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2. Overview of Procurement Processes and Federal Assistance Issues Relevant to Public-Private Partnerships

2.1. Comparison of P3 and Traditional Project Delivery Procurement Processes

A public agency (agency) moving from traditional project delivery methods to using a P3 approach may find the need to make a number of substantive changes to its standard solicitation process to account for the complexity of a P3 procurement. The types of changes required may vary depending on the agency's legal authority for P3 procurements.

For P3 procurements, the agency should focus on development of performance-based contract requirements suitable to form the basis for a long-term relationship between the public and private sectors. Performance-based requirements are discussed in Section 5.2.4. Recognizing the inherent incentives associated with taking on responsibility for long-term services such as operations and maintenance and assuming performance risk during the contract term, the concessionaire is given greater flexibility to determine its approach to the design and construction of the project.

In contrast, for design-bid-build (DBB) procurements, the agency asks for bids based on a design developed by the agency (or a design consultant) and a standard form contract, with the agency responsible for ensuring that the project design meets the agency's requirements and for overseeing the construction process to ensure construction quality. Design-build (DB) delivery is similar to DBB in that both involve a relatively short-term relationship between the public and private sectors. In the DBB model, the agency retains a significant degree of control over the construction process, while the DB model involves transfer of certain risks and significant control to the design-build contractor. However, for both DBB and DB projects, the public sector retains complete control over post-construction operations and maintenance, and, most critically, the responsibility for funding or obtaining the project financing necessary to support design, construction, and operations and maintenance (O&M) of the project. In a P3 transaction, the concessionaire commits to a fixed public funds amount, date-certain delivery, and, for availability payment transactions, only receives compensation from the agency if the concessionaire meets the contractual performance obligations during each phase (for revenue risk deals, the concessionaire's compensation depends on revenues received). Only in very few circumstances can the concessionaire seek additional compensation, so each decision on the approach to the project should be carefully considered and monitored throughout the project life cycle. The concessionaire's decision-making will therefore be geared to minimize the occurrence of unintended consequences that may lead to future performance failures that could jeopardize its revenue stream.

A typical P3 project procurement includes (at a minimum) the following tasks differing in scope and nature from parallel activities for DBB and DB projects:

