Procurement process

Relevant procedure

What procedures normally apply to a PPP procurement? What evaluation criteria are used to award a PPP transaction?

Generally speaking, statutes (or regulations issued thereunder) include planning and approval processes for PPP projects to determine in the first instance whether the project is worth pursuing. Statutes differ on how this process is performed, mostly based on whether a dedicated PPP authority exists or not. In some states, this process is also involved with respect to unsolicited proposals. Once the relevant authority has decided to procure a project under the PPP model, generally, a public bidding process is required under the applicable legislation. The most commonly used process involves a solicitation for expressions of interest together with a submission of qualification, following which the procuring authority selects a shortlist of bidders to which a request for proposals is issued. It is customary for the procuring authority to request comments and invite commentary by the shortlisted bidders before formally issuing the final request for proposals.

Evaluation criteria vary from state to state. In some cases, a specific set of factors must be evaluated. In others, the generic best value for money test (in addition to satisfying the technical requirements of the project) is used.

Consideration of deviating proposals

May the government consider proposals to deviate from the scope or technical characteristics of the work included in the procurement documentation during the procurement process, without altering such terms with respect to other proponents? How are such deviations assessed?

Many jurisdictions within the United States allow proposers to offer alternative technical concepts on a confidential basis and it is a common feature in many of the current PPP procurements. The procuring authority may accept these deviations and determine whether it will indeed receive better value for money by accepting the deviations, while at the same time satisfying the expected outcome from the original technical requirements. After receiving the confidential proposal, in advance of the proposer’s bid, the authority would then analyse if it is willing to accept it or not, based on value for money offered and satisfaction of its expected goals. Typically, before performing such an analysis, the authority will receive the confidential proposal and decide whether it indeed constitutes a deviation or not.

Unsolicited proposals

May government parties consider unsolicited proposals for PPP transactions? How are these evaluated?

Some PPP statutes, particularly in the most active states in the PPP market, permit receipt of unsolicited proposals. The proposal is, in most cases, subject to an analysis similar to that of projects that the states propose by themselves. If the authority decides to proceed with the project as proposed, it then has to proceed through the same procurement process as if it had proposed the project itself. In some cases, the proponent is entitled to either credit in the evaluation of the proposals or to a special stipend for its work.

Government stipend

Does the government party provide a stipend for unsuccessful short-listed proponents or otherwise bear a portion of their costs?

In the case of some states, the procuring authority is permitted to offer a stipend. Where this is permitted, the stipend is customarily paid to the extent that the unsuccessful proponents agree to assign their work product related to their bid to the procuring authority, which can then incorporate it into the project at hand or other projects.

Financing commitments

Does the government party require that proposals include financing commitments for the PPP transaction? If it does not, are there any mechanisms during the procurement process to ensure that the applicable PPP transaction, once awarded, is financeable?

It is customary in the United States for the procuring authority to require evidence of availability of financing as part of the proponents’ bids. Most commonly the requirement is to deliver financing commitments.

Legal opinion

May the government ask its counsel to provide a legal opinion on the enforceability of the PPP agreement? May it provide representations as to the enforceability of the PPP agreement?

Typically, in the United States, the public entity does have its counsel provide a legal opinion and provide representations regarding the enforceability of the PPP agreement.

Restrictions on foreign entities

Are there restrictions on participation in PPP projects by foreign entities? May foreign entities exercise control over the project company?

Generally speaking, there are no specific restrictions regarding participation by foreign entities in PPP projects or controlling the project company. However, foreign investment in an infrastructure project could be subject to review by the Committee on Foreign Investment in the United States (CFIUS), which conducts national security reviews of foreign direct investment into the United States. While the process is currently voluntary (unless an investment meets the criteria of a pilot program involving critical technologies), CFIUS could take an interest in, request a filing with respect to, or even unilaterally initiate a review of an investment that raises particular national-security concerns. This could happen in the case of infrastructure projects depending on such factors as whether the underlying infrastructure is considered critical, the amount of control that the private entity will exercise, whether the private entity is controlled by a foreign government, whether the transaction involves personal data of US citizens, and whether the infrastructure services important or sensitive US government facilities. CFIUS can impose mitigation measures on such investments if it identifies unresolved national security concerns, and in the most serious cases, it can refer the case to the president of the United States to block or divest the transaction. The Exon-Florio provision (Title V, Section 5021 of the US Code, 23 August 1988), amended by the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), establishes a list of factors that the president must analyse in making a determination. In September 2019, CFIUS published draft regulations for public comment to fully implement FIRRMA’s provisions. The regulations include provisions that would expand CFIUS’s jurisdiction to cover certain non-controlling investments in US critical infrastructure as well as certain real estate transactions that do not necessarily include US businesses. A final version of the regulations will be published and go into effect no later than February 2020.