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New bill calls for Texas P3 center

Texas House Bill 2475 would establish a Center for Alternative Finance and Procurement to help identify the best method of delivery for potential projects.

In order to bolster the public sector's capacity to review potential public-private partnership (PPP; P3) projects in Texas, State House of Representatives member Charlie Geren last month introduced a bill calling for the establishment of a Center for Alternative Finance and Procurement to be created within the Texas Facilities Commission.

House Bill 2475 also calls for the creation of a public-side contract advisory team to ensure that maximum taxpayer benefit can be achieved in infrastructure project procurement, or as stated in the latest draft, “to assist governmental entities in the receipt of proposals, negotiation of interim and comprehensive agreements, and management of qualifying projects.”

The bill was drafted in response to the call for creation of a P3 center of excellence in a December 2014 report issued by the House Committee on Economic and Small Business Development, which Geren told the State Affairs Committee, the body currently reviewing the legislation, “concluded that a P3 center of excellence is needed to help determine the best projects and the best method of delivery to create value for the taxpayer and ascertain those that should instead be built with traditional financing mechanisms”. 

Such a center was an integral piece of Government Code Chapter 2267 (GC 2267), the original legislation that cleared the way for public-private partnerships (PPPs; P3s) in Texas four years ago, but due to budget constraints, such an establishment was not politically feasible in 2011, according to Tim Merriweather, one of the individuals responsible for drafting GC 2267 and a member of the non-profit, Austin-based Texas Infrastructure Council (TxIC), formed in 2014 to advocate for a P3 clearinghouse in the state.

“Because P3s are new to Texas and the US, it's important to have an unaligned third party that can assist public entities in the procurement process,” Merriweather said in an interview with Infrastructure Investor. 

He said that his organisation supports HB 2475 because it will help smaller local government bodies around the state who don't have the capacity to determine which projects are best-suited for P3 delivery and which are more cost-effective through traditional procurement methods. He noted that the center is not aimed at increasing the number of P3s used in state infrastructure projects, but instead intends to increase capacity to identify those projects best suited for such delivery.  

Rodney Moss, who spoke in support of the bill before the State Affairs Committee on Wednesday on behalf of the Association for the Improvement of American Infrastructure, said, “Around one in seven infrastructure projects should qualify for alternative delivery in that they provide greater value than traditional.”

“What this entity will do is help government filter these one in seven projects out as early as possible so that the money could be saved for the six projects that it's not appropriate for,” Moss said, estimating that a P3 center would save millions of taxpayer dollars annually.

Both Merriweather and Moss pointed to Canada as an example of a location where P3 centers have been successful, with Moss pointing out that Canada and Texas are similarly populated – with roughly 34 million in Canada and 27 million in Texas – but that Canada has five P3 centers whereas Texas has none. 

“If we look at Canada […] they have five of these entities,” Moss said. “Over the last 10 years these five entities have delivered about $70 billion worth of alternative procurement. If you look at what Texas has done in the last four years, it's essentially nothing […] because we don't' have this consultative resource within government to help.”

Eugene Anderson, senior director of external relations for United Water, also spoke in support of the bill before the committee, and none stood to oppose the bill.

At the end of the State Affairs Committee meeting, the bill was designated as “pending business”. Should HB 2475 clear the legislature and be signed into law, it would take effect on September 1, 2015.