• Determining the scope of work: In addition to defining the project goals and scope, it is necessary to determine the respective roles to be played by the private sector and the public agency with respect to project elements such as financing, permitting, property acquisition, design, construction, operations, and maintenance of the P3 project. The scope of work for a P3 concessionaire is much broader than the scope of work for other delivery models and may encompass the whole life-cycle of a project.
• Risk assessment, mitigation, and allocation: Risk management for a P3 project differs significantly from other delivery models due to the increased complexity of the P3 approach as well as the concessionaire's greater ability to manage and mitigate risk than is the case for contractors in a traditional delivery method. In addition, each P3 project is unique, requiring detailed analysis relating to risk and making it difficult to rely on programmatic documents to allocate risk. Risk allocation decisions often rely on the use of performance incentives as well as consideration of the concessionaire's responsibilities for project financing. Agencies planning to use a P3 approach should also consider measures they can implement during the pre-award period to mitigate post-award risk. Typically, these would include obtaining final survey and topographical reports, geotechnical reports, hydraulic reports, hazardous materials assessments, subsurface utility information, and right-of-way (ROW) information. The value that an agency receives for risk mitigation efforts during the period prior to award of the P3 contract means that such mitigation measures are among the agency's most cost-effective investments for the project.
• Performance requirements: Like DB projects, P3 projects primarily rely on performance specifications. However, unlike DB projects, most P3 projects include long-term operations and/or maintenance, and consequently P3 contracts should include performance requirements addressing long-term operations and maintenance. Contracts for toll concessions or other revenue risk projects often rely heavily on built-in performance incentives since the concessionaire bears the risk of lower revenues if the project must be shut down for repairs, as well as having to pay the cost of the repairs. Projects relying on payment of public funds during the operations period typically incorporate performance incentives in the form of deductions to fixed payments if the concessionaire fails to meet performance obligations under the contract.
• Development of terms and conditions: Agencies typically rely on standardized contract documents (general conditions, standard specifications, and special provisions) for DBB projects, and provide detailed design to define the project scope. Many agencies have also developed standard forms for DB contracts, thus reducing the level of effort required to produce procurement packages. For P3 procurements, the large number of variables associated with the P3 project requires a significant level of effort to produce the procurement package, including addressing issues relating to financing, risk allocation, performance requirements, and operations and maintenance over the extended term of the P3 agreement.
• Selection criteria determination: The process of selecting a DBB contractor is relatively simple, involving award to the lowest responsible bidder that has provided a responsive bid. For DB procurements, the selection criteria involve evaluation of technical proposals as well as price. P3 projects bring an additional level of complexity into the selection criteria and should account for the length of the agreement term as well as inclusion of new elements. Typically, the determination whether P3 proposers meet responsibility standards is made at the shortlisting phase and is subject to updated review at the proposal phase. Many agencies also include a responsiveness (or compliance) review as part of the proposal evaluation. As is the case for all procurements that involve selection on a basis other than low price, the procurement documents should include clear and well defined selection criteria and evaluation processes as well as relevant information regarding the process so that proposers understand the rules of engagement.
• Selection and negotiation: DBB procurements, by definition, result in award based on bids received, without negotiations. For DB procurements, many agencies reserve the right to use a competitive negotiation process, and some agencies engage in limited pre-award negotiations with the selected proposer. Although P3 procurements can be structured to fit within the equivalent of a low bid procurement process-an approach used in other countries, including Canada-agencies in the United States generally prefer using a best value selection process that permits them to consider factors such as the quality of the proposer's team, technical concepts, approach to financing, and management approach. ⁵ Although the procurement documents often permit competitive negotiations to be used (a process that involves requests for proposal revisions, sometimes called best and final offers (BAFOs), that option is rarely exercised, as it lengthens an already lengthy procurement process and can add significantly to the costs incurred both by the agency and the proposers. It is more common for P3 projects to include a post-selection negotiation phase in the procurement due to the complexity of the project and the need to address issues that only become apparent after review of the proposals. To the extent possible, the agency should seek to address as many issues as possible regarding the project scope and requirements during the competitive pre-proposal period, thus avoiding the need for extensive pre-award negotiations and conforming to constraints on pre-award negotiations in Federal procurement integrity requirements, such as the FHWA Design-Build Rule. ⁶
• Financing: Unlike DBB and DB procurements, P3 procurements involve additional considerations relating to private sector and government financing that are often new to transportation agency procurement personnel.
• Contract administration: The long-term nature of P3 projects requires a different approach to the contract administration process than is the case for DBB or DB projects, which have a much shorter term.

The nature of the P3 delivery method will also dictate use of certain provisions not commonly included in the agency's other contracts. For example, for P3 projects involving transfer of revenue risk, the agency should consider what limitations to include for setting toll rates or other user fees and include appropriate provisions in the contract to ensure the requirements are clear over the long term. For P3 projects involving payments to the concessionaire by the agency, the agreement should include performance requirements to ensure the project will achieve operational and policy objectives, specify processes to resolve performance failures, and provide sufficient incentives to assure compliance and performance throughout the term of the contract. Agency counsel should be consulted regarding the availability payment regime to ensure that provisions for deductions from payments are legally enforceable.

2.2. State and Local Laws Affecting Public-Private Partnerships

Analysis of State and local laws affecting use of a P3 approach is a key first step for an agency considering use of P3 as a tool for project delivery, especially if the agency has not previously used P3 delivery approaches, or if the particular project presents unique issues that the agency has not faced in the past. If an agency does not have explicit P3 authority, it must determine whether it has the ability to proceed with a P3 procurement under existing legislative authority. The agency should also consider whether existing laws (including case law as well as statutes, ordinances, and regulations) present issues for a P3 that could be resolved through the legislative process. Issues to consider in this legal analysis are provided in Table 4.

Table 4. Aspects to Consider in Legal Analysis.

