Early, Practical Steps for Public Owners to Build Better Partnerships and Support Successful P3 Project Delivery

A foundational best practice in the world of public-private partnerships (P3s) is to focus on and value the benefits of relationship building between the public- and private-sector partners. This is readily apparent during project delivery, where a partnership can often become strained, potentially diverging into contentious, when partners lose touch with the value of the relationship they built (or should have built). The value proposition of a P3 is maximized at alignment of interests, and when interests are misaligned, this value falls away.

Not enough attention is paid to the steps that public owners can take to set a solid foundation before there is even a private partner in the picture. Little more than some internal discipline is required; it starts with the public owner itself.

Focused, honest, early development efforts, and thoughtful and meaningful goal and objective setting sets the right tone in early communication with industry participants (prospective private partners). When the procurement is underway, submittal requirements and evaluation criteria that align with those thoughtful goals and objectives solidify the value of pre-partnering efforts, all signaling the payoff of investment in a strong partnership posture for the project.

Identify Thoughtful Goals and Objectives

Owners typically develop goals and objectives through an inter-disciplinary, collaborative process involving internal and, occasionally (and wisely), external stakeholders. Sometimes development of thoughtful goals and objectives includes reviewing prior comparable procurements or projects and identifying lessons learned at various stages of project delivery.

Well-prepared procurement documents include the goals the owner seeks to accomplish for the procurement, the project, and/or the selected delivery approach. An owner’s development and articulation of its project goals will leave a lasting impact on a project. If thoughtfully carried out, it will also lay a solid foundation for early project decision-making and set the project on a path toward successful delivery.

It is common for public owners to include the typical P3 catchphrases and buzzwords in their project goals (e.g., “harness private sector innovation,” “efficiently allocate risk,” or “accelerate project delivery,” etc.). Though attractive, generic project goals lack specificity, obscuring what the public owner actually intends to accomplish (or worse, telegraphs that the owner does not what it is trying to accomplish). This ultimately leads to misalignment between the public and private partner, where the private partner/bidder takes these goals seriously or elects to move on to other opportunities, sensing a lack of direction from the owner.

Even thoughtful goals may merit further examination and refinement. For example, an owner’s goals may include improving cost controls and cost certainty by minimizing change orders and overruns. This is a goal that any owner and project team can rally behind, but it offers little value with respect to the project at-hand and the potential partnership proposed to be entered into. How does a prospective bidder meaningfully bid to a goal that is predominantly internal to and controlled by the owner? How does the owner intend to improve cost control and cost certainty for the project? Were change orders and overruns a challenge in past projects and if so, what lessons were learned? Were the identified challenges bidder-based or were they a result of internal project administration? These are the types of questions an owner should be asking as it develops its goals in order to maximize their utility throughout project development and partnership formation. Perhaps the goal is not just to “accelerate project delivery” but to deliver the project (or specified phases or components of the project) by Q3 of 2022 for reasons X, Y, and Z. Similarly, in what specific substantive area, or as a solution to what kind of issue(s), is the public owner keen to harness innovation proposed by the private sector?

A more thorough, intentional inquiry will enable the public owner to produce project goals that are more tailored to the project, project delivery, and the specific issues a project proposes to solve. Tailored goals that present opportunities for bidders to offer their qualifications and solutions makes for a meaningful pursuit and affirms a partnership posture at the outset.

Set the Right Tone with Industry Participants

In some cases, public owners communicate their goals and objectives to industry participants prior to a procurement in the form of external or public-facing communications. In crafting such communications, public owners must ensure that each interaction with the private sector sets the right tone for the partnership. While the form of early communications can vary greatly—frequently asked questions on a public-facing project website, community meetings, industry forums, market soundings, or even issuance of a Request for Information (RFI)—effective communication by a public owner is critical to project success during the early stages of delivery.

For some projects, owners may issue a Request for Information (RFI) or conduct market sounding interviews prior to commencing a procurement. An RFI provides basic project and background information as context for the decision-making environment and poses substantive questions for industry response. Market soundings are less formal interactions soliciting similar feedback from likely interested or implicated parties. Both an RFI and market soundings can be useful tools for owners to obtain industry feedback on discrete issues or substantive topics that are pending final decision-making by the owner. Less attention, however, is paid to what the owner may be implicitly communicating in an RFI (or in conducting a market sounding) and the impact this may have on the prospective partnership. It would be shortsighted for a public owner to undertake either an RFI or a market sounding process where industry feedback would have no impact on an owner’s decision-making, or where these efforts are undertaken for publicity purposes (primarily or solely). Furthermore, this also fails to appreciate the opportunity that an RFI and market sounding each present for partnership building. RFI responses and industry meetings arising in connection with or apart from an RFI process are typically the first opportunities for industry participants to directly engage with owners. Owners should pay careful attention to utilizing pre-procurement interactions like an RFI or market sounding to ascertain genuine and key decision-making information from the industry to set the right tone for the procurement, project, and partnership.

Industry forums are another useful tool that owners can use to set the right tone. Usually, industry forums occur before the owner has issued any procurement documents. These industry forums, the RFI process and other pre-procurement communications discussed earlier, offer private partners the opportunity to gauge the extent and quality of the owner’s pre-development work. The easiest assessment is that of the owner’s goals: are they vast and misaligned with the project? Do they communicate a view that the private sector partner is to solve all problems? Do they reflect precision and thoughtfulness, such that the owner understands the risks and how to share them? As a foundational matter, does the owner really know what it wants? Through early interactions such as these, owners can see which potential private sector partners are keying on goals and objectives, and which are not. The value of this interaction—owner preparation and private sector proper focus—is the earliest sign of the parties’ investment in and alignment on and fundamental value of the prospective partnership approach.

