By: Jason Tomasulo
The Maryland Legislature recently passed House Bill 560, which makes significant revisions to Maryland’s Public-Private Partnership law, effective July 1, 2013. The genesis for the revisions was the combination of Maryland’s infrastructure needs and the budgetary constraints due to the economic downturn over recent years. In 2011, the American Society of Civil Engineers Report Card gave Maryland an overall grade of “C-” for its infrastructure. To put the infrastructure needs in perspective, the cost to build the number one transportation priority in all twenty-three counties and the City of Baltimore is more than $12 billion, which is six times the current $2 billion in annual transportation capital expenditures. After exploring the use of public-private partnerships (“P3s”) by other states and conducting meetings with private industry, Maryland concluded that P3s could help address its infrastructure needs, provided it retained ultimate control over its assets and combined the strengths of the private sector – flexible financing, advanced construction techniques, project development and operational efficiencies – with those of the public sector – accountability, transparency and the delivery of public services.
Revisions to Maryland’s P3 statute have been in the works for at least a couple years. In 2011, the Joint Legislative and Executive Commission on Oversight of Public-Private Partnerships was established and tasked with, among other things, reviewing Maryland’s current process for P3s, studying the best practices and lessons learned in other states, and making recommendations on improving the process for P3s in Maryland. Maryland Lieutenant Governor Anthony Brown chaired the Commission. The Commission issued its Final Report to the Governor and General Assembly on January 6, 2012. Although proposed legislation that included many of the recommendations in the Final Report was introduced during the 2012 legislative session, the Legislature was unable to pass the bill into law during that session.
On January 30, 2013, Benjamin Stutz, Policy Director for Maryland Lt. Governor Anthony Brown, spoke to members of the Construction Law Section of the Maryland State Bar Association in Annapolis, Maryland, and outlined key points of the proposed legislative revisions that would be re-introduced during the current legislative session. The proposed legislation was based on recommendations in the Final Report. Some amendments were made to the bill before passage in March 2013.
The prior Maryland Public-Private Partnership law, State Fin. & Proc. Art. §10A-101 et seq., provided a skeletal framework for the authorization and implementation of public-private partnerships. The new legislation provides needed detail for the mechanics of such partnerships. Some of the key features include the following:
- A new definition of “Public-private partnership” that focuses more on the partnership and collaborative relationship between the public and private sectors, and less on the mechanics of how the agreements are structured
- A statement of public policy to utilize P3s to develop and strengthen the state’s infrastructure assets, apportion between the public and private sectors the risks with developing and strengthening public infrastructure assets, foster new job creation, and promote socioeconomic development and competitiveness of Maryland
- A process for a “Reporting Agency” (the Department of General Services, Maryland Department of Transportation, Maryland Transportation Authority, the University System of Maryland, Morgan State University, St. Mary’s College of Maryland, and Baltimore City Community College) to adopt regulations and processes for the development, solicitation, evaluation, award and delivery of P3s
- A revised P3 process that divides oversight between the Executive and Legislative Branches and shortens the review time for participants in the P3 process, with the Board of Public Works providing initial approval of the public infrastructure asset as a P3 and also having final approval after the agency reaches agreement on the terms of a P3 agreement
- Balancing the desire for more transparency with the need to protect confidential and proprietary information by publishing online the Reporting Agency’s Pre-solicitation Report and the proposed P3 agreement, but withholding confidential commercial, financial and/or trade secret information
- Subjecting P3s to Maryland’s Little Miller Act, prevailing wage statute, Environment Article of the Maryland Code, and requirements for high performance buildings (e.g., LEED Silver), if applicable
- Allowing for the possibility of recouping proposal costs in response to a solicitation of a P3 for unsuccessful private entities
- Allowing for the submission of unsolicited proposals to address Maryland’s infrastructure needs
While these changes seem well-suited to achieving the goal of spurring P3s to address Maryland’s infrastructure needs, time will tell if these changes have the desired effect.
Jason C. Tomasulo is Senior Counsel at Cohen Seglias Pallas Greenhall & Furman PC. He focuses his practice on construction law and represents owners, general contractors, subcontractors, suppliers and sureties.