PPP – Ashurst

Chambers Associate: How would you define public-private partnerships?

Betty Cerini, partner: Public-private partnership (PPP) projects are a way of developing government infrastructure – for example, roads, railways, airports, schools or hospitals. A government authority asks a private sector developer to design, build, finance, operate and maintain the infrastructure.  A typical project may be for a term of 35 years: 5 years for construction and then 30 years for operations and maintenance.

Anna Hermelin, partner: A long-term contract between a private party and a public sector entity or agency, for providing a public asset or service, in which the private party bears significant risk and management responsibility and remuneration is linked to performance. Under a typical PPP or P3, the private party bears responsibility to design, build, finance, operate, and maintain the relevant public asset.

Casey Thomas: Under a public-private partnership, a public authority selects a private developer team to deliver an infrastructure asset. The project risks are allocated between the government and the private side through the procurement process and negotiations. Traditionally, a P3 is a long-term project involving private financing, as well as the initial design and construction of the project followed by 30-40 years of private operations and maintenance, although this structure can vary from project to project.

CA: How has the practice developed or changed in recent years? Have you witnessed an increase in PPP projects?

BC: In the last 10 years, the PPP landscape has changed significantly in the US.  Most notably, the type of projects which have been delivered under a PPP structure has diversified from traditional toll road concessions which represented nearly all of the PPP projects in the US, to a broad range of projects including social infrastructure, broadband and clean energy projects. 2020 was a challenging year for a lot of industries, however, the US government has shown willingness to support the development of US infrastructure assets and the market is hopeful that President Biden's infrastructure investment package will expand the pool of PPP opportunities and create more opportunities for private financing to play a role in the development of government infrastructure.

“In the last 10 years, the PPP landscape has changed significantly in the US.”

AH: The P3 model originated in the UK (where it is now out of favor) before migrating to other parts of the world. At the moment, Canada and Australia are leading the field in delivery large scale transportation and social infrastructure projects under the P3 model. The model has been gaining traction as an alternative delivery model in the US.

CT: In the U.S., P3 requires legislation to be enacted which allows the state or other governmental entity to enter into public-private partnerships. This enabling legislation provides a regulatory framework for P3 procurements and contracting. More governments are recognizing the growing need for infrastructure improvements, and they are enacting legislation to enable the use of P3 models to deliver more projects and on a larger scale than would be possible without private sector involvement.

CA: What do associates do on matters?

BC: A PPP project involves a complex web of contractual arrangements. The principal agreements include the project agreement between the government authority and the developer's project company; the developer's subcontracts for design & construction and operations & maintenance; and the finance documents. Associates have an important role in drafting and negotiating all of these documents. This involves working closely with the client which may be the government authority, the private sector developer or the banks lending to the project. It also involves working with other advisers – technical, financial and insurance.

“More governments are recognizing the growing need for infrastructure improvements, and they are enacting legislation to enable the use of P3 models to deliver more projects and on a larger scale than would be possible without private sector involvement.”

AH: Associates are a key part of our teams. They help to solve issues as they arise, consider solutions from precedent projects in the context of the project at hand and tend to quickly gain the trust of the client based on their understanding and passion for infrastructure development.

CT: An associate's role depends on whether the firm is acting for a public authority, a sponsor, or a lender on the deal. When working on the public authority side, associates are responsible for assisting in the procurement process to select a private developer, and execution of the project agreement by the public authority and the selected developer. This includes drafting procurement documents (e.g. RFQs and RFPs) and the project agreement, along with related documents. On the lender side, associates are responsible for due-diligence of lender risks. If the client is a sponsor, associates might assist in reviewing the procurement and project documents, preparing the financing documents, and working on the sponsor's bid.

“An associate's role depends on whether the firm is acting for a public authority, a sponsor, or a lender on the deal.”

CA: What does a partner’s role look like?

BC: Partners are responsible for developing the structure of the project and coordinating the drafting and negotiation of all the documents referred to above. Fundamentally, this is about allocating risk to the entity within the project structure which is best able to manage that risk. This requires a good overall understanding of how the different parts of the project work together. Given the complexity of a PPP project there are many different people working on the project.  A key element of the partner's role is to help manage and coordinate the input from all these people to ensure that the project progresses efficiently.

Partners aim to develop close relationships with their clients and the broader infrastructure sector. This helps win roles to advise on new projects. 

AH: Partners lead the client teams and are ultimately responsible for ensuring that the Ashurst team delivers excellence and innovation.

