Evaluating and Implementing Airport Privatization and Public-Private Partnerships (2021)

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165 Assessing Your Airport’s Ability to Procure Using Alternative Delivery (Chapter 4) • Does the project owner have the legal authority to pursue delivery of the project using an alternative project delivery method? – Your legal counsel may find that your airport does not have specific authority (i.e., a statute that names alternative project delivery methods), but neither does the airport’s procure- ment powers limit the ability to procure a P3. In this instance, your legal counsel will describe the feasibility of procuring and awarding the project given the broader legal context and institutional history of the airport. • Can the airport take the revenue risk for the project (i.e., a position where the airport could have a return or loss on investment)? – To determine whether your airport has this legal authority, an owner should look at the state statutes that govern the airport’s procurement ability, city or county ordinances that give the airport its powers (if applicable), and the airport’s procurement and contract policies. – The owner should engage its legal counsel to understand its legal and regulatory envi- ronment, particularly if there are any issues that may impede the owner’s ability to use alternative delivery methods. – Does the airline use and lease agreement structure affect its ability to take revenue risk? Have the airlines been engaged regarding the potential for P3? • Do existing procurement rules allow for a dynamic process (and provides for the confidentiality required for success), that includes processes such as the following: – Private One-on-Ones/Negotiations? – Option to Lease? – Predevelopment Agreement? – Two-Step Procurement (RFQ and