A Review of Maryland’s Public Private Partnership Law

The following article on Maryland’s Public Private Partnership Law was provided by Earl Adams, Jr., of Counsel in the Baltimore and Washington, DC offices of DLA Piper and formerly the Chief of Staff to Lt. Governor Anthony Brown. He can be reached at earl.adams@dlapiper.com.

During the 2013 session, the General Assembly passed and subsequently the Governor signed into law Maryland’s Public-Private Partnerships bill (HB 560). The idea behind the bill was to give several of Maryland’s agencies a tool to work on the state’s infrastructure needs, including road improvements, bridges and better transit options. Several other states have to varying degrees passed similar legislation which effectively allows government to pass upfront capital costs onto private operators in exchange for giving the operator a dedicated revenue stream.

In Maryland’s version, HB 560 establishes as a public policy the need for the state to utilize P-3 projects, where appropriate, for:

• developing and strengthening the state’s public infrastructure assets;
• apportioning between the public sector and the private sector the risks involved in the development and strengthening of public infrastructure assets;
• fostering the creation of new jobs; and
• promoting the state’s socioeconomic development and competitiveness.

Though public-private partnerships were permitted under state law prior to HB 560, the review and approval process was lengthy and cumbersome. The goal of HB 560 is to establish a more comprehensive approach for P-3s that will create certainty in the marketplace for how projects are proposed, reviewed and approved.

The law defines P-3 projects, inter alia, as any project that “deliver[s] public infrastructure assets using a long-term, performance-based agreement between specified reporting agencies and a private entity.” MDOT and its modal agencies, the Department of General Services, the Transportation Authority, and the University System of Maryland are designated as “reporting agencies” that can take advantage of the new law. The reporting agencies are able to consider both solicited and unsolicited P-3 proposals.

In the case of a solicited proposal, once a reporting agency has decided to proceed with a project, the legislation establishes the following process for review and approval:

• Concurrent review of pre-solicitation report to Budget committees, Comptroller and Treasurer (45 days max with a 15-day extension permitted for larger projects);
• Review and vote by Board of Public Works to designate project as a P-3;
• Solicitation Process (includes issuing RFP and negotiation of agreement terms);
• Concurrent review of P-3 agreement by Budget committees, Comptroller and Treasurer and publishing of agreement in the Maryland Register (must be accomplished in 30 days); and then
• Board of Public Works approval of agreement.

With respect to the solicitation process, unlike current law, HB 560 encourages the reporting agency and potential bidders to communicate about the solicitation documents. Based on industry feedback, the Administration decided to permit the “back and forth” to ensure that the project solicitation documents represent the best practices within the marketplace. The law also exempts designated P-3 projects from the state procurements regulations, allows a reporting agency to reimburse private entities for the costs incurred to develop unsuccessful responses, and permits reporting agencies to establish MBE participation goals.

In the case of unsolicited proposals, the legislation enables reporting agencies to develop a process to “evaluate [ ] proposal[s] … that will assist in implementing [their] functions in a manner consistent with state policy.” It also permits reporting agencies to adopt by regulations an application fee for submitting unsolicited proposals and to charge a higher fee if the proposal addresses a project that is not in Maryland’s Capital Improvement Plan (“CIP”) or Consolidated Transportation Program (“CTP”). If a reporting agency decides that an unsolicited proposal meets a need or is otherwise advantageous, it must follow the process outlined above, but most interestingly, unlike current law, the private entity that submitted the proposal may participate in the procurement. Lastly, the legislation includes a number of contract provisions that must be included in all P-3 agreements, including minimum quality standards, requirements for state inspections of facilities and audits and prohibitions on P-3 agreements extending beyond 50 years.

The law went into effect on July 1st and MDOT has already issued a pre-solicitation document for the proposed Purple Line that will connect Montgomery and Prince George’s Counties. This first project will be a true test of whether HB 560 will usher in a new day for public-private cooperation in Maryland.

The new P-3 legislation is codified in Title 10A of the State Finance and Procurement Article.


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