CT: Partners are involved in high-level project structuring for the client. They advise on and negotiate an appropriate risk allocation between the public and private entities. Partners also work with associates to draft the documents and coordinate input from co-advisors and the client. Partners are responsible for building client relationships within the industry.

CA: What are the highs and lows of the practice?

BC:

Highs

• Learning about infrastructure in many different sectors – for example, finding out how the introduction of autonomous vehicles will impact on the road sector.
• Working towards building something tangible for the public benefit.  In particular, after working on a complex deal for many months or years it is very satisfying attending the project opening after construction has been completed.
• Working together with the multiple stakeholders and advisers on the project.  There may be tensions at times, but broadly everyone is working towards the same goal.

Lows

• Given the complexity of the projects, progress can sometimes seem very slow. It requires patience!

 

AH: The highs of practice are being able to see the projects we work on (such as, a new train line, road or transit option or a new stadium, civic building, school or water facility) become a reality and knowing that we have been part of making it happen. The lows are when politics, funding constraints or external events, such as COVID-19, hinder a project that you really believe in from being delivered as planned.

CT: Highs of the projects practice include the opportunities to learn about a new asset and contract structure with each project, and to provide innovative avenues for governments to deliver infrastructure projects and improve daily life for people. Lows include long project timelines and statutory requirements that can be difficult to navigate for a unique project structure such as P3.

“The highs of practice are being able to see the projects we work on (such as, a new train line, road or transit option or a new stadium, civic building, school or water facility) become a reality and knowing that we have been part of making it happen.”

CA: What makes the field of PPP unique?

BC: PPPs involve the development of essential government infrastructure with a private development partner that is usually a special purpose company which is owned by a number of entities with specialist experience in the various design, construction, operation and commercialization elements of the specific PPP project.  PPP lawyers are able to witness and play a meaningful role in the fruition of tangible projects that directly benefit the greater public, while working in a collaborative and competitive team environment – the combination of these experiences are unique to PPP projects and are a hallmark of working as a PPP lawyer.

AH: It is a small community – the investors, lenders, contractors, advisors, and public agencies get to know each other (often, coming across each other across multiple jurisdictions). This creates a strong sense of team across all stakeholders.

CT: It's an innovative practice in that the structure and risk allocation is different on every project, which requires creativity to deliver. Further, associates can develop a deep understanding of an asset, especially on government-side representations where you might advise the governmental entity for years, from the beginning of the procurement through financial close.

“It is a small community – the investors, lenders, contractors, advisors, and public agencies get to know each other (often, coming across each other across multiple jurisdictions).”

CA: Will the election of President Joe Biden impact life in the practice at all? If so, why?

BC: President Biden has recently announced the release of a $2 trillion infrastructure investment package over an 8-year period, which has been anticipated by the industry since his election late last year. This package involves prioritizing the modernization of a large number of infrastructure assets, including thousands of highways, roads and bridges, hundreds of transit stations and also a number of airports and a commitment to the delivery of high-speed broadband to all Americans. In recent years, governments have used a PPP delivery structure in order to develop these type of assets and with increased government support to develop these assets, we expect states will continue to see the benefits in utilizing a P3 structure, which is likely to result in an uptick in activity in the PPP industry. While President Biden's infrastructure investment plan will still need to pass congress, which may see the ultimate form of the plan change shape, there has been recent bipartisan support for an infrastructure bill in order to unlock private finance for a range of sectors including the key PPP sectors of transportation, broadband and clean energy.

AH: Joe Biden has made investment in infrastructure a foundation of the reinvigoration of the economy and of balancing inequalities in society. As a result, we are expecting an uptick in infrastructure investment across the country.

“Problem solving, curiosity and a passion for being part of creating or revitalizing a public asset. Projects can take time, so patience is also important!”

CA: What skills or personal qualities are most beneficial for a PPP lawyer?

BC: PPP lawyers play an important role in drafting and negotiating complex agreements, so strong writing and contract drafting skills are beneficial for a PPP lawyer. However, the most important personal quality of any lawyer is attitude and a willingness to learn. All the other skills can be learned and Ashurst associates have the opportunity to be trained by some of the most experienced PPP lawyers in the industry. Also, a general interest in infrastructure will be valuable and ensure that a lawyer is engaged at an industry level and stays abreast of trends, politics and technological developments in the sector.

AH: Problem solving, curiosity and a passion for being part of creating or revitalizing a public asset. Projects can take time, so patience is also important!

CA: What is the most interesting case you’ve worked on and why?

