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6 Conclusions

Based on the research and interviews conducted for this study, public agencies are incorporating a variety of mechanisms to enhance opportunities for early involvement of the private sector in the project development process. While these mechanisms are fostering development of better projects through increased information sharing, greater technical and financial innovation, and improved risk management, it is unclear if these mechanisms have expanded private investment in P3s. The lack of clarity may be partly due to the extent to which different mechanisms have been tested. The frequency with which these mechanisms have been used varies widely, with some practices - such as industry forums - being employed almost universally, while other practices, such as use of Pre-Development Agreements (PDAs), having only a limited track record in the United States.

Table 6-1 summarizes the potential effects of the different mechanisms examined in this study. Broader knowledge and adoption of some of these mechanisms would provide potential benefits. The majority of the mechanisms have the potential to foster positive effects by adding value, reducing schedule and cost, and managing risk. Such effects are denoted in the table in blue and through the use of plus (+) signs. With some mechanisms, there is potential that the benefits of early private sector involvement could be countered by reduced competition or other negative effects. Such effects are donated in the table in red and through the use of minus (-) signs. The magnitude of these potential effects is indicated by the intensity of the blue and red shading in individual cells.

As indicated in Table 6-1, one of the key tradeoffs that public agencies may encounter in employing some early involvement mechanisms with P3 projects is the potential for reduced competition. The increased information sharing between private and public sectors associated with early involvement mechanisms may reduce competition, particularly when the procurement process "locks in" a private entity at an early stage. This may diminish the creative tension that results from competition. Conversely, early "lock-in" may result in positive synergies by reducing the private sector's perception of risk, which could increase its willingness to invest.

Early involvement requires an additional investment of time and resources early in the project development process, but it has the potential to produce a better defined and more financially feasible project. This dynamic may also produce efficiencies later in the process, expediting project implementation.

Table 6-1. Potential Effects of Early Involvement Mechanisms

Involvement Mechanisms	Add Value & Foster Innovation	Maintain or Reduce Cost & Schedule	Maintain or Increase Competition	Reduce Public Sector Risk	Reduce Priate Sector Risk
Planning to Procurement
Program Development and Project Screening	High (+)	Medium (+)	Low/No	Low/No	Low/No
Industry Forums	Medium (+)	Low/No	Low/No	Low/No	Low/No
Market Sounding	High (+)	Low (+)	Low/No	Low/No	Low/No
RFIs	High (+)	Medium (+)	Low/No	Low/No	Medium (+)
Unsolicited Proposals	Medium (+)	Medium (+)	High (-)	Low (-)	Low (+)
PDAs/MDAs	Medium (+)	Medium (+)	High (-)	Medium (-)	Medium (+)
Risk Workshops	Medium (+)	Low (+)	Medium (+)	Medium (+)	Medium (+)
Collaborative Evaluation of Alternatives	Medium (+)	Low (+)	Low (-)	Medium (+)	Medium (+)
Progressive Design-Build	Medium (+)	Medium (+)	Medium (-)	Medium (+)	Low (-)
Procurement
Industry Meetings	Medium (+)	Low/No	Low/No	Low/No	Low/No
Multi-Stage Procurement	High (+)	High (-)	Medium (+)	Medium (-)	High (-)
Multiple P3 Delivery Procurements	Medium (+)	High (-)	Medium (+)	High (-)	High (-)
ATCs	High (+)	High (+)	Medium (+)	Medium (+)	Medium (+)
Interweaving	Medium (+)	Medium (+)	Medium (-)	Medium (+)	Medium (+)
Sole Source Procurements	Low/No	High (+)	High (-)	High (-)	Medium (+)
Post-Procurement
Lender Engagement	Medium (+)	Low/No	Low/No	Low/No	Low/No
Competitive Stipends	Medium (+)	Low/No	Medium (+)	Medium (+)	Medium (+)

Legend	Positive	Negative
High	High (+)	High (-)
Medium	Medium (+)	Medium (-)
Low	Low/No	Low (-)

6.1 Increasing the Consideration for Early Involvement of the Private Sector in P3s

Based on the findings reported in this Discussion Paper, public project sponsors considering early involvement of the private sector in the development of P3 projects may consider the following successful practices:

• Mechanisms for private sector involvement are identified and incorporated early in the project development process. Strategies likely to yield the greatest overall benefit are identified early in the project development process. Before pursuing these strategies, the public agency is aware of potential trade-offs regarding early private sector involvement, is cognizant of the statutory, legal, regulatory, political, and financial barriers which limit their potential application, and develops a strategy to address and overcome these barriers.
• Assessment of alternative project delivery options is valuable early in the project development process (e.g., prior to preliminary engineering). This is particularly valuable for projects over a certain project size (e.g., $100 million to $300 million) and can result in the avoidance of project development and early design costs that might not be necessary if a P3 delivery model were selected.
• Early involvement mechanisms are aligned with the objectives of the P3 procurement process. Early involvement of the private sector can assist public agencies in their due diligence review to achieve project development and financing goals.
• Procurement rules are well defined and not overly prescriptive. The private sector representatives interviewed for this discussion paper recommended that the procurement rules should be sufficiently flexible to allow for and encourage potential innovations.
• Greater information sharing and innovation are balanced with the potential for reduced competition. To the extent that strategies for early private involvement may adversely affect competition as the procurement process advances, steps are taken to ensure that the earliest parts of the procurement process stimulate adequate competition.
• The public interest is prioritized, while still focusing on enhancing financial feasibility and encouraging private sector innovation. Public officials interviewed for this paper suggested that early involvement strategies are carefully calibrated to preserve the public interest while giving the private sector sufficient opportunity to design and develop a financially feasible transportation project within existing legal statutes and procedural guidelines.
• Early involvement strategies consider risk and resource utilization. Representatives from the both public and private sector emphasized that adequate staff time and financial resources need to be devoted to early risk identification.
• Early involvement mechanisms maintain transparency while preserving the confidentiality of sensitive business information. Private sector representatives are mindful of the amount of information that can be shared with the public sector given the legal transparency requirements, the loss of potential competitive advantages, and the impacts to their future negotiating position with the procuring agency.
• The exchange of information does not confer a competitive advantage. Public sector officials are concerned that early private sector involvement may give one or more firms an unfair competitive advantage due to unbalanced information, or confer a "head start" advantage. They should carefully consider how much project related information can reasonably be exchanged, and the optimal point in the planning and procurement process for sharing this information.

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