What Worked: Creating an Award-Winning Local P3 Project.

• Author: Sun, Holly

Howard County, Maryland, officials expected their first public-private partnership (P3) project to go well--but they didn't necessarily expect to win three international awards for it.

The county undertook its first availability-payment structured municipal courthouse project--only the second to reach financial close in the United States--in 2017. They were obviously doing something right, so what worked? County officials boil it down to four points:

1 | The public was engaged with the project and had a clear understanding of why this type of P3 was appropriate.

2 | The county achieved upfront political consensus with commitment in the form of legislation.

3 | The county and its partners put together a strong team--both internally and externally--and gave them designated time to work on the project.

4 | County officials made sure that all stakeholders understood the features of the P3 procurement and that the team addressed them all adequately.

Since local government social infrastructure P3 projects are still relatively new and rare in the United States, this article will share some of the experiences and lessons Howard County learned from this award-winning project.

AN OVERVIEW

The history. Howard County's existing Circuit Courthouse was built 176 years ago. Despite a few renovation efforts over the years, the building had become increasingly inadequate to handle security, space, and technology needs, so in 2016, elected officials decided to build a new courthouse. Based on preliminary projections, the project was expected to be one of the largest capital projects in the county government's history (other than high schools).

The process. In fall 2016, county staff started looking at project delivery approaches, including P3s, and soon hired a financial advisor through a competitive bid process to help examine options. A citizen advisory body called the Spending Affordability Advisory Committee (SAAC) reviewed the initial analysis and made recommendations to elected county officials. After this stage, the county council adopted a resolution to approve the use of a design-build-finance-operate-maintain (DBfOM) format for project delivery and approved the project in its capital improvement project budget, authorizing general obligation bonds for partial public financing. An Industry Day conducted in June 2017 attracted potential bidders from all over the world, kicking off a procurement process that ran through October 2018, when commercial and financial close were achieved simultaneously. (See Exhibit 1 for the project schedule.)

The P3. The estimated capital cost of the new, 238,000-square foot courthouse was approximately $150 million. Under the P3 agreement, a project company is responsible for the design, construction, partial (private) financing, and operating and maintenance of the new building for 30 years. The county will make a milestone payment of $75 million as partial (public) financing for the construction, along with monthly availability payment to the project company during the 30-year period, based on the contract.

The awards. In October 2019, Howard County won three awards for its new courthouse project at the P3 Awards 2019 Conference in New York. These awards, granted by a panel of more than 80 industry experts, included Gold for "Best Social Infrastructure Project," Gold for "Best Financial Structure," and Silver for "Government Agency of the Year." Factors that stood out during the judging process included the project's well-structured procurement--11 months from request for proposal (RFP) to financial close, innovative financing, design, and sustainability.

PUBLIC ENGAGEMENT AND A CLEAR UNDERSTANDING OF "WHY"

Howard County's SAAC consists of 20 to 25 residents with different areas of expertise and diverse backgrounds. This committee typically meets during January to February to provide data-driven analysis with guidance and recommendation on the upcoming fiscal year's budget. In November 2016, the county executive requested the committee to analyze courthouse delivery options and make recommendations regarding whether to use a traditional project delivery approach or some form of a P3 approach.

After thoroughly reviewing four financing and delivery options, with help from a financial advisor, the committee unanimously recommended a hybrid P3 (DBfOM), based on the following comparative benefits:

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