Chapter 4 evaluates possible approaches for: (i) leveraging early identification of refinancing opportunities that may be acceptable to lenders in the post-procurement phase; and (ii) leveraging early identification of competitive stipends that would be provided post-procurement to encourage developer participation. While implemented post-procurement, these mechanisms are intended to encourage developer participation early in the procurement process.
| Mechanism | Description | Examples |
|---|---|---|
| Early Lender Engagement | Lenders are engaged early in the procurement process to build in opportunities for refinancing and/or refunding of developer and/or public equity in the post-procurement phase. |
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| Competitive Stipends to Unsuccessful Proposers | The private sector is made aware early in the
project
development process of competitive stipends to be awarded post-procurement as incentive to motivate private sector interest and to confirm public sector commitment. |
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Early lender engagement can assist project developers and clarify lender expectations regarding opportunities for refinancing and/or refunding in response to changing financial conditions that may occur post-procurement.
Advantage. Early lender engagement may preserve the project developer's flexibility and enhance lender confidence up-front during project procurement by identifying mechanisms for refinancing and/or refunding that may be pursued post-procurement. Lender feedback regarding financial feasibility can result in changes in project design that increase bankability and private sector interest.
Disadvantages. This mechanism may create reliance on future refinancing or cash-out opportunities that may be vulnerable to changing financial market conditions in the future.
Applications. An example of this approach is the Transportation Infrastructure Finance and Innovation Act (TIFIA) loan review and negotiation process, which can occur prior to, during, or after project procurement.
Under this approach, stipends are offered to partially compensate prospective developers for the cost of their proposals. Stipends also serve as consideration for the intellectual property rights associated with such proposals, so that project sponsors may use information in unsuccessful proposals. Depending upon the degree to which information is considered proprietary, proposers may decline the stipend to prevent their competitors from obtaining access to the proprietary information.
Advantages. Competitive stipends demonstrate the project sponsor's commitment to the procurement process and partially offset the substantial cost associated with preparing a compliant P3 proposal. Both effects can potentially encourage early participation by developers and thereby foster competition.
Disadvantages. Depending upon the number of unsuccessful proposers that are eligible, this approach may increase the public agency's procurement costs and requires the agency to make allowance for the number of potential stipends in its procurement process.
Applications. Stipends may be necessary to stimulate increased private sector interest in taking on the competitive risk in preparing a costly proposal. To keep the process manageable and cost-effective, the procuring agency may choose to limit the shortlist to no more than five of the highest ranked proposers.