BC: Our work advising Maryland Department of Transportation on the I-495/I-270 P3 program has been an interesting and rewarding experience. We have worked closely with MDOT to advise them on the structuring and solicitation of this P3 using a novel delivery approach involving the initial selection of a developer to perform predevelopment work for the project and subsequently deliver the infrastructure through multiple DBFOM concession agreements. This approach sought to meet certain goals of the client including driving competition and innovation, allowing the selected developer to collaborate with MDOT and other stakeholders to address risks and community concerns early in the process, and delivering the project at no net cost to the State. The project, which is one of the largest P3 programs currently being delivered in the US, is being delivered over multiple phases and an extended period of time, and also involves a bi-state component as it will connect with Virginia's managed lane system.

AH: I was working with the Asian Development Bank to advise governments in emerging economies in Asia on how to utilize PPPs to bring much needed infrastructure investment into fast-growing communities.

CA: Has an increased focus on the climate impacted life in the practice?

BC: The shift to clean energy is affecting PPP in a number of different ways.  Various clean energy projects, for example off-shore wind projects, are being developed using PPP structures. In the waste sector, public authorities around the globe are using PPP projects to develop waste-to-energy plants. Across many different sectors, the industry is looking at how green technology can be integrated into a project – for example, solar paneling on public sector buildings or using biomass heating systems. 

Also, green energy policies mean that a higher public benefit value may be attributed to certain technologies.  For example, high speed rail may be seen as greener than developing more road or aviation capacity. 

“The shift to clean energy is affecting PPP in a number of different ways.  Various clean energy projects, for example off-shore wind projects, are being developed using PPP structures.”

CA: What political factors do you navigate when working in the practice?

BC: The PPP industry is inherently political since it involves the development of government infrastructure and the use of government funds. However, as mentioned above, the development of the US's infrastructure has recently had bipartisan political support at a federal level and President Biden's infrastructure investment plan is likely to be positive for the PPP industry. 

However, politics can impact the nature and shape of PPPs given the involvement of a government counterparty, and the industry needs to be able to react to these changes – even if the changes are positive, such as changes to PPP legislation promoting private investment, which may result from President Biden's infrastructure investment plan.

“…the development of the US's infrastructure has recently had bipartisan political support at a federal level and President Biden's infrastructure investment plan is likely to be positive for the PPP industry.” 

CA: What opportunities are unique to Ashurst?

BC: Ashurst has market leading PPP practices in the UK, Europe, Australia and US. The projects partners and associates around the network work together on new opportunities and share best practice which allows Ashurst to have a single global projects team. This global network also presents a great opportunity for people to move between different offices around the world.  Our US offices have a number of experienced lawyers from the UK and Australia, who have extensive experience working on PPP projects in those markets and that expertise has allowed us to develop our US practice and take advantage of the huge potential for US infrastructure development.

AH: Ashurst decided early on to invest in its infrastructure practice. As a result, we have a world-class practice crossing continents and have advised on numerous mega-projects in Europe, Middle East, Asia, Australia and the United States. We bring that global experience to our clients and apply it in the local context. In addition, we advise both the public sector and private investors which gives us a 360 view of the market and a deep knowledge of how to deliver a project.

CT: As an Ashurst associate, on different projects, you have the opportunity to work as lenders' counsel, sponsors' counsel or legal advisor to the governmental authority. This experience provides a 360 view of how the P3 market works, including drivers behind the procurement process, and issues that sponsors typically prioritize when developing a bid.

CA: What advice would you give to a student preparing for a career in PPP?

BC: Read as much as you can about the sector; pursue summer placements at law firms with a good reputation in the industry; consider whether you would be well-equipped for a job that can be intense in terms of expectations, and requires an interest both in the big picture commercially and the finer details of contracts.

“It is a close-knit community across the globe and there is a genuine enthusiasm for developing young talent so don't be shy about asking for advice.”

AH: Ask questions, pay attention to the community around you and their infrastructure needs and speak to as many people in the industry as you can. It is a close-knit community across the globe and there is a genuine enthusiasm for developing young talent so don't be shy about asking for advice. There is such a great need for infrastructure investment – it’s an exciting time for this sector!

CT: Take relevant classes in law school such as project finance and contract drafting, if they are available. Seek out internships or summer associate programs in the projects industry. Experience in finance or construction law is also valuable, and try to do as much transactional work as you can. You can also subscribe to industry press (e.g. P3 Bulletin, Inframation) to read about the sector.

 

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