Topics for Legal Consideration	Questions / Issues
Procurement	Do existing laws allow practices such as a two-step (shortlisting followed by RFP) best value procurement, payment of stipends, confidential meetings with proposers, discussions and requests for revised proposals, and pre-award negotiations?
	Do existing laws allow practices such as a two-step (shortlisting followed by RFP) best value procurement, payment of stipends, confidential meetings with proposers, discussions and requests for revised proposals, and pre-award negotiations?
	Do existing laws impose constraints on the structure of the concession that may affect project feasibility, for example: Requirements relating to appropriation of funds and limitations on multi-year contracts. Ability to accept performance and payment guarantees in forms other than 100% payment and performance bonds. Contractor licensing laws that are inconsistent with complex teaming structures. Open records laws. Privacy laws.
Right-of-way (ROW) acquisition	Requirements of State condemnation laws, including availability of "quick take" authority. Estimated timelines for property acquisition and capability to manage the acquisitions with the agency's existing resources. Agency's ability to pay for utility relocations without a title review to determine whether the utility owner has "prior rights" or has the obligation to relocate at its own expense.
Debt Limitations	Whether constitutional or statutory debt limitations apply to the transaction and, if so, how these may be addressed. Can an agency commit to payment of compensation on termination (rarely exercised but critical to proposers interested in the project and their lenders).
Dispute resolution procedures	Legal constraints and policies affecting use of alternative dispute resolution procedures.
Anti-indemnity laws	Legal constraints on indemnities affecting the transaction.
Other considerations	Effect on project of matters such as: Statutes of limitations (requiring a claim to be brought within a specified time after the cause of action arises). Statutes of repose (requiring a claim to be brought within a specified time after completion of the project). Other laws affecting project feasibility; for example, the possibility that a long-term concession might be considered a "possessory interest" subject to an ad valorem tax.

A number of the issues identified above are discussed in reports published by the National Cooperative Highway Research Program (NCHRP) and Transit Cooperative Research Program (TCRP), including:

• NCHRP Report 561: Best-Value Procurement Methods for Highway Construction Projects (hereafter referred to as the NCHRP Best Value Report) provides information regarding best value procurements and certain legal issues relating to such procurements.
• A 2012 TCRP legal digest entitled "Legal Issues Involving Surety for Public Transportation Projects" examines various legal issues relating to surety bonds for complex projects. ⁷
• A 2012 TCRP legal digest entitled "Legal Issues Involving Surety for Public Transportation Projects" examines various legal issues relating to surety bonds for complex projects. ⁸
• A 2015 NCHRP legal digest entitled "Liability of Design-Builders for Design, Construction, and Acquisition Claims" discusses legal issues relating to right-of-way acquisition, utility relocations, indemnities, and statutes of limitations and repose. ⁹

A number of States have adopted procurement legislation based on the American Bar Association's Model Procurement Code, which allows agencies to use a competitive sealed proposal process for procurement of contracts. ¹⁰ Although the Model Code allows competitive negotiations, it does not permit post-selection negotiations with a single proposer. Therefore, in Model Code States, an agency may have the authority to procure P3 contracts without the need for additional legislation.

2.3. P3 Procurement Successful Practices

A successful P3 procurement requires the agency to consider a number of issues that are different in scope or in scale from requirements on traditional procurements. This variation has an impact on roles and responsibilities as well as processes throughout the procurement process. Table 5 provides a summary of successful practices at each stage of the procurement process with a focus on practices unique to P3 procurements.

