What are public-private partnership (P3) projects?
P3 projects refer to projects that utilize an ongoing relationship between a public entity and a private partner. These projects go well beyond the hiring of private contractors and suppliers, into the world of investing, leasing, and other long term arrangements. Private funding is an attractive option for governments as they can enter into projects without dipping into their own pockets, and for private parties, state and local governments serve as reliable partners on projects that make for secure long term investments. The same laws that require legislation such as the Miller Act and Little Miller Acts prevent the encumbrance of public property, however, and as a result special legislation is often required to empower state and local governments to enter into these agreements.
Unique problems do arise with P3 projects, however. Most relevant to Levelset, these types of projects create serious questions when it comes to filing mechanics liens and bond claims. Since public property cannot be encumbered by mechanics liens, the recourse for unpaid contractors and subcontractors would usually be to file a bond claim. But not all P3 projects require bonds, creating an uninviting grey area for laborers and materialmen. When a private party does have an interest in public property, such as a lease, lien rights may exist but will be limited as to not infringe on the public use of the property.
Despite the above issues, P3 projects have been picking up a lot of steam. Over the last few years President Obama has come out in support of these types of projects through the Build America Investment Initiative. The initiative supports the growth of P3 programs across the country and encourages collaboration between public and private entities through the utilization of Federal Tax Credit Programs. States have been jumping on board too, with Georgia and Washington D.C. recently enacting P3 legislation. In late June, Louisiana Governor John Bel Edwards signed Senate Bill 195 enacting new legislation regarding public-private partnerships and the Department of Transportation and Development in the Bayou State.
Senate Bill 195, now known as Act 519, allows the Louisiana Department of Transportation and Development (DOTD) to solicit and enter into P3 projects for transportation facilities. Under the Act, 25% of these projects undertaken by the DOTD shall be outside the boundaries of metropolitan planning areas. Further, the act stipulates that those 25% of projects will be “subject to approval of the House and Senate committees on agriculture, forestry, aquaculture, and rural development as well as committees on transportation, highways, and public works.” So while the DOTD may solicit these projects, the aforementioned committees will have the final say. Lastly, the Act forbids unsolicited proposals which appears to be a change from Louisiana’s prior policies on unsolicited proposals for P3 projects.
Check out our other resources regarding public-private partnership projects. Don’t miss our other coverage on Louisiana mechanics liens and bond claims or our FAQs on Louisiana lien and bond law.