The new P3 legislation allows the State of Georgia and its agencies, and any local government and authority, to partner with the private sector to develop, finance, lease, construct, operate and/or maintain qualifying projects. 

The legislation sets forth the requirements for adoption of P3 guidelines and comprehensive agreements, and authorizes the receipt of both solicited and unsolicited proposals for projects.  The types of projects that are eligible to be developed under the new P3 legislation is extensive, and could include transportation projects (e.g., roads, bridges, highways, rails, ports and aviation facilities), water and wastewater facilities, stormwater projects, solid waste facilities, and social infrastructure projects (e.g., courthouses, schools, prisons, civic and convention centers, and public housing), among others.                

The P3 process established in the new legislation is slightly different for projects on the state level, as compared to projects on the local level.  The following first summaries the legislation as it applies to local governments and authorities.  It then provides a brief summary of some of the notable differences in the legislation as it applies to state public entities.  

Which public entities are eligible to use the new legislation for P3 projects?

The new P3 legislation broadly encompasses all public bodies, including:

  • Any state department, agency, board, bureau, commission, authority or instrumentality of the State of Georgia, including the Board of Regents of the University System of Georgia; and
  • Any county, municipality, consolidated government or board of education, and any local authority created under Georgia law (e.g., water or sewerage authority).

What is a “Qualifying Project”?

The legislation broadly defines “qualifying project as any project “meeting a public purpose or public need,” which is either selected in response to a request from a local government or submitted by a private entity as an unsolicited proposal and reviewed and approved by the local government.  The term “qualifying project” expressly excludes any project involving (i) the generation of electric energy for sale; (ii) communications services; (iii) cable and video services; or (iv) water reservoir projects.  

Guidelines for Unsolicited Proposals Received by Local Governments

  • Model Guidelines Committee

As part of the P3 legislation, a new committee called the “Partnership for Public Facilities and Infrastructure Act Guidelines Committee” (the “Guidelines Committee”) will be established to prepare recommended model guidelines for local governments interested in receiving unsolicited proposals for projects from the private sector.  The Guidelines Committee will be composed of 10 people, including:

  • 4 members appointed by the Governor, in each of the following areas:
    • County governing authority;
    • Municipal governing authority;
    • Local board of education; and
    • Licensed member of the State Bar of Georgia with expertise in representing local government in public works construction.

 

  • 3 members appointed by the Speaker of the Georgia House of Representatives, in each of the following areas (provided that one of the appointees has expertise in working with local government):
    • Construction management employed by a firm with less than $25 million in annual revenue;
    • Licensed architect; and
    • Real estate development.

 

  • 3 members appointed by the Lieutenant Governor, in each of the following areas (provided that one of the appointees has expertise in working with local government):
    • Construction management employed by a firm with more than $25 million in annual revenue;
    • Licensed professional engineer; and
    • Member of business community with expertise in finance.

Appointments to the Guidelines Committee will be made on or before August 1, 2015 and the term of each appointment will be for two years.  Committee members will meet at least monthly and will issue model guidelines by July 1, 2016.  Thereafter, the Guidelines Committee will update the model guidelines every two years.

  • Adoption of P3 Guidelines

Prior to executing a comprehensive agreement for development or operation of a qualifying project pursuant to an unsolicited proposal, the local government is obligated to adopt either (i) the model P3 guidelines prepared by the Guidelines Committee; or (ii) its own guidelines prepared by such local government.  

If a local government decides to prepare its own P3 guidelines, such guidelines will need to address a number of provisions, including (a) the period of time each calendar year when the local government will consider receiving, processing, reviewing or evaluating unsolicited proposals for qualifying projects; (b) procedures for the financial review and analysis of an unsolicited proposal; (c) criteria for determining fees to be paid by the proposer to process, review, and evaluate an unsolicited proposal; (d) requirement for the issuance of a request for proposals (or RFP) upon a decision by the local government to proceed with a qualifying project; (e) procedures for posting and publishing notice of the opportunity to offer competing proposals; (f) procedures for posting and publishing notice of the opportunity to offer competing proposals; (g) procedures and timing to process, review and consider competing proposals (which shall not be less than 90 days); (h) procedures for determining whether information included in an unsolicited proposal should be released as part of any RFP to ensure fair competition; and (i) procedures for identifying and appointing an independent owner advisor to the local government to assist in evaluating an unsolicited proposal and to serve as owner adviser (although the engagement of such advisor by the local government is discretionary).