Table 5. Select P3 Procurement Successful Practices

P3 Procurement Phase	Successful Practice
Pre-procurement	Feasibility Analysis: The P3 feasibility analysis helps determine whether a project can or should be implemented as a P3 project and, if so, the type of P3 to use and the related contractual and risk arrangements for project implementation. As part of this analysis the agency develops the detailed scope, performance requirements, evaluation factors and financial model and performs initial risk assessment. Value for Money analysis is then used to support moving forward with the project.
	Selection of Advisors: Due to the unique and complex structure of a P3 project and the need to develop a contract that will be scrutinized by multiple entities, including private sector investors and lenders, it is very important for the agency to engage its technical, legal, and financial advisors early in the procurement process, and for those advisors to have relevant U.S. P3 project finance experience.
	Market Soundings / Request for Information: Many public agencies considering a P3 project will begin by advertising a request for information (RFI) to get input from a variety of interested parties both locally and nationally to assist in determining the best procurement approach for the project. In lieu of, or in addition to, an RFI, the agency will often set up informal market sounding meetings or phone calls with interested firms to obtain information that firms may be reluctant to share in written responses to an RFI.
	Federal Support: For projects utilizing Federal funding, grants and/or credit assistance programs such as the Transportation Infrastructure Finance and Innovation Act program (TIFIA), Railroad Rehabilitation and Improvement Financing (RRIF) or Private Activity Bonds, it is suggested that prior to procurement, the agency reach out to the Build America Bureau at the U.S. DOT in Washington, D.C. and the regional DOT modal office (e.g., the FHWA Division Office or FTA Regional Office) with jurisdiction, if applicable. Early engagement and coordination, prior to procurement, has been found to significantly help in ensuring efficient access to Federal programs and resources without impacting the desired procurement schedule.
	Local Support: Approval from or cooperative efforts by State or local agencies and other entities may be required for a P3 procurement. The agency may need to consult with representatives of the State Treasurer, Attorney General, Governor's Office, and/or key legislative committee chairs, other otherwise involve such individuals in the procurement process early on.
	Industry Forum: For complex projects, an industry forum or workshop prior to issuing the procurement documents helps to obtain comments and input from the private sector regarding the proposed procurement process. One-on-one meetings are also a valuable tool to obtain bidder and industry feedback. This can result in significantly higher value to the State and a procurement strategy that can help the project obtain the required financing.
	Establish procedures ensuring confidentiality of information and documents received during the procurement process.
Initiation of Procurement	A two-step selection process, with the issuance of an RFQ followed by an RFP issued to the shortlisted proposers.
	An industry review process prior to issuing the final RFP to obtain input and comments from the shortlisted proposers, including one-on-one meetings with proposers, is particularly important for the agency's first project as well as for subsequent projects that include elements differing significantly from earlier projects.
Pre-selection	An opportunity for proposers to submit Alternative Technical Concepts (ATCs).
	Establishment of Evaluation Committees: Enlisting qualified individuals to participate on specialized committees and subcommittees to evaluate technical and financial proposals on a pass/fail and qualitative basis.
Selection / Negotiation	A best value selection process to select the preferred proposer (unless the P3 will use a pre-development agreement (PDA), in which case the agency may elect to use a qualifications-based selection process).
	Reservation of the right to engage in discussions with proposers (often limited to proposers within a competitive range) and to request proposal revisions.
	Reservation of the right to hold negotiations with the selected proposer prior to final award.
	Payment of stipends to unsuccessful proposers and to pay stipends to all shortlisted firms if the procurement is cancelled.
Other	Maintain leadership continuity: It is important to develop a transition plan from procurement to contract management. Continuity can greatly help the agency as it moves into the project delivery phase. Key personnel involved in the procurement (including outside advisors) should remain involved through financial close and, if practicable, contract administration.
	Public involvement and transparency: Agencies using Federal funding and credit assistance are required to adopt appropriate measures to ensure that the public interest is served by the use of a P3 delivery method and enabling the public to learn about the details of P3 procurements and projects-including conducting a VfM analysis, publicly disclosing the terms of the P3 agreement and amount of Federal participation and conducting a performance review. The agency should also prepare a public outreach plan to keep the general public apprised of the major project stages.
	Monitoring: During the procurement period, the agency should develop protocols and assign responsibility for performance of appropriate project oversight that enforces the contract requirements during design and construction and throughout the operations period.

2.4. Overview of Federal Programs Providing Funding and Financing for Public-Private Partnerships

Many transportation P3 projects rely on Federal funding and financing programs, such as TIFIA or RRIF loans and/or Federal grant assistance. Where Federal funding is part of the equation, whether in the form of grants or loans, the procurement will be subject to Federal requirements associated with the grant or loan.

