Public-private partnership (“P3”) projects are gaining steam nationwide. With the state of America’s infrastructure, it’s no surprise that governments are looking for new and innovative ways to address the problem. In fact, it seems to be one of the issues lawmakers on both sides of the aisle can agree on. However, it is important to provide oversight when agreements between public and private industry are struck. Recently, Oklahoma passed legislation to do just that- Senate Bill No. 430 (“SB 430”) was signed into law to provide structure for assessing and awarding Oklahoma P3 projects relating to infrastructure. SB 430 goes into effect on November 1, 2017.
For background on P3 Projects and insight into some of their benefits and drawbacks, check out this article: P3 projects: What if you have payment problems?
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Oklahoma P3 Projects and Infrastructure
P3 projects are often associated with infrastructure. The two are a natural fit, and many states are embracing the pairing or at least assessing the opportunities they present. The process for identifying, requesting, analyzing and approving Oklahoma P3 projects will go through several different groups and committees, but the process is pretty simple.
Partnership Committee and the Office of Public-Private Partnerships
The Partnership Committee, along with assistance of the Office of Public-Private Partnerships (“P3 Office”), has the ability to identify potential P3 projects. When such a project is identified, the committee will have the authority to review and endorses a “short list” of bidders, approve requests for proposals, and approve contract templates. The Partnership Committee will not have the authority to enter into contracts or block them.
Proposals for Oklahoma P3 projects may be submitted to the Partnership Committee by proposers or responsible state agencies. The Partnership Committee will then identify potential projects where the P3 format may be appropriate. Projects will be selected based on the partnership’s potential to improve efficiencies, ability to improve environmental performance, to promote public safety, and to attract private investment and minimize governmental liabilities.
Comparing and Analyzing Use of P3
After a potential partnership is identified, it will be subject to a public-sector study to determine if using the P3 structure is appropriate. This analysis will be based on:
- The need served by the partnership
- The cost of traditional methods of procurement
- An analysis of the alternative P3 method
- Weighing the costs and benefits of using the alternative P3 method
Notice of Intent
If P3 is deemed appropriate, the P3 Office will publish a notice of intent to enter into a public-private partnership. The P3 Office will also prepare a “request for qualifications” for potential partners. Following the request, potential partners will have 60 days to submit their qualifications.
The Partnership Committee will evaluate qualifications and continue discussions with bidders to determine which bids are the best fit for the partnership. The committee will then offer a limited number of invitations to submit a proposal based on bidders’ qualifications.
Analyzing Proposals, Negotiations
After an evaluation of proposals, including further discussions with those proposing projects, no fewer than three proposals will be selected as qualified and then ranked.
Negotiations shall begin with the most qualified proposal. If those negotiations are not fruitful, written notice will be given to the proposer and the next ranked proposer will be engaged in negotiations. This process will be continued until a deal has been struck. In the event that no deal is struck, the process may be opened up to more proposals or terminated altogether. In any event, the proposals will remain the intellectual property of the proposer.
Tax Effects of the Partnership
Generally, Oklahoma P3 projects will be taxed in the same manner as traditional public projects. When the project is owned by the state, the gross receipts and income of a successful proposer derived from a project will be exempt from taxation levied by the state and its subdivisions. Also, transfers between the proposer and the state will be exempt from taxes if the state retains ownership.
Who knew government infrastructure-based partnerships could be so much fun??
In all seriousness, the process for procuring Oklahoma P3 projects is pretty dry, but it is incredibly important for that process to be rigid and transparent. Legislation such as SB 430 is important to ward off foul play. It’s no fluke that P3 Projects have the support of Barack Obama, Donald Trump, and Hillary Clinton alike. They provide a great opportunity to minimize public spending while maximizing public utility. With the proper safeguards in place, P3’s are a great tool- especially in infrastructure.
For more on Oklahoma’s construction laws, head over to our Oklahoma Construction Payment Resources.