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Public-Private Partnerships

Farella Braun + Martel’s multidisciplinary Public-Private Partnership (P3) team builds upon our vast experience with infrastructure, mixed-use and industrial development projects.  Lawyers from throughout the firm’s various practice groups are brought together to help clients bridge the gap between California’s public infrastructure demands and the available supply of private capital.

Under a P3 approach, large, technically-complex projects get built quicker and better, and at less cost to the public than would be the case if the project were built under a traditional design-bid-build basis with public funds.  The private partner is incentivized to complete the project quickly, because the private partner is usually not paid until after the project has been completed, and is incentivized to design and construct the facility well, because deficiencies in design or construction will increase the private partner’s costs to operate and maintain the facility.  Another significant benefit to the public sector is that P3 agreements frequently include an upfront cash payment to the public partner.  Ultimately, we strive to create a win-win for the public, public sector agencies and the private sector investors such that the benefits of the P3 approach are realized and existing infrastructure is expanded/modernized and new infrastructure is built.

The State of California has P3 enabling statutes for transportation projects, development of courthouses and the high speed rail system.  Significantly, California also has P3 enabling statutes for “local government agencies” to develop a variety of “fee producing” public infrastructure projects.  Similarly, California’s Community Colleges and public agencies can also develop educational buildings and certain power-generation facilities, respectively, through other enabling statutes.  However, due to the relatively few completed P3 projects, demonstrating the benefits requires trust in a new system and processes, which run outside of traditional project development norms and could lead to misperceptions of the P3 value proposition.

Our team of attorneys from the firm’s Transactional, Construction, Environmental, Insurance Coverage and Real Estate practices is able to handle P3 projects from inception to post-completion.  On the front end, our construction lawyers draft and negotiate concession agreements, design-build agreements and operation-and-maintenance agreements, while our transactional team coordinates financing through bonds and other means, and our real estate, insurance and environmental lawyers work to acquire property for rights of way, develop insurance programs, and work with regulatory agencies to acquire permits and mitigation measures appropriate for each project.  During project implementation, we provide course-of-construction counseling to avoid claims, and at the backend, we resolve unavoidable disputes through litigation, arbitration and mediation.

Recent direct experience with P3 projects in California is light because of the very few projects that have been developed under this approach.  Notwithstanding, we did represent the private developer of San Diego Expressway Toll Road (State Route 125, a limited access toll road in San Diego County), one of the first and the largest P3 project to date in California, in defending against about $500 million in claims related to the design and construction of the toll road, including many issues of first impression regarding P3 financing of design-build infrastructure, and pursued a number of counterclaims valued at about $400 million.