This notwithstanding, public owners can—and should—reconsider goals, objectives, even scope and timing, as a result of partnership-affirming interactions with industry participants. During the course of a procurement, it is generally understood that decision-making is ongoing and subject to further development as the project progresses toward implementation. Owners will typically address this point during any presentations or include language on this point in any presentation materials. Owners should be guided by goals and objectives but will ultimately be making decisions. Thoughtful outcome and goal-driven preparation and focus reduces the risk of inconsistent information overall. Inconsistency regarding key procurement issues, the prospective partnership, and significant impacts to the risk profile of a project can make it difficult for prospective proposers to take the step to submit a Statement of Qualifications (SOQ) or a proposal. This is particularly true where an owner is communicating information that raises significant concerns about a project’s viability, or perhaps even the level of political risk attached to a project. Submission of an SOQ or proposal is a very real financial decision for bidders, and a decision to submit should be the first thing valued by owners in setting the partnership-affirming tone.

Again, this does not mean an owner needs to have everything figured out. But this does mean that owners should be intentional with each opportunity to engage with industry participants, and fully appreciate that one or more of them might be a future partner.

Invite Meaningful Participation through Goal-Driven Submittal Requirements and Evaluation Criteria

Ultimately the goals an owner identifies should be translated into the submittal requirements and evaluation criteria included in the Request for Qualification (RFQ) or a Request for Proposals (RFP), providing owners with the opportunity to invite meaningful private sector participation. The hallmark of an effective procurement is that goals drive submittals and the vision for the project solicited.

Accordingly, the submittal requirements and evaluation criteria are the heart of an effective procurement package and are where private partners get a glimpse of how the owner sees the goals fitting into project delivery. On the owner side, significant time and resources are spent building the framework of the submittals and evaluation regime and on the private side, significant time and resources are spent preparing responsive SOQs and proposals. With that investment, a clear signal that project goals drive submittals is partnership-affirming.

Public owners should craft the submittal requirements and corresponding evaluation criteria included in an RFQ and RFP with an eye toward the ultimate determinations to be made by the public owner at each stage of the procurement: (1) what qualifications does the prospective private sector partner need to support the public owner’s identified and articulated goals, and (2) what information is needed for the public owner to determine which qualified proposer offers the solution that best assures the public owner that the final result will achieve the identified and articulated goals. Goal-driven document drafting sounds deceptively simple and yet there are project-specific nuances, market knowledge, and owner preferences that each have their own utility in the submittal requirement/evaluation criteria development process.

For example, some procurement documents will include as a submittal requirement “’X’ years of experience performing a comparable scope of work.” Not unlike the prospective bidders’ assessment of the owner’s articulation of goals, it should be clear to prospective partners that a requirement or submission points to assessment of the likelihood of goal achievement. Here, this submittal requirement can be more thoughtfully conveyed by looking at what is meant by “comparable,” and what the driving forces behind a comparability determination are. In the context of higher education, owners can answer this question of comparability a number of different ways:

• Nature of the project assets (e.g., student housing, educational facilities, student union, etc.);

• Cost, including the dollar amount of the design, construction, operations, and maintenance, or the amount of private financing injected into the project;

• Geography, to the extent the owner values private partner regional P3 experience;

• Unique features of the project scope (e.g., artwork integration, revenue component, or certain stakeholder interfaces); and

• Anticipated peculiarities or areas of particular concern or focus valued by the owner.

This is not to suggest that all submittal requirements should be excessively detailed. In fact, too much detail and specificity can detract from the value proposition of P3 delivery generally, and expertly crafted submittal requirements are useless if no (or not enough) private sector entities can be responsive to them. An excellent development approach (and efficient use of resources) is for owners to challenge candidate submittal requirements by asking whether a response places the owner closer to making a determination of whether a particular private sector partner is offering information or a solution that will achieve the owner’s identified goals.

Submittal requirements and evaluation criteria optimally go hand-in-hand. Perhaps an owner’s previous procurement included a submittal requirement that was not weighted heavily enough, or a submittal requirement that was weighted too heavily. Ultimately, the evaluation criteria should accurately reflect the owner’s values and those values really are, or should be, byproducts of the owner’s goals and objectives.

In conclusion, it is important for an owner not only to invest the time to identify its goals upfront but also to understand the value of having thoughtful, precise goals guide the owner in its decision-making and communications at various milestones of the procurement and partnership. This series examined three practical steps that public owners can take to build better partnerships and support successful project delivery.

• Identify thoughtful goals and objectives.

• Set the right tone with industry participants.

• Invite meaningful participation through goal-driven submittal requirements and evaluation criteria.

Ultimately, the more confidence and clarity an owner has about the goals identified, the easier it will be to convey those goals and ensure that, from the beginning, the owner and prospective private sector partner are focused on the project together—as partners.

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Racquel A. Muindi is an associate in the P3/Infrastructure Group at Ballard Spahr LLP, focusing her practice on advising private and public sector clients on complex P3/infrastructure, energy, and project finance matters within the transportation, transit, utility and social infrastructure spaces. Racquel advises clients on key issues and complexities surrounding project development and structuring, procurement, bid preparation, financing and project delivery. Read more about Racquel, and connect with her on LinkedIn.