Coming February 2019, New P3 Legislation for New Jersey!
Yes, that’s right. New Jersey Senate Bill 865 affords local governments, public schools and other public authorities to enter into Public Private Partnerships (aka P3). Previously, P3 legislation was limited to public colleges and universities.
What is a Public Private Partnership aka P3?
A Public Private Partnership, also known as P3, is a contractual agreement between a public agency and a private entity. These agreements have proven beneficial in financing projects and in distributing risks, to alleviate one party from bearing the burden.
New Jersey Senate Bill 865, defines a public-private partnership agreement as:
“’Public-private partnership agreement means an agreement’ entered into by a local government unit and a private entity pursuant to this section for the purpose of permitting a private entity to assume financial and administrative responsibility for the development, construction, reconstruction, repair, alteration, improvement, extension, operation, and maintenance of a project of, or for the benefit of, the local government unit.”
P3s are frequently used on high risk, expensive projects. As public agencies struggle to find available funds, private entities are looking for investment opportunities, and often a well-structured P3 aids both parties.
P3s also provide an opportunity for innovation and collaboration – and, of course, increased infrastructure.
What’s New for New Jersey
Authors, Jayne Mariotti Hebron and Steve Park, provide a thorough overview of the changes in their article New Jersey P3 Legislation Expands Opportunities for Major Infrastructure Projects, Including Roads. First up? NJEDA is the P3 boss. NJEDA = New Jersey Economic Development Authority. NJEDA must approve all project applications before the procurement process can begin; then, after the procurement process, the public entity needs final approval from NJEDA.
“…before the public entity enters into a P3 agreement, the project and the resultant short list of private entities is submitted to NJEDA for final approval. NJEDA shall retain the right to revoke approval if it determines that the project has “substantially deviated” from the plan submitted, and retains the right to cancel a procurement after a short list of private entities is developed if deemed in the public interest to do so.”
Authors also discuss the bill’s requirements for P3 agreements. These requirements include provisions that a prevailing wage must be paid to workers and “any work performed under it is subject to the provisions of the Construction industry Independent Contractor Act.” Another interesting point relates to contractors that contribute to the private entity’s financing of a project:
“A project with an expenditure of under $50 million developed under a P3 agreement includes a requirement that precludes contractors from engaging in the project if the contractor has contributed to the private entity’s financing of the project in an amount of more than 10 percent of the project’s financing costs. If the agreement includes the lease of a new project in exchange for upfront or structured financing by the private entity, the term of the lease may not be for a period greater than 30 years.”
What about the money? The legislation requires a separate account be established for the project, before work can commence. In an effort to keep finances “above board” the legislation “…requires the private entity to appoint a third-party financial institution to act as a collateral agent, manage the construction account, and maintain a full accounting of the funds and instruments in the account.”
I will be interested to see how the requirement for a third-party collateral agent aids in financing transparency. Hopefully, this will ensure that parties further down the ladder of supply are paid in a timely manner. Just to be safe, follow the proper mechanic’s lien/bond claim statute and protect your rights!
Furnishing to a construction project in Montana? Then you’ll certainly want to read this post! Let’s take a look at the notice, lien, bond claim and suit requirements in Montana.
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