Q. “An Act Promoting Economic Growth and Job Creation in the State” allows public private partnerships. If possible, give a synopsis of what this law means for the business community.

A. A Public Private Partnership or “P3” is a relationship between a private entity and a state agency to design, develop, finance, construct, operate or maintain a state owned facility. Essentially the private partner will provide funding to build or upgrade a facility and then operate and maintain it throughout the term of the agreement at little or no cost to the state. The state will continue to own the facility and get it back at the end of the agreement.

The law is intended to provide a new means by which to fund infrastructure repair and development in the state especially during this period where the Connecticut economy is struggling. Once a P3 is identified or proposed it will initially involve a relatively sophisticated investor or developer on the private side, hopefully based in Connecticut. Even if the private investor is not from Connecticut it will likely team up with and hire Connecticut-based professionals including lawyers, architects, engineers and construction companies. The work on a P3 project will also lead to good paying construction jobs and ancillary construction work within the state. Each P3 project will be subject to either the state prevailing wage requirements or rates established in a Project Labor Agreement. This should be a much-needed boost to many highly qualified but idle construction-related companies and workers throughout the state.

Q. What are going to be some of the opportunities under the new law? Where are some types of projects that could be created under the partnership?

A. Guidance from experienced professionals and a commitment within State agencies to the process will be critical in getting P3s off the ground in Connecticut. The Office of Policy Management recently engaged Public Financial Management, Inc., a company experienced in developing and implementing P3 projects around the country, to provide advisory services related to bringing P3 projects to Connecticut. The State is setting off on the right foot in this regard.

The law identifies several types of projects contemplated by the State including educational, health, early childcare, transportation systems and any other project proposed by the legislature. Typically P3 projects have included parking garages, university student housing, ports, stadiums, toll roads and toll bridges. Traditionally P3 projects involved adding a toll to a highway or bridge but it appears that our legislature is adverse to tolls, at least in the short-term. However, the range of P3 projects has expanded over the years. There are many other possibilities. Maybe we can have a P3 for student housing or parking here in Hartford if, or when, UCONN moves its West Hartford branch downtown. The bottom-line is that there are many opportunities for P3 projects throughout the state. We just need the right people in place to make them happen.

Q. The law allows up to five P3 projects to be approved through January 1, 2015. Yet, as you mention, the projects must still work their ways through the bureaucracy. What are your thoughts? Will five projects be approved in the relatively short timeline?

A. I am a little concerned about the bureaucracy that has been built into the P3 approval process. A state agency proposing a P3 project must perform a comprehensive analysis of the feasibility of a P3 project, consult with other state agency commissioners, and submit the proposal to two legislative committees for public hearings before submitting the P3 proposal to the Governor for approval. A proposing agency must also be careful to avoid a P3 project that could be classified as a privatization of services currently performed by state employees. Such a classification could trigger yet another comprehensive review by the State Contracting Standards Board.

Approval for a P3 project will require political will at both the elected official and administrative levels and a commitment from a high level agency administrator to push it through the process. I think the first P3 project may be difficult, but once the trail has been blazed the P3 projects that follow will move more quickly to approval. I’m hopeful four or five P3 projects will have the Governor’s approval by the end of 2014.

Q. The number of approval steps seems almost Byzantine. In your opinion, will this law be a success in Connecticut with the complicated approval process?

A. Governor Malloy has shown the political will to pass the P3 law and appears committed to the concept. It has worked well in many other states across the country and I don’t think the initial P3 projects in any of those other states were simple. Again with the right people supporting P3 projects I believe they can be a success. The government is obligated to maintain the state’s infrastructure and we need to put our construction people back to work. The State currently does not have the money to do it alone. Necessity is a great motivator.

Q. Explain this aspect of the law: The agency can and most likely will issue a Request for Information to obtain information regarding potential P3 projects prior to beginning any procurement process. Does this mean a project could be proposed by one entity and then underbid by another?

A. I don’t believe so. The agency will likely identify a potential project or general need and solicit information prior to procuring actual proposals at least until the agency reaches a certain comfort level with the process. The information the agency obtains will be used to better define the P3 project. Actual proposals for a P3 project will be submitted to the agency independently of one another. It is anticipated that the agency will protect proprietary information and trade secrets of a proposing party. Each proposal will vary and so will the experience of the proposers. I think it will be the past experience and qualifications of a bidder that determines who will be awarded a P3 project. I don’t see it as one entity underbidding another. Each proposer will bring its own vision to the project and the best proposal for the State should get the award.

Q. What are some of the unusual contract provisions? Will they hinder interest in the private public partnerships?

A. P3 agreements extend over a long period of time, up to 50 years under Connecticut’s new law. This allows the private partner to recover its initial investment and make a reasonable amount of money over the period of the agreement. The agreement has to be flexible enough to respond to a changing landscape, including technological advancements. The agreement must also clearly define the goals of the project and the roles each party will play to achieve the goals.

Some of the provisions that must be included in any P3 agreement will likely get a close look by potential investors, but should not hinder their interest. A P3 agreement cannot include non-compete provisions limiting the ability of the State to perform its functions, and it cannot include additional user fees allowed beyond those specified in the P3 contract. The State cannot waive sovereign immunity or grant sovereign immunity to a contractor or private entity. This means that the private P3 partner will have to get permission from the State Claims Commissioner to bring any action against the state under the P3 agreement or otherwise. The P3 law also subjects agreements to the State’s environmental policy, set aside laws for small contractors, and state and local permitting and inspection requirements. The State will also have strong remedies if a contractor “defaults” under a P3 agreement.

While contract provisions are important it will ultimately be the quality of collaboration and the working relationship between the public and private entities that determine the success of a P3 project.

Q. How about investors? Do these projects make sense for them? Is there more or less risk with these new partnerships?

A. The private sector has been investing in P3 projects around the country and the world for many years now. A properly handled P3 project makes sense for both the private and public sectors. A P3 agreement is a long-term commitment between the parties. The contract should cover and properly allocate anticipated risks and remedies. The main risk is continued public, administrative and political support for P3 agreements. Hopefully most of the risk for each project will be exhausted during the rigorous initial approval process. There is always the risk that for whatever reason the public turns against a P3 project and the political tide follows. This risk can be minimized, however, by regularly and accurately informing the public about the project.