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How P3 Procurement Works

Given the risks and complexity involved in using nontraditional methods of transportation project delivery, choosing the best partner(s) requires due diligence on the part of the public sector. Because of the size, complexity, and length of term of P3 agreements, special procurement processes are needed to ensure that there is sufficient and qualified competition.

Public agencies may use unsolicited proposals as a way of accessing private sector ideas about potential projects that could be commercially viable. Agencies that allow unsolicited proposals have developed various processes to introduce competitiveness and transparency into the procurement process.

A public agency may conduct industry outreach to gain a better understanding of private sector capabilities and interests with regard to a particular project. This process may occur prior to the procurement process or once an agency has selected a short list of qualified bidders. This can help an agency understand how to structure a commercially viable project that will generate competitive bids. Agencies may hold information sharing meetings or workshops with industry representatives to describe the basic attributes of the project and of the potential agreement and to obtain participant feedback.

To create a competitive and fair procurement environment, agencies often use a multi–stage, "best value" procurement process that includes a request for qualifications, followed by a request for proposals and then by negotiations with the preferred bidder. Bid selection can be based on different criteria, such as the dollar value of the offer, the lowest subsidy or availability payment required, the lowest proposed length of the concession term, or the lowest net present value of gross revenues required. The selection of the preferred partner may be based on the bid price in conjunction with qualitative factors ("best value").

Negotiations with the preferred bidder can allow both parties to establish a mutually agreeable, project-specific solution to issues identified after the procurement process. This requires skilled legal counsel with expertise in developing long-term, enforceable agreements between the public and private sectors. The negotiation process can help to ensure mutual understanding of both parties regarding the details of an agreement and the smooth implementation and oversight of a project.

Source: FHWA (PDF)