Open for Public Comment: Kentucky’s P3 Legislation Is Ahead of Schedule

Last April, the Commonwealth of Kentucky enacted legislation to allow for modifications to the Kentucky Model Procurement Code and related statutes so that the Commonwealth and local governments can more effectively enter into public-private partnerships (P3) for capital projects. P3 is seen as a means of developing infrastructure in this time of contracting state budgets, a problem currently facing Kentucky.

P3 projects are generally financed with private funds. The projects then generate income streams, from, for example, such sources as student payments for college dorm room and board and those income streams are then used to allow the private entity in the P3 to recoup its investment. Even before the new legislation, Kentucky colleges have taken advantage of private money to finance and develop capital improvement projects. A recent example is the $75 million project to construct two new resident halls and additional related improvements at Eastern Kentucky University.¹

The P3 legislation allows for the award of P3 contracts through “competitive negotiations”² rather than through the typical sealed bidding process. The statute also provides that a “person or business may submit an unsolicited proposal to a governmental body.³” Such proposals would then be publicized, and the governmental entity would allow for the submission of competing proposals. The statute specifically protects against the public disclosure of trade secrets and other sensitive information that might be included in the unsolicited proposal.⁴

The new P3 legislation also authorizes the Finance and Administrative Cabinet (FAC) to generate the administrative regulations setting forth the determining criteria for when a P3 will be used on a particular project.⁵ Ahead of schedule, the FAC filed its proposed regulations in mid-August, setting forth both qualitative and quantitative criteria. The proposed regulations were printed in the September 1st Administration of the Register of Kentucky, starting the clock on the 30-day public comment period.⁶ FAC aims to complete the regulations by the end of the calendar year following consultation with “design builders, construction managers, contractors, design professionals... and other appropriate professionals...”⁷

Enactment of P3 legislation is generally seen as a means of offering opportunity to the construction industry while developing infrastructure that forwards the public benefit. Such dual purposes are served both by unleashing more private capital but also by allowing for less restrictive project delivery methods, such as those that employ the same entity to provide both architectural services and construction management services on the same capital construction project. An additional recognized value of P3 is that such a contractual structure can transfer the risks for increased expenses, such as unanticipated construction and maintenance costs, away from the public sector to the private entity involved in the partnership.

Contact your Dinsmore attorney to learn more about these proposed regulations and other P3 project considerations.

¹ EKU BUILDS, Construction Continues on P3-Funded Housing, available at http://ekubuilds.eku.edu/posts/construction-continues-p3-funded-housing (last updated May 20, 2016 at 3:18 PM EST).
² KY. REV. STAT. ANN. § 45A.077(1).
³ Id. at § 45A.077(12)(a).
⁴ Id. at § 45A.077 (12)(b)(1).
⁵ Id. at § 45A.077 (3).
⁶ Bottom Line, KENTUCKY CHAMBER, Procedures to Develop Public-Private Partnerships Filed, available at https://kychamberbottomline.com/2016/08/16/procedures-to-develop-public-private-partnerships-filed/ (August 16, 2016).
⁷ KY. REV. STAT. ANN. § 45A.077 (3).