2024-26210. Evaluation of the Appropriateness of Public-Private Partnership Project Delivery Including Value for Money or Comparable Analyses; Bipartisan Infrastructure Law

Exhibit 2—Definitions of Terms in This Proposed Guidance

Term	Definition
Public-private partnership (P3)	A long-term arrangement between a public sponsor and a private entity for delivery of a project that includes at least the following elements: design, construction, financing, and either operations or maintenance or both of the project over a term specified in a concession agreement (as defined below).
Agreement types:
Concession Agreement	An agreement between a public sponsor and private entity (e.g., concessionaire or developer) signed after a preferred bidder is selected or contract price is agreed upon. Other names for such agreements include P3 agreement, project agreement, project development agreement, and comprehensive project agreement. BIL section 70701(a) uses the term “Project Development Agreement,” which the Bureau interprets as a concession agreement.
Pre-development Agreement	An agreement between a public sponsor and private entity to develop and design the project further and finalize a committed proposal.
Contract types:
Long-term Contract	A contract between a public sponsor and a private entity to deliver a project, including some or all elements for design, construction, financing, operations, and maintenance over the concession term.
Short-term Contract	A contract between a public sponsor and private entity to deliver a project that does not include operations or maintenance.
Evaluation types:
Screening Evaluation	An evaluation that sets high-level criteria based on the public sponsor's project goals and objectives.
Qualitative Evaluation	Before detailed project scope, cost, and schedule are available, an evaluation that compares advantages and disadvantages of all practical conventional and alternative delivery options including public-private partnership delivery. The public sponsor documents the process for selecting the preferred delivery option based on the project's characteristics, feasibility, goals, and objectives.
Detailed Evaluation	An evaluation that compares all practical conventional and alternative delivery options to select the most suitable public delivery option and most suitable P3 delivery option and then estimates the likely quantitative outcomes of public and P3 options. Conventional VfM quantifies differences in financial outcomes to the public sponsor and evaluates other outcomes qualitatively. Detailed P3 evaluation may account for non-financial benefits such as differences in service levels for the public and costs to the public and society at large by use of benefit-cost analysis methodology. For example, if one delivery method results in an earlier start of operations than the other, the public will benefit earlier from higher service levels, which can be quantified in economic terms.
Federal financial assistance	Includes grants and loans from the Federal government to support infrastructure investment, not including private activity bond allocations and grants for technical assistance.
Major Project	A project funded with Federal financial assistance under title 23, United States Code, with a total estimated cost of $500 million or more and such other projects as identified by the Secretary of Transportation pursuant to 23 U.S.C. 106(h).
P3 procurement types:
Conventional P3 Procurement	Public sponsor seeks competitive, fixed price, and certain schedule bids from qualified bidders after the public sponsor completes a limited preliminary design of the project.
Progressive P3 Procurement	Through a competitive process early in project development, the public sponsor selects a qualified private entity to develop a project without a bid price.

3. Principles of P3 Analysis

The appropriateness of P3 delivery as an option should be evaluated during the early phases of the project life cycle (such as project identification and delivery option screening) and as the project progresses during project development and procurement. With better and more information available later in the project life cycle, and as the commercial and financial terms or assumptions change, the public sponsor should update the P3 evaluation by conducting detailed VfM to ensure a P3 model is still appropriate and in the public interest.

To ensure compliance with statutory VfM or comparable analysis requirements, the Bureau expects public sponsors to evaluate the appropriateness of, and value to be generated from, P3 project delivery at two decision points in the project lifecycle: (1) after project identification and before the project development phase, and (2) after the P3 procurement and before entering into a concession agreement between the public sponsor and private developer at commercial close. Exhibit 3 below shows these two decision points in a simplified P3 project lifecycle.

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The project life cycle presented in Exhibit 3 also applies to Major Projects under section 106(h) of title 23, United States Code, with an estimated total cost above $750 million that meet the other criteria under BIL section 70701. Additionally, under BIL section 11508, the Major Project financial plan for Major Projects being carried out through a P3 must include a detailed VfM analysis or similar comparative analysis. This analysis is submitted as part of the initial financial plan, or subsequent financial plan annual update where appropriate. For requirements applicable to Major Projects that do not meet these criteria, see FHWA's Major Projects guidance documents, available at https://www.fhwa.dot.gov/​majorprojects/​.

Observing principles derived from lessons learned and best practices helps public sponsors objectively analyze the advantages and disadvantages of delivering an infrastructure project through a P3. Following these principles also helps public sponsors communicate to the public the basis of their decisions. The next paragraphs describe principles public sponsors should incorporate into their analyses to support requests for DOT federal financial assistance.

