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Key Elements and Legal Issues of P3 Agreements

  1. Type of P3 agreement:
    1. Design-Build-Operate-Maintain
    2. Pre-Development Agreement
    3. Concession - Investor Financed
    4. Concession - Tax-exempt Financed
    5. Other
  2. Agreement resulted from:
    1. Unsolicited proposal and negotiations
    2. Competitive procurement following unsolicited proposal
    3. Competitive procurement
    4. Sole-source negotiations
    5. Other
  3. What is the title and date of the primary P3 agreement? Who are the parties to that agreement?
    What is the form of the private entity (e.g., corporation, LLP, LLC, partnership or joint venture)? If a joint venture, is there joint and several liability?
    Are the obligations of the private entity guaranteed by one or more third parties (other than sureties)?
  4. Does the P3 agreement contemplate a subsequent assignment of the private entity's rights to another entity, such as a non-profit corporation to be formed for the purpose of financing the project?
  5. Describe conditions applicable to the financing plan (types, sources, and covenants of capital financing).
  6. What other major ancillary agreements are there? Are other agreements contemplated to be executed in the future (e.g., such agreements might include a design-build contract, a concession agreement, a full or partial completion guaranty and/or financing agreements)?
  7. What are the roles of the public and private entities for pre-financing tasks, such as project definition, preparation of environmental documents, permitting, traffic and revenue studies, surveys, geotechnical investigations, right-of-way acquisition and preliminary engineering, public involvement?
  8. How is the private entity to be compensated for pre-financing costs (e.g., current reimbursement, reimbursement from financing proceeds, development fee, return-on-equity contribution)?
  9. How is the private entity to be compensated for its equity and debt contributions?
    How is the private entity to be compensated for post-financing design, acquisition, permitting, construction, and related services?
    How is the private entity to be compensated for operation and maintenance services?
  10. Is the public entity required to exercise its power of eminent domain to facilitate the transportation facility?
  11. Does the public entity establish the design, construction, operation and maintenance standards with which the private entity must comply?
  12. Describe any payment due from the private entity to the public entity for the grant of rights.
  13. What is the mechanism by which user fees, if any, are established and adjusted? Describe any limitations or user fees and exempt vehicles.
  14. Describe any revenue recovery between the public and private entities.
  15. What is the duration of the agreement and what are the options to extend this timeframe (if applicable)?
  16. What are the major performance milestones that will be required of the parties, including the public entity and the private entity?
  17. Describe measures of compensation upon termination for convenience.
  18. Describe any performance standards, performance warranties, or performance guarantees.
  19. If applicable, describe the private entity's rights and obligations to provide future project capacity improvements, extras, or expansions.
  20. Who is responsible for the operation and maintenance of the completed facility?
  21. Does the private entity have the right to make and enforce, with the consent of the public owner, reasonable rules with respect to the transportation facility?
  22. Describe any provisions relative to competitive transportation facilities (include a description of what constitute competitive facilities, exceptions, and measure of damages).
  23. Is the private entity required to reimburse the public entity for services? For design review? Permitting? Operation and maintenance? Policing?
  24. If applicable, what is the reasonable/maximum return or rate of return on investment authorized for the developer/operator to earn, the formula by which such rate of return will be calculated and the distribution of project revenues?
  25. What events constitute developer/operator defaults, and what are the major remedies available to the public owner?
  26. What other rights does the public entity have to terminate the agreement (e.g., failure to meet milestones, termination for convenience)? If the agreement is terminated for convenience, what compensation is paid to the private entity?
  27. What events constitute public entity defaults, and what are the remedies available to the developer/operator?
  28. What are the lender's rights and remedies with respect to private entity defaults? Does the agreement provide for lender's rights and remedies?
  29. How is the performance of the private entity secured (e.g., surety bonds, letters of credit or third party guarantees)?
  30. What indemnification obligations do each of the parties have?
  31. What are the obligations of the developer/operator to maintain records, to allow inspection and audit and to provide regular reports to the public owner?
    What obligation does the public entity have to maintain the confidentiality of specified information?
  32. What are the conditions under which the private entity may assign its rights under the P3 agreement and/or its rights to the transportation facility?
    Can it assign its rights to a non-profit or other entity for purposes of financing?
    Can it make an assignment for security?
    Can it transfer its rights and obligations to an affiliate or unrelated third party? What are the conditions, if any, to obtain the consent of the government entity?
  33. Describe lender protection provisions (if any).
  34. What dispute resolution mechanisms are provided for?
  35. Describe any provisions regarding high-occupancy toll lanes or variable pricing.
  36. Describe any provisions or HOV policy (if applicable).
  37. Describe any provisions limiting liability or waiving consequential damages.
  38. Describe any public subsidy of revenues (e.g. shadow tolls, assumption of operation and maintenance costs).
Federal Highway Administration | 1200 New Jersey Avenue, SE | Washington, DC 20590 | 202-366-4000
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