In addition to Federal grant or credit assistance, many transportation P3 projects rely on private activity bonds (PABs). PABs are tax-exempt bonds issued by or on behalf of a local or State government for the purpose of providing special financing benefits for qualified projects. The ability to issue PABs can also be important for achieving project feasibility.

The process for obtaining Federal funds for State and local P3 projects varies depending on the source of funds. FHWA, FTA, the Federal Railroad Administration (FRA), and the Office of the Secretary of Transportation (which includes the Build America Bureau and various grant programs) administer specific programs differently because of different legal requirements. Congress created the Build America Bureau to centralize the application processes of the credit programs administered by U.S. DOT most commonly used for surface transportation P3 projects, namely the TIFIA, Railroad Rehabilitation and Improvement Financing (RRIF) and PABs programs, which are described in the Glossary (see Appendix A).

Interested agencies must apply to the Build America Bureau for credit assistance under the TIFIA and/or RRIF programs and for a PAB allocation. Each such action is discretionary and is made on a project-by-project basis. Early (and continuing) engagement with the Build America Bureau is important for projects that are considering the use of TIFIA, RRIF, and/or PABs.

This section provides general information about certain Federal programs. In addition to the programs described below, U.S. DOT administers multiple different grant programs that may be beneficial for P3 projects, such as the Infrastructure For Rebuilding America (INFRA) program (also known by the statutory name, the Nationally Significant Freight and Highway Projects program) and the Better Utilizing Investments to Leverage Development (BUILD) Transportation Discretionary Grants program. Refer to chapters 3 through 5 for information about the steps the agency should take at different phases of the P3 procurement to ensure that the project will be able to benefit from these programs. Refer to chapters 6 and 7 for information relevant to the period from issuance of the RFP through financial close.

2.4.1. Funding from the Federal Highway Administration

Apportioned Federal-aid highway funds are those authorized under the Federal-aid highway formula programs, including the National Highway Performance Program ¹¹ and the Surface Transportation Block Grant Program. ¹² Such funds are apportioned to the States on a formula basis for eligible capital improvements, and it is up to each State to decide how such funds may be used on eligible projects. ¹³ Apportioned funds play an important role in highway P3 projects, where the transportation agency may use the funds to make availability or progress payments to the concessionaire or for any other eligible activity for which the State would use its own funds.

FHWA's Design-Build Rule, at 23 CFR part 636, primarily addresses procurement-related issues. Projects relying on FHWA funding will also be subject to requirements that apply to all FHWA funded projects.

2.4.2. Tolling of Federal-Aid Highway Facilities

Many highway P3 projects rely upon tolls as the source of revenue by which the private concessionaire recovers its investment in the construction and operation of a P3 facility. In some cases, the agency may retain the revenue risk and agree to compensate the concessionaire with availability payments. Public agencies may permit the assessment of tolls on certain Federal-aid highways, tunnels, bridges, and ferries, but must comply with 23 U.S.C. §129 and §166 and/or non-codified tolling provisions in law such as the Value Pricing Pilot Program (VPPP). These provisions describe the types of facilities and projects that may be subject to tolls, and how toll revenues may be used.

2.4.3. Federal Transit Administration Funding

An agency seeking to use FTA funding for a P3 project may also pursue Capital Investment Grants (CIG) funding. The Maryland Purple Line and Denver EAGLE projects were both New Starts projects, one of three types of eligible projects under the CIG Program. As of the date of this Guidebook, CIG grants are governed by the Major Capital Investment Projects regulation and the CIG interim final policy guidance. ¹⁴

Projects proposed for CIG program funds are required to follow a multi-step, multi-year process defined in Federal Public Transportation law at 49 U.S.C. § 5309. For New Starts and Core Capacity projects, this process includes three phases: Project Development (PD), Engineering, and Construction. For Small Starts projects, this process includes two phases: PD and Construction. For information on advancing into and through the CIG program, including the details of the statutory project evaluation and rating process, please see the FTA Interim Final Policy Guidance on the FTA website. ¹⁵

