Using Public-Private Partnerships and Public-Public Partnerships to Meet the Growing Demands for Public Infrastructure
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The gap between Florida’s infrastructure needs and what Florida currently has is nearly $2.59 trillion over ten years. By year 2039, continued underinvestment in Florida’s infrastructure at current rates will have serious economic consequences — $10 trillion in lost Gross Domestic Product (GDP), more than 3 million lost jobs, and $2.4 trillion in lost exports.
The Florida Legislature has acknowledged that the public resources needed to construct or upgrade these facilities are inadequate and encourages investment by private entities to provide the greatest possible flexibility to public and private entities contracting for the provision of public services. Two creative solutions are public-private partnerships (PPPs) and public-public partnerships (PUPs). Both approaches have been shown to lower project costs, improve the schedule for delivery, and provide other public benefits.
PUPs are collaborations between two or more public entities to provide or improve public services. Unlike PPPs, neither partner in a PUP expects to earn a profit from the collaboration — The goal is to improve efficiency and lower costs. The public joins forces and leverages their shared capacities and buying power to provide services and/or facilities.
The infrastructure-related PPPs and PUPs discussed in this report have been extremely successful, resulting in cost savings in the tens of millions of dollars and highway capacity improvements coming online years sooner than they would have under a traditional government procurement. By shifting responsibility for the construction, long-term operation, and/or maintenance to a private entity, these projects provide a powerful incentive to ensure quality construction, since the private partner will share the financial risk, thereby enabling the public partner to focus on the outcome-based public value they are trying to create. These projects also foster job creation, economic development, and competition.
Why then, are there not more PPPs and PUPs? One reason is the onerous and burdensome requirements contained in Florida law. Florida TaxWatch believes that PPPs and PUPs can go a long way toward helping meet future demands for infrastructure; however, their usefulness is severely limited by the current slow pace of government procurement. Another reason is the absence of incentives for private entities that submit an unsolicited proposal, who then have no advantage over competing bidders throughout the remainder of the process. As Florida continues to grow and develop, the demands placed on public facilities and services will grow accordingly. These demands will be exacerbated by Florida’s changing climate, rising sea levels, and more frequent and more intense coastal storms.
Government procurement moves slowly, and Florida TaxWatch thinks every effort should be made to “fast track” infrastructure proposals where a private entity is sharing the financial risks for the project and the project has been shown to be in the public interest. For these projects, Florida TaxWatch supports the idea of a trade-off, where the project would be allowed to go forward sooner and with minimal obstacles, but not at the expense of transparency, accountability, and taxpayer value. To accomplish this, Florida TaxWatch urges the Florida Legislature to consider the following recommendations.
1. The legislature should make clear its expectations regarding the percentage of the state’s multi-billion-dollar annual capital budget to be expended, and the number of additional jobs to be created, through the use of PPP and PUP projects annually.
2. The legislature should amend chapters Chapter 255 and 334, Florida Statutes, to eliminate the requirement that public entities, after receipt of an unsolicited proposal, continue to solicit and accept other proposals for the same project.
3. The legislature should amend chapters Chapter 255 and 334, Florida Statutes, to allow an unsolicited proposal for a qualifying project submitted by a private entity to go forward:
- After review of the detailed project plan by the responsible public entity, other affected public entities, and the general public;
- After a determination by the responsible public entity that the proposal provides a needed public infrastructure upgrade at a lower cost, with a faster schedule for delivery, as well as other public benefits (e.g., job creation, etc.);
- After holding a duly-noticed public meeting at which the responsible public entity issues a “finding of public interest” report that, at a minimum, includes:
- Benefits to the public;
- Advantages/disadvantages of developing or operating the qualifying project as a public-private partnership versus a traditional procurement;
- Funding sources and financing for the qualifying project;
- General reputation, qualifications, industry experience and financial capacity of the private entity;
- Compatibility of the project with regional infrastructure plans; and
- Other criteria that the responsible public entity deems appropriate.
4. As an alternative, the legislature should amend chapters 255 and 334, Florida Statutes, to provide incentives to private entities that submit an unsolicited proposal that meets all requirements and who then have no advantage over competing bidders throughout the remainder of the process. These incentives may include, but be limited to, bonuses (additional points during bid evaluation); automatic short listing; and the right to match a more competitive bid.
5. The legislature should create an Office of Infrastructure Investment that reports to the Governor and is independent of other agencies and departments of the state. The Office would provide technical assistance and expertise to responsible public entities on using public-private partnerships to develop or operate infrastructure projects (including analyzing their benefits and costs and the innovative financing options available to support them). At the end of each fiscal year, the Office should provide to the legislative committees having jurisdiction over transportation or infrastructure a report that:
- Identifies PPP projects that are expected to be soliciting bids within the next fiscal year; are in progress; were completed during the prior fiscal year; or were removed from consideration during the prior fiscal year; and
- Summarizes actions taken by the Office to fulfill its duties.
6. The legislature should create a task force to support the Office of Infrastructure Investment and make recommendations on a uniform process for the review, solicitation, evaluation, award, and delivery of public-private partnerships.