June 8, 2016
A proposed Washington D.C.’s public-private partnership (P3) rule, set to be passed or rejected by the Council of the District of the Columbia in the coming months, lays the groundwork for procurement that includes a requirements for bonds or other securities.The P3 rule, submitted for a 30-day public comment period on May 31, would require that the private entity for each project “…maintain or cause to be maintained performance and payment bonds, letters of credit or other acceptable forms of security in compliance with title VII of the Procurement Practices Reform Act of 2010.” These procurement practices, in turn, require bid security for competitive proposals when the price is estimated to exceed $100,000. Payment bonds, according to the Reform Act, should be for 100% of the contract price that does not include the cost of operation, maintenance and finance. Further, the chief procurement officer can reduce the amount of performance and payment bonds to 50%.“DC ‘s new public-private partnership proposed rule hopefully being passed in the near future would be such a great benefit to credit professionals shipping on these types of projects,” says Connie Baker, CBA, director of operations for NACM’s Secured Transactions Services (STS). If passed, it will provide suppliers great assurance of collecting what is owed in the case of late payment or nonpayment.The council will likely vote on the proposed rule in sometime in September or October, according to Judah Gluckman, deputy director and counsel with the D.C. Office of Public-Private Partnerships (OP3).P3 agreements in D.C. would mandate risk mitigation plans and responsibilities for both the private entity and the government agency, terms regarding the planning, acquisition, financing, improvement and more, as well as any compensation and/or revenue structure of the private entity, including the extent to which the private entity may charge fees to individuals and entities for the use of the P3 facility, the proposed rule states.he private entity must also provide a schedule for an annual independent audit covering all aspects of the agreement and the financial condition of the private party, while funding sources that will fully fund the capital, operation, maintenance and other expenses must be identified under the P3 agreement.