Submission of Unsolicited Proposals by a Private Entity for a Proposed Project

Once a local government affirms its participation in the P3 process established by the new legislation by adopting a rule, regulation or ordinance, a private entity may submit an unsolicited proposal for a proposed project to such local government for review and determination as a qualifying project.  The unsolicited proposal prepared by the private entity is to include the following information:  

  • Project description, including location of the project, the conceptual design of such facility or facilities, and a conceptual plan for the provision of services or technology infrastructure;
  • Feasibility statement, including method used to secure any necessary property interests required for the project, a list of all permits and approvals, and a list of public utility facilities that will be crossed by the project and plan to accommodate such crossings;
  • Schedule for the initiation and completion of the project, including proposed major responsibilities and timeline for activities to be performed by both the local government and private entity;
  • Financial plan providing the private entity’s general plans for financing the project, including:
    • Sources of the private entity’s funds and identification of any dedicated revenue source or proposed debt or equity investment;
    • Description of user fees, lease payments and other service payments payable over the term of the comprehensive agreement; and
    • Methodology and circumstances for changes to such user fees, lease payments and other service payments over time.
  • Business case statement that includes a basic description of any direct and indirect benefits that the private entity can provide in delivering the project.

The local government may charge and retain a reasonable fee to cover its costs of processing, reviewing and evaluating the unsolicited proposal, including reasonable attorney’s fees and fees for financial, technical and other necessary advisers or consultants.           

Approval as a Qualifying Project; Procurement and Negotiation of a Comprehensive Agreement

Following the local government’s receipt and review of an unsolicited proposal from a private entity, the local government may approve the project as a “qualifying project.”  The local government’s determination of a qualifying project does not bind the local government or the private entity to proceed with the qualifying project.

If approved as a qualifying project, the local government shall: (i) seek competing proposals for the qualifying project by issuing a request for proposals for a period of not less than 90 days; and (ii) review all submitted proposals based on the criteria established in such request for proposals.

Once the time to receive proposals expires, the local government is to rank the proposals (i.e., the initial unsolicited proposal and subsequent proposals submitted in response to the subject RFP) in accordance with the factors set forth in the request for proposals or invitation for bids.  The local government is not obligated to select the lowest price offer, but may consider price as one of the factor in evaluating the proposals. 

After ranking the proposals, the local government is to begin negotiations with the first ranked private entity.  If a comprehensive or interim agreement cannot be reached with the first ranked bidder, the local government may conduct negotiations with the next ranked private entity.[1]  This process continues until the local government voluntarily abandons the process or executes a comprehensive or interim agreement with a private entity. 

Termination of the P3 Procurement

At any time during the procurement (i.e., before full execution of a comprehensive agreement), the local government may, without liability to any private entity or third party, cancel its request for proposals or reject all proposals received in response to its request for proposals, including the unsolicited proposal, for any reason whatsoever. 

Comprehensive Agreement

The P3 legislation requires certain matters to be addressed in a comprehensive agreement, which documents the terms and conditions of the P3 arrangement between the local government and the private entity.  Such matters include: (i) a thorough description of the duties of each party in the completion and operation of the qualifying project; (ii) dates and schedules for completion of the qualifying project; (iii) establishment of fees and payments; (iv) any reimbursement to be paid to the local government for services provided by the local government; (v) a process for the review and approval of plans and specifications for the qualifying project by the local government, and periodic and final inspection; and (vi) delivery of performance and payment bonds and other security, among other matters.  Further, the comprehensive agreement will need to address the rights and responsibilities of the local government and the private entity if the comprehensive agreement is terminated or there is a material default by the private entity, including the assumption by the local government of the duties and responsibilities of the private entity and the transfer or purchase of property or other interests of the private entity by the local government.

Sovereign Immunity; Eminent Domain

The legislation provides that sovereign or official immunity is not waived by any public entity or local government, or any officer or employee thereof, with respect to the P3 project, including interconnection of the qualifying project with any other infrastructure or project.  The power of eminent domain cannot be deleted to any private entity with respect to any project commenced or proposed under the new legislation.

