Public-private partnerships (P3s) are a method of alternative procurement for government infrastructure projects. Rather than following the traditional design-bid-build process in which each procurement step is separately contracted for by a government agency, two or more of those steps are combined for improved efficiency and risk transfer. The result is a procurement method that is generally faster and less expensive for delivery of infrastructure projects.
Government agency procurement laws are typically legislated at the state level, although some local home-rule jurisdictions have also adopted their own rules. In California, there are a number of statutes authorizing P3s for various types of infrastructure projects. This post concerns one of those statutes, the California Infrastructure Finance Act (IFA), codified at Government Code §§ 5956 et seq. That act provides one of the most broad and flexible authorizations for P3s in the state, although there are limitations on its applicability as well. The IFA is particularly useful for water and wastewater infrastructure projects, which are the focus of this blog.
The IFA was adopted by the California Legislature in 1996 to authorize the use of private financing for government infrastructure projects. The statute does not require the use of private financing, however, and allows the private entity or entities in a P3 to “study, plan, design, construct, develop, finance, maintain, rebuild, improve, repair or operate” the project. The main limitations are that the infrastructure project must be fee-producing (not a hard requirement for most water or wastewater projects to meet), that the project may not include any state funds, and that the length of the P3 contract may not exceed 35 years. Overall, the IFA is a very useful statute for implementing P3s. Perhaps the greatest limitation of the IFA is that so few local government agencies are aware of or understand it.
For more information on the IFA, please see the slideshow below that I presented at a meeting of the National Council for Public-Private Partnerships (NCPPP) last week. If you have specific questions about the IFA, please comment below or contact me directly.