New D.C. Office Advises on Public-Private Partnerships
The Works

New D.C. Office Advises on Public-Private Partnerships

The city adds in-house expertise for these complex deals.

A new West End library is in the works in Washington, D.C., part of a P3 project. (Rendering: Enrique Norten/Ten Arquitectos)

D.C. public agencies looking to work with the private sector on infrastructure projects now have the support of a dedicated, in-house consultancy to help forge those deals: the Office of Public-Private Partnerships. Created by legislation introduced by Mayor Muriel Bowser when she was on city council in 2014, the office opened its doors four months ago.

Judah Gluckman, who helped draft the law and now serves as the office’s deputy director, says D.C., like most cities, is struggling to finance much-needed infrastructure projects and increasingly turning to public-private partnerships (or P3s) to make them happen. Several projects, for example, have leveraged the value of real estate by requiring private developers to incorporate public amenities like fire stations or libraries into their designs in exchange for the right to build. But these are often complicated agreements; no two are exactly alike, and public agencies often aren’t accustomed to making them.

“There was also a need, that if you were going to do this well, because these are complex deals, you really needed a base of knowledge and expertise in-house,” says Gluckman, “so you could structure these deals so that they worked out for the public sector as well as they often do for the private sector.”

The office will advise public agencies on which projects may be ripe for a partnership opportunity, solicit collaboration with private entities and help to structure the resulting deals. Having looked at best practices in the U.S., Canada and the U.K., Gluckman and Seth Miller Gabriel, the office’s director, determined that they needed to be an independent advisory, not aligned with any particular area of government such as transportation, public safety or education.

They also determined that the requirements of P3 deals often didn’t meld well with the city’s existing procurement standards. Those laws are based on relatively short-term contracts, but in a P3 deal, a private sector entity might not only design and build a project, but also maintain, finance and operate it. (“That’s the problem all too often, right,” Gluckman argues. “Governments are pretty good at building things, but when it comes time to find the operations and maintenance that’s sort of where they fall short. So that’s part of our hope, that doing P3s will ensure better maintenance of our facilities.”) As one of its first priorities, the office is seeking to streamline existing laws and to craft a new procurement process that allows a little more flexibility, so that not every aspect of a deal needs to be specified up front in the solicitation document.

“You can explain the performance outcomes, the level of service that you need in whatever facility or infrastructure you’re asking the private sector to build, but you’re not going to give every little specification such that it prevents them from really innovating and achieving some efficiencies that ultimately lowers cost of the project, maybe delivers it faster without actually lowering the quality in any way,” says Gluckman.

That’s exactly what’s happened in British Columbia. Sarah Clark, president and CEO of Partnerships British Columbia, told Governing that P3 hospitals were being completed so early — before operating funds had been allocated — that, “we had to limit how early they could be built.”

Those efficiencies are possible in a type of deal known as the availability-payment model, in which a private entity finances, operates, maintains, and sometimes builds and designs a project in exchange for periodic payments from a public entity based on performance. If the same entity is responsible for all of these components — and entitled only to a fixed payment — they may have a greater incentive to spend more wisely.

“In theory, so much of P3 from our perspective is predicated on lifecycle efficiency,” says Gluckman. In theory, because in the worst case scenario, public agencies are often on the hook in these deals when projects go over budget, rather than under. Another of the office’s roles will be to minimize public risk, so as to avoid botched partnerships like the Chicago parking meter deal, which shorted the city $1 billion.

Several states, including Pennsylvania, Washington, Florida, Virginia and Texas, already have offices dedicated to brokering P3 deals. Gluckman says many focus on transportation infrastructure, which has been a common market for P3s. In some ways, the closest to the D.C. model is the Chicago Infrastructure Trust, created by Mayor Rahm Emanuel in 2012. The nonprofit agency is also intended to focus on both “soft” and “hard” infrastructure. But the Trust has seen significant challenges, failing to deliver on promised projects, and ultimately getting a near complete overhaul of its leadership.

Gluckman says even with a more flexible procurement process, there will still be plenty of oversight over D.C.’s office. Before it even puts out an RFP, the city council will need to approve its issuance. Right now the staff of two — just Gluckman and Gabriel — are working on putting the rules and guidelines in place to implement the law. They’re also reaching out to private sector developers and investors and educating public officials on how these deals could benefit their agencies.

The office is so small because the goal is to serve as an adviser to the “owner agencies,” not to carry the full load. “What we’re really trying to do is build technical capacity in all of our major agencies,” he says. Gluckman says there’s definitely a mixture among public sector officials of relief — at having assistance with the deals — and apprehension, among those who aren’t sure yet how it will meet their needs.

Still, he thinks these offices will become more common in cities. “As federal funding becomes less reliable, as budgets become tighter, I think we’re increasingly looking to the private sector.”

The Works is made possible with the support of the Surdna Foundation.

Jen Kinney is a freelance writer and documentary photographer. Her work has also appeared in Philadelphia Magazine, High Country News online, and the Anchorage Press. She is currently a student of radio production at the Salt Institute of Documentary Studies. See her work at jakinney.com.

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Tags: washington dcpublic-private partnerships

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