P3 Projects are gaining popularity across the country. The flexibility that a Public-Private Partnership Project can provide is invaluable. P3 projects bring together public and private entities for construction projects in a way not possible under traditional public projects. Depending on the way the parties come together, these projects can simply mirror traditional project types with private financing or they can create a longstanding relationship between the awarding authority and the private entity. Because there are so many potential variations of the structure for a P3 project, states have passed legislation according to how they wish for these relationships to work. Last April, legislation guiding Kentucky P3 projects was put into place. This past October, the Kentucky Finance and Administration Cabinet released its amended proposal for regulations to put the law into action.
For a state-by-state guide to P3 Projects, The National Council for Public Private Partnerships has created this helpful infographic.
Kentucky P3 Projects
One of the greatest benefits to allowing P3 projects is bringing in the expertise of private partners to the execution of public projects. But these projects go well beyond planning and expertise. P3 projects can enter into the world of investing, leasing, and other long term agreements. For public entities, it makes sense to seek out private funding to complete massive projects while alleviating the tax burden on constituents. For private entities, public awarding authorities represent a reliable, long-term partner. That sort of stability and longevity can be hard to come by in the construction industry. For these reasons, the Bluegrass State found it ideal to go forward with allowing Kentucky P3 projects.
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Kentucky’s House Bill 309 (HB309) creates a pretty straightforward ecosystem for Kentucky P3 projects. Some key provisions are:
- The Secretary of the Finance Cabinet must propose state and local regulations to detail Kentucky’s P3 process. These regulations are supposed to reflect the state’s enthusiasm about P3’s and promote their use.
- Current methods for soliciting projects and considering project bids must be used. Any unsolicited proposals that are received must be publicly disclosed. In that event, competing proposals must also be considered over a 90-day period.
- P3 Projects exceeding $25M in value are subject must be submitted to legislature for approval.
- The legislature calls for the creation of the Kentucky Local Government Public-Private Partnership Board within the Finance Cabinet.
- Local projects that exceed 30% of the local government’s general fund must be submitted to the Board for approval.
- Bonds requirements may vary based on project type.
- Colleges, Universities, and other postsecondary institutions who wish to enter P3 project must approve the project by the institution’s governing board.
These are only some of the provisions contained in the new Kentucky P3 Project legislation. Consult an attorney familiar with Kentucky construction law before entering or attempting to enter into a Kentucky P3 project.
Takeaway
Much like the rest of the nation, Kentucky is embracing P3 projects. The sentiment nationwide is that this structure provides great opportunities, and P3 projects have been embraced by both Barack Obama and Donald Trump. Previously, one serious issue regarding P3 projects was the balance of public and private aspects as they relate to securing payment. As we mention regularly, public property is not subject to mechanics liens. That is why public projects utilize payment bonds. However, not all P3 projects are required to carry the bonds, and leaving a contractor without an opportunity to file a lien or file a surety bond claim would leave them exposed during payment disputes. Luckily, the Kentucky P3 legislation calls for bonding on P3 projects.
