Public-Private Partnerships, commonly referred to as P3s, are contractual agreements between public and private entities that provide for significant involvement of private entities in the delivery and financing of public buildings and infrastructure projects. Under a P3 agreement, the private entity assumes the project’s financing and is entitled to either the revenue generated from project activities or performance-based government payments.
Public-Private Partnerships enable public entities to undertake projects which they might otherwise postpone or ignore due to lack of funds. P3 projects also create a vast number of jobs, and dramatically accelerate project completion when compared to traditional Design-Bid-Build projects. There are several different types of P3 delivery options; however, the most common P3 system is a Design-Build-Finance- Operate-Maintain (DBFOM) transaction.
North Carolina Background on P3 Law and Process of Current Law
Historically in North Carolina, local municipalities and state agencies required approval from the State Building Commission to engage in any type of procurement for construction other than traditional procurement methods such as separate-prime bidding, single-prime bidding, dual bidding, and construction management at risk contracts. See G.S. § 143-128(a1) & § 143-128(9). On August 23, 2013, Governor Pat McCrory of North Carolina signed into law HB 857, which empowered these entities to engage in alternative delivery methods, such as design-builds and public-private partnerships.
As a result, North Carolina amended G.S. § 143-128, thus allowing local government and state agencies to use P3s and design-build contracts to construct a wide range of projects. Although unsolicited proposals are not contemplated under the statute, public entities may still pursue alternative procurement vehicles subject to the stringent criteria set forth in the new statutory framework. See, e.g., § 143-128.1A. (establishing criteria regarding design-build contracts); § 143-128.1B (establishing criteria for design-build bridging); § 143-128.1C. (establishing criteria for P3s). This new framework creates a mechanism whereby the government entity must also submit a detailed report explaining why it chose the alternative delivery system over traditional procurement methods.
Despite the criteria and reporting requirements contained therein, this new law recognizes that that North Carolina is “not wholly satisfied by existing procurement methods” for the design, construction, improvement, renovation and expansion of public buildings. This new enabling legislation therefore provides opportunities for government entities to become more creative in their approach.