CIG funds are eligible to be awarded at the end of the multi-year, multi-step process either in a Full Funding Grant Agreement (FFGA) or a Small Starts Grant Agreement (SSGA) depending on the project type. In advance of the award of an FFGA or SSGA, FTA may also issue "Letters of Intent," indicating an intention to obligate future CIG funds to the project, or award Early Systems Work Agreements (ESWA), committing CIG funds for construction work following final completion of the environmental review process, as long as FTA determines the project is likely to receive an FFGA and that issuance of an ESWA is likely to result in earlier project delivery and a cost savings.

2.4.4. Transportation Infrastructure Finance and Innovation Act Financing

The ability to obtain loans and other forms of credit assistance under TIFIA has been a critical component for the plan of finance for numerous surface transportation P3 projects in the United States. As discussed in chapters 3 through 5, agencies should take appropriate measures to ensure that the project will be eligible for TIFIA financing.

TIFIA was enacted as part of the Transportation Equity Act for the 21st Century of 1998 (TEA-21) to address a finance-related problem identified by agencies looking at successful P3s in other countries and interested in gaining the same benefits in the United States. One major obstacle to the use of P3s was the inability of the private sector to tap into traditional sources of public financing for construction and long-term loans, resulting in a higher cost of funds for private sector partners than for a public agency borrowing money for the same project. It became apparent that P3s would be feasible only if the rules changed.

The FAST Act provided nearly $1.5 billion in TIFIA subsidy authorization for fiscal years 2016 through 2020. ¹⁶

TIFIA provides three types of credit assistance: direct loans, loan guarantees, and standby lines of credit. TIFIA direct loans provide credit assistance at Treasury rates with maturities up to 35 years after substantial completion for up to 33 percent of anticipated project costs (or up to 49 percent if applicants provide a strong rationale for requiring the higher level of assistance). TIFIA standby lines of credit provide a contingent loan that may be drawn upon after project substantial completion at Treasury rates.

The TIFIA program has proved to be critically important in enabling P3s to proceed because the P3 concessionaire can borrow directly (rather than the public sponsor), loans are provided at attractive rates of interest to help reduce the cost of borrowing, and because the program provides flexible loan provisions such as deferred payment periods. All four of the projects described in Appendix B relied on TIFIA financing, as well as many other projects. Some notable P3s financed by TIFIA include:

• TxDOT North Tarrant Express: $531 million loan.
• VDOT Transform 66 Outside the Beltway: $1,299 million loan.
• Florida DOT (FDOT) I-4 Ultimate: $950 million loan.
• Port Authority of New York and New Jersey Goethals Bridge Replacement: $474 million loan.
• Capital Beltway High-Occupancy Toll Lanes: $588.9 million loan.
• Maryland Purple Line: $874.6 million loan.
• Colorado High-Performance Transportation Enterprise (CHPTE) U.S. 36: $55.4 million loan for Phase 1 (CHPTE as original borrower, assumed by concessionaire upon project completion) and $60 million loan for Phase 2 (concessionaire as direct borrower).
• CHPTE, Central 70: $416.0 million loan.

For TIFIA assistance, the applicant must, among other statutory eligibility criteria: ¹⁷

• Demonstrate the creditworthiness of the project, including, in certain circumstances, obtaining two investment-grade ratings on the project's senior debt.
• Identify a dedicated source of funding to repay the TIFIA loan.
• Otherwise demonstrate the extent to which the project generates economic benefits, leverages private capital, and promotes innovative technologies.

In addition, when a P3 project is proposed for TIFIA financing, the agency and project concessionaire must be prepared to work with the Build America Bureau and U.S. DOT operating administrations, including FHWA or FTA, as applicable, which will assist with project oversight and compliance with Federal requirements. Projects receiving TIFIA financial assistance are generally subject to the same requirements as all other Federal grant-funded projects. Thus, TIFIA financed projects must comply with Federal design criteria, program requirements such as DBE, Buy America, Form FHWA-1273, Davis-Bacon, NEPA, and many other requirements.