A. Establish Delivery Option Goals. VfM provides insights to support decision-making, when the public sponsor defines goals related to the delivery method. Examples of delivery goals are maximizing use of innovative approaches and technologies, preserving flexibility for future improvements, and minimizing the taxpayers' near-term financial burden in subsidizing the project. Delivery goals may be different than project goals. Whether a project is likely to achieve project goals is better analyzed through techniques such as benefit-cost analysis or environmental or economic impact analysis, rather than VfM.

B. Identify Practical Delivery Options. After setting project delivery goals, public sponsors can then consider which delivery methods are likely to fulfill the identified goals. Sponsors can then narrow their choices by screening out impractical ones. For example, a public sponsor might have authority for some delivery methods and not others. Documenting the basis for rejecting a delivery method enhances credibility of the public sponsor's process.

C. Inform Subsequent Decisions. VfM analyzes tradeoffs between delivery options to identify the most suitable public delivery option and most suitable P3 option. The public sponsor can then determine whether the public or P3 option provides the most value relative to the established delivery option goals. The purpose of VfM is to inform selection of the project delivery method, not to justify project delivery decisions public sponsors previously made. Using VfM as intended, public sponsors will be able to show how the analysis preceded, and directly contributed to, the decision to advance the project with a P3 or other delivery approach.

D. Analytical Framework and Data. VfM involves predictions, projections, and assumptions. Public sponsors should (a) use actual, verifiable data, if possible, and (b) where predictions, projections, and assumptions are necessary, provide the methodology and basis for the inputs.

E. Transparency and Accountability. To the maximum extent practicable, public sponsors should make information available to the public, including (a) the project's delivery goals, (b) the information used in the VfM analysis, (c) how the VfM analysis was employed in the decision-making process, and (d) the decision-makers charged with selecting the final delivery method.

4. P3 Analysis Requirements

Several provisions in the legislation established or amended statutory P3 evaluation requirements. Applicability of these requirements depends on project size, source of funding or financing, phase of the project life cycle, and other attributes. In 2005, the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users defined the term major project, reduced the financial plan requirement threshold to $500 million, and required submission of project management plans.^[7] In 2012, the Moving Ahead for Progress in the 21st Century Act established the requirement to assess the appropriateness of a P3 for delivering major projects.^[8] The 2015 FAST Act established the requirement that public sponsors receiving credit assistance from the Bureau have conducted VfM or comparable analysis before deciding to advance projects as P3s.^[9]

Enacted November 15, 2021, the BIL established new, and amended prior, statutory P3 evaluation requirements.^[10] The BIL:

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• establishes a P3 evaluation requirement for projects with total estimated costs of more than $750 million. Sponsors of these projects are required to conduct VfM if they intend to seek TIFIA or RRIF credit assistance, are in a state in which there is a state law authorizing the use and implementation of P3s for transportation projects, and the project is anticipated to generate user fees or other revenues that could support project capital and operating costs.^[11] This provision of BIL further specifies the level of detail and specific elements to be included in this detailed P3 evaluation; ^[12]

• amends the requirements of section 106(h) of title 23 to require public sponsors of projects with an estimated cost of $500 million or more, receiving title 23 assistance, and intended to be delivered as a P3, to conduct adetailed VfM or similar comparative analysis; ^[13]

• stipulates reporting and transparency requirements throughout project delivery and following key project delivery milestones; ^[14] and

• adds VfM as a TIFIA eligibility criterion for projects to be carried out through P3s.^[15]

Exhibit 4 summarizes the statutory requirements for projects required to conduct a VfM analysis and the expected evaluation type based on the project delivery type.

Exhibit 4—P3 Evaluation Requirements by Project and Delivery Type

Project type	Delivery type	Required public sponsor P3 evaluation *
		Stage 1	Stage 1A	Stage 2
All transportation projects costing more than $750 million that generate user fees or other revenues carried out by certain public agencies in states with P3 authority, and seeking TIFIA or RRIF credit assistance 16	All delivery types, except progressive P3 Progressive P3	Screening Screening	n.a Qualitative	Detailed. Detailed.
Title 23 projects costing $500 million or more 17	All P3	Detailed.**
All projects proposed for P3 delivery and seeking TIFIA or RRIF credit assistance 18	Conventional P3 Progressive P3	Screening Screening	n.a Qualitative	Detailed. Detailed.
Notes:
* Stage 1: early in project development before starting the procurement process.
Stage 1A: for a progressive P3, before signing a pre-development agreement.
Stage 2: before signing a concession agreement with a private P3 entity, if a P3 delivery method is selected in Stage 1.
n.a.: not applicable.
** The Major Project financial plan for Major Projects being carried out through a P3 agreement must include a detailed VfM analysis or similar comparative analysis. This analysis is submitted as part of the initial financial plan, or subsequent financial plan annual update where appropriate. Project sponsors of Major Projects under 23 U.S.C. 106(h) should consider whether their project also meets the requirements of the other VfM requirements detailed in this guidance. If so, their projects would also be subject to the additional VfM requirements detailed in this guidance.