Interplay between new P3 legislation and existing laws

The power and authority granted to public entities under the new P3 legislation is in addition and supplemental to (and not in substitution for) the powers conferred by any other general, special or local law.  The limitations imposed by the new legislation will not affect the powers conferred by any other law and will only apply to the extent a public entity elects to proceed under the new legislation. Further, public entities that proceed with a procurement pursuant to competitive sealed bidding or any other purchasing options available under current law are not required to comply with the new legislation.  

P3 Process for State Public Entities

As noted above, while the process under the new P3 legislation is similar for projects submitted to local governments and state public entities, there are some important distinctions.  The following summaries a few of the notable differences: 

  • Responsible Public Entity; P3 Guidelines

For any unsolicited proposal involving a project for:

  • One or more state government entities (other than an institution of the University System of Georgia), the responsible public entity is the State Properties Commission and the P3 guidelines will be developed by the State Financing and Investment Commission; and
  • An institution of the University System of Georgia, the responsible public entity is the Board of Regents of the University System of Georgia (or its designees), which shall also develop guidelines for the P3 process.
  • Timing of Submission of Unsolicited Proposals for State Public Entities; Reimbursement of Costs

A private entity may submit an unsolicited proposal for a project to the State Properties Commission or the Board of Regents of the University System of Georgia, as applicable, only between May 1 and June 30 of each year

For unsolicited proposals submitted to state public entities, the private entity is obligated to reimburse the responsible public entity for the actual costs incurred to process, review, and evaluate the unsolicited proposal, including reasonable attorneys’ fees and fees for financial, technical and other necessary advisers or consultants. (Note that in the case of an unsolicited proposal submitted to a local government, the private entity’s obligation to reimburse the local government’s processing, review and evaluation costs is discretionary by the local government).

In addition to submitting the unsolicited proposal to the responsible state public entity, the private entity will need to submit its unsolicited proposal to each “affected local jurisdiction,” which is defined as any county, municipality, or school district in which all or a portion of a qualifying project is located.   Each affected local jurisdiction has 45 days after receiving such notice to submit any comments regarding the unsolicited proposal and indicate whether the project is compatible with local plans and budgets. 

  • State Credit Pledge or Loan

The legislation prohibits the state’s credit from being pledged or loaned to any private entity, and the responsible public entity cannot loan money to the private entity to finance all or a portion of the qualifying project.  

  • Multiyear Lease

Any multiyear lease entered into by the state as lessee which is not terminable at the end of each fiscal year during the term of the lease is required to comply with Ga. Code Ann. § 50-16-41, including compliance with any multiyear contract value authority adopted by the Georgia State Financing and Investment Commission for each fiscal year. 

Effectiveness

The new P3 legislation becomes effective upon its approval by the Governor or on May 12, 2015 without such approval.

About MMM’s Infrastructure and P3 Team

Morris, Manning & Martin, LLP’s (“MMM”) Infrastructure and P3 team regularly advises clients on a variety of infrastructure and public-private partnership (P3) projects.  For over 30 years, our attorneys have been involved on more than 100 P3 projects throughout the country.  Our team has significant experience representing public and private sector clients on P3 projects in a variety of sectors, including solid waste (e.g., landfills, resource recovery/waste-to-energy, recycling facilities, etc.), waterwastewater and stormwater projectsrenewable energy, and social infrastructure projects(e.g., redevelopment projects, civic centers, sports facilities, schools, etc.). 

If you have any questions concerning this Legal Alert, please contact any of the attorneys listed to the left or the MMM attorney with whom you regularly work.

 


 

[1] The term “interim agreement” is not defined in the new P3 legislation, and it remains unclear the scope of such agreement and how it differs from a “comprehensive agreement.”  In other states, such as Virginia, interim agreements are described as an agreement which “(i) permit the private entity to commence activities for which it may be compensated relating to the proposed qualifying project, including, but not limited to, project planning and development, design and engineering, environmental analysis and mitigation, survey, and ascertaining the availability of financing for the proposed facility or facilities; (ii) establish the process and timing of the negotiation of the comprehensive agreement; and (iii) contain any other provisions related to any aspect of the development or operation of a qualifying project that the parties may deem appropriate.” (See Va. Code Ann. § 56-575.9:1).