Minnesota Department of Transportation

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Alternative Transportation Finance

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MnDOT project to lay groundwork for P3 financing

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By ATF Staff

MnDOT is getting organized to procure a robust public-private partnership project that could pave the way for future private investment in the state’s transportation infrastructure.

Under legislation enacted in 2012, the department is authorized to undertake one P3-funded pilot project on the trunk highway system. The law allows the department to enter into agreements with governmental or nongovernmental entities — including private and/or nonprofit organizations — to finance or invest in the project, including repayment agreements.

Before a major P3 project can go forward, however, MnDOT first has to lay the groundwork by defining the elements of a sound P3 procurement process. To that end, the department is working with consultants on a project that will establish a clear process, policy and regulatory framework for P3.

“This overarching process will be a practical step in developing the state’s P3 program,” said Phil Barnes, the department’s alternative finance lead. “Each element of the procurement process, the internal organization to support it, and guidance material for its implementation is needed to successfully attract private investment in transportation projects.”

The project will help establish a common understanding of P3 and its associated procurement processes. It will also help MnDOT see innovations in more traditional projects, as well as begin to attract interest from the private sector.

Barnes said MnDOT stands to learn a number of valuable lessons from the project, including the roles of public and private partners in P3 transactions, the structure of P3 contracts, sample procurements processes from other states, and how this all fits with the current legal framework.

“Our goal is to develop a schematic procurement process appropriate for Minnesota,” he said. “We will also discuss at a high level something called a value-for-money analysis (VFM). The VFM assessment process has been used by various public agencies worldwide as a tool to compare the viability of pursuing a project with a traditional procurement approach with a P3.”

Barnes said the ultimate goal is to create an equitable and transparent process that will make a business case for a procurement method and stand up to scrutiny.

“I am dedicated to preparing the department for requests to evaluate non-traditional funding sources for projects,” Barnes said. “To accomplish this, the P3 project will engage key stakeholders and define the elements of a sound P3 procurement process for Minnesota that would be a basis for a more technically robust ATF program.”

Posted 3/29/2013

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