Refer to the Credit Programs Guide published by the Build America Bureau for additional information about the TIFIA program and the steps that the agency should take to ensure that its concessionaire will have access to TIFIA assistance. ¹⁸

2.4.5. Private Activity Bonds

The Build America Bureau also administers the PAB program allocation, which provides the use of tax-exempt private activity bonds for eligible surface transportation projects. Surface transportation PABs were first authorized in 2005 in SAFETEA-LU. ¹⁹ The PAB program authorizes U.S. DOT to allocate up to $15 billion in tax exempt PABs for qualified highway and rail-highway freight transfer facilities. In order to qualify for a PAB allocation, the activity must include a project receiving some level of Federal assistance under Title 23, U.S. Code (which may include receiving credit assistance under the TIFIA program) or be a freight transfer facility receiving funding under Title 23 or 49, U.S. Code. ²⁰ Once the allocation decision is made, the recipient of the allocation must comply with the provisions of the terms of the U.S. DOT allocation approval letter, which may include a time period for the use of the allocation, as well as the Internal Revenue Code requirements applicable to PABs.

As with any tax-exempt debt, PABs must be issued by or on behalf of a public entity authorized under applicable State law and regulations of the IRS to issue these types of bonds. ²¹ PABs cannot be directly issued by the private sector partner. Depending on State law, the agency, an economic development authority, or a nonprofit "63-20" corporation could be the issuer. (One method of reducing the borrowing costs to a private partner is to issue debt through a nonprofit public benefit corporation pursuant to Internal Revenue Service (IRS) Rule 63-20 and Revenue Proclamation 82-26. The nonprofit corporation is able to issue tax-exempt debt on behalf of private project developers.) Even though issued by a public entity or nonprofit, the issuer typically serves only as a "conduit" for purposes of issuing the bonds-the private sector partner is liable for repayment of the obligation.

PABs are particularly important to help reduce the cost of borrowing for P3 projects, especially for larger projects that will be financed from a stream of revenue during the operations and maintenance term of the P3. Again, PABs were part of the financing for all four of the projects described in Appendix B, as well as various other projects, with PABs amounts as follows:

• TxDOT North Tarrant Express: $274 million.
• TxDOT IH 635 Managed Lanes: $615 million.
• VDOT Capital Beltway High-Occupancy Toll Lanes: $589 million.
• Maryland Purple Line: $313 million.
• CHPTE U.S. 36: $20 million.
• Indiana Finance Authority Ohio River Bridges East End Crossing: $677 million.
• VDOT Elizabeth River Tunnels: $675 million.
• PennDOT Rapid Bridge Replacement Project: $721 million.
• CHPTE Central 70 Project: $121 million.

As with the TIFIA program, if the agency believes that the plan of finance for a proposed P3 project may rely on issuance of PABs, it is critical for the agency to engage with the Build America Bureau early in the procurement process to discuss the reasons a PAB allocation is appropriate. The Build America Bureau is also available to consult with the agency throughout the procurement process.

2.4.6. Railroad Rehabilitation and Improvement Financing

The RRIF program was established by the Transportation Equity Act for the 21st Century (TEA-21) and amended by the Safe Accountable, Flexible and Efficient Transportation Equity Act: a Legacy for Users (SAFETEA-LU). Under this program the FRA Administrator is authorized to provide direct loans and loan guarantees up to $35.0 billion to finance development of railroad infrastructure. Not less than $7.0 billion is reserved for projects benefiting freight railroads other than Class I carriers.

The funding may be used to:

• Acquire, improve, or rehabilitate intermodal or rail equipment or facilities, including track, components of track, bridges, yards, buildings and shops;
• Refinance outstanding debt incurred for the purposes listed above; and
• Develop or establish new intermodal or railroad facilities

Direct loans can fund up to 100 percent of a railroad project with repayment periods of up to 35 years and interest rates equal to the cost of borrowing to the government.

Eligible borrowers include railroads, State and local governments, government-sponsored authorities and corporations, joint ventures that include at least one railroad, and limited option freight shippers who intend to construct a new rail connection.

2.5. Federal Environmental and Regulatory Requirements

Refer to section 3.3 for a description of general requirements relating to Federal approvals required for transportation projects, as well as information regarding how to integrate the P3 process with the process for obtaining such approvals.

Footnotes

⁵ Best value procurements are discussed in detail in Section 4.1 of this Guide. See also S. Scott et al., NCHRP Report 561: Best-Value Procurement Methods for Highway Construction Projects (Washington, DC: Transportation Research Board of the National Academies, 2006). Available at: https://www.nap.edu/login.php?record_id=13982. [ Return to note 5. ]

⁶ U.S. Government Publishing Office. 23 CFR part 636 – DESIGN-BUILD CONTRACTING. Available at: https://www.govinfo.gov/app/details/CFR-2011-title23-vol1/CFR-2011-title23-vol1-part636. [ Return to note 6. ]

⁷ See S. Scott et al., NCHRP Report 561 (TRB 2006). [ Return to note 7. ]

⁸ Loulakis et al., Transit Cooperative Research Program (TCRP) Legal Research Digest 40: Issues Involving Surety for Public Transportation Projects (Washington, DC: Transportation Research Board of the National Academies, 2012). Available at: https://www.nap.edu/login.php?record_id=22738. [ Return to note 8. ]

⁹ M. Loulakis et al., NCHRP Legal Research Digest 68: Liability of Design-Builders for Design, Construction, and Acquisition Claims (Washington, DC: Transportation Research Board of the National Academies, 2015). Available at: https://www.nap.edu/login.php?record_id=22074. [ Return to note 9. ]

¹⁰ According to the American Bar Association website, 17 States have adopted the principles in the Model Procurement Code. See https://www.americanbar.org/. Refer to the NCHRP Best Value Report identified in note 5 for additional discussion regarding the Model Code. [ Return to note 10. ]

¹¹ 23 U.S.C. §119. [ Return to note 11. ]

¹² 23 U.S.C. §133. [ Return to note 12. ]

¹³ 23 U.S.C. §145. [ Return to note 13. ]

¹⁴ The CIG program is governed by 49 CFR Part 611 and the Final Interim Policy Guidance for Federal Transit Administration Capital Investment Grant Program (June 2016), which can be accessed at https://www.transit.dot.gov/sites/fta.dot.gov/files/docs/FAST_Updated_Interim_Policy_Guidance_June%20_2016.pdf. [ Return to note 14. ]

¹⁵ https://www.transit.dot.gov/funding/grant-programs/capital-investments/final-capital-investment-grant-program-interim-policy. [ Return to note 15. ]

¹⁶ The TIFIA subsidy authorization is used to fund the capital reserve required to be established for each TIFIA credit instrument. The capital reserve must be sufficient to cover the estimated long-term cost to the Federal Government of a Federal credit instrument, including any expected credit losses. The credit subsidy is calculated based on a credit evaluation performed by the Build America Bureau and the U.S. Office of Management and Budget. Congress funded this subsidy amount so each TIFIA loan borrower would not be required to pay the credit subsidy, thereby helping to reduce the cost of borrowing for TIFIA loans. [ Return to note 16. ]

¹⁷ See 23 U.S.C. §601 et. seq. [ Return to note 17. ]

¹⁸ The Credit Programs Guide (Transportation Infrastructure Finance and Innovation Act/Railroad Rehabilitation & Improvement Financing) is available at: https://www.transportation.gov/buildamerica/programs-services/tifia/program-guide. For an overview of the TIFIA program, see https://www.transportation.gov/tifia/tifia-credit-program-overview. [ Return to note 18. ]

¹⁹ See §11143, Pub. L. 109-59 (August 10, 2005). [ Return to note 19. ]

²⁰ 26 U.S.C. §142(m)(1). [ Return to note 20. ]

²¹ 23 U.S.C. §103(b)(1) and §141(e)(1)(A). [ Return to note 21. ]

 

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