Before implementing a P3, States need to create a legal framework. P3 enabling legislation varies widely among States, but the basic goal is the same: to allow public entities to take advantage of the benefits of P3 project delivery while protecting the public interest. Some States provide broad authority for public entities to enter into and manage P3 agreements, while others strictly limit P3s to specific projects or project types and define the type of provisions that must or must not be included.
It is up to each State to determine the appropriate approach to legislation, starting with an understanding of the goals it is trying to achieve. Enabling legislation varies from State to State because policymakers consider the needs and goals of their constituencies and the unique political and institutional environment of their State. Policymakers often include language in legislation that reassures specific constituencies - such as tax-payers, road users, or road builders - that their interests are protected. There is a fine line, however, between prescribing processes or provisions intended to protect the public interest, and those that create inefficiencies or deter private sector interest.
Table 4-1 presents the factors that State policy makers may consider in creating a legal framework for P3s. It may be used to authorize or restrict who may enter into P3 agreements, how partners and proposals may be selected, and what types of agreements may be entered into. Other key issues that legislatures have attempted to address are:
As States gain experience in P3s, there is a growing body of literature, cases, and models that can serve as references in developing appropriate legislation. Drawing from these resources, the Federal Highway Administration and the law firm Nossaman LLP have created model legislation to serve as a guide.1 In addition, the National Conference of State Legislatures has developed a "Public-Private Partnerships Toolkit" that lays out a set of recommended principles for legislators to follow in making policy decisions.2 A recent paper3 finds that political sentiment, unionization rates, and traffic congestion are important predictors of both the passage of P3 legislation and of its favorability to private investment. It also finds evidence that fiscal stress leads states to adopt P3 enabling legislation.
|Primarily Statutory Issues: These issues are typically addressed through State legislation.||
|Issues typically addressed through Policy and/or Statute: These issues may be addressed in legislation, to authorize or clarify specific capabilities, as necessary, but the details are frequently addressed through program policy.||
|Issues typically addressed through Contract and/or Statute: These issues are typically addressed in contracts although the general parameters may be set by statute or policy.||
SEP-15 is a new experimental process to identify, for trial evaluation, new P3 approaches to project delivery. SEP-15 is designed to allow the FHWA to identify regulations that currently inhibit the creation of P3s and private investment in transportation improvements, and to develop procedures and approaches to address these impediments. SEP-15 addresses, but is not limited to, four major components of project delivery: innovative contracting, compliance with environmental requirements, right-of-way acquisition, and project finance.
2. National Conference of State Legislators. Public-Private Partnerships for Transportation: A Toolkit for Legislators. www.ncsl.org/issues-research/transport/public-private-partnerships-for-transportation.aspx
3. R. Richard Geddes. Why do U.S. States Adopt Public-Private Partnership Enabling Legislation? http://www.human.cornell.edu/pam/people/upload/Why-Do-States-Adopt-PPP-Leg-Dec-2010.pdf