Joining the Expanding Club: State of Maryland Becomes Latest State to Pass Public-Private Partnership Legislation
Date: May 14, 2013
The state of Maryland recently passed new public-private partnership (P3) legislation aimed at encouraging and using public-private partnerships to address some of the state's most dire infrastructure development and rehabilitation needs. The new legislation goes into effect July 1, 2013. While the concept of P3 is not new to Maryland, in practice its utility has been extremely limited. Prior to the 2013 legislation, P3 was limited to contracting to build and operate state transportation projects, and even then it was used on only a few occasions, as the prior P3 legislation did not provide much meaningful guidance regarding how state agencies should conceive and evaluate P3 opportunities or how to conduct procurements for P3 projects. As a result of these limitations, the state rarely utilized the prior P3 legislation. In adopting this new, more extensive and robust P3 law, Maryland joins a growing number of states that have passed P3 legislation aimed at addressing critical non-transportation infrastructure needs and echoes the Obama administration's stated commitment to utilizing P3 to develop and improve America's infrastructure.
Among its many features, the new law:
- Revises the definition of P3 and describes the respective roles of the private and public entities involved in P3 transactions/projects.
- Expands the applicability of P3 beyond transportation projects to broadly defined "public infrastructure assets.
- Provides detailed guidance on how the state's agencies, legislative offices and committees, the state comptroller, the state treasurer and Board of Public Works (BPW) must initially propose and evaluate P3 projects and procedures. Specifically, the law requires that the procuring agency submit a pre-solicitation report that examines the suitability of the project for P3, potential risks and rewards of utilizing P3, the manner in which the project would be financed, including the level of state funds contribution, and the procurement procedures that would be used to solicit and award the work. This pre-solicitation report is then further reviewed by the members of the BPW, who are the governor, the state comptroller and the state treasurer.
- Allows for both solicited and unsolicited proposals.
- Adapts the state's procurement code to provide for a "best value" negotiated procurement process for P3 projects.
- Authorizes the state to reimburse a private entity party to a P3 agreement where participation in the P3 agreement directly results in a documented revenue loss for the private entity on a competing project.
- Imposes mandatory requirements and terms for P3 agreements, including, but not limited to, imposition of existing laws applied to public contracts pursuant to the Maryland Code State Finance and Procurement Law Article, Title 17, as well as Maryland's Environmental Law and Labor and Employment Law Articles.
The new P3 law may serve as an opportunity for Maryland to tap private funding, resources, and operations and management capabilities that exist abundantly in the private sector to address its sagging infrastructure and development while also alleviating the budgetary pressures that are being felt by all governments, including its own. The legislation, and Maryland's efforts to follow through on it, suggest that the state is interested in providing a unique partnering opportunity for private sector businesses. For example, on April 11, 2013, the day after the legislation passed, the Maryland Transit Authority (MTA) issued a Request for Information (RFI) "seeking private sector input on best practices and innovative approaches to delivering and financing the Maryland National Capital Purple Line and the Baltimore Red line."1 Following responses to the RFI, the state will host two industry forums to discuss these projects. Potential offerors interested in pursuing P3 opportunities would be well-served to participate in this type of open dialogue with the state through this RFI process, as well as to review the legislation and develop capabilities for bidding on P3 solicitations and strategies for targeting potential P3 opportunities through unsolicited offers.
What the future for P3 holds remains a significant question. While the federal government almost universally precludes the use of P3 in its procurements, indications from the Obama administration are that this stance will soften in the future. In contrast, the majority of states have adopted P3 as a delivery vehicle for future projects. How more recently adopted programs/legislation such as Maryland's translates into real solutions remains to be seen, but the success of P3 in other countries bodes well for the future domestically.
1These are mass transit projects that have been in their initial phases but "on the books" for some years. See, MTA Website, http://mta.maryland.gov/heels-newly-signed-p3-law-state-seeks-private-sector-input-delivering-purple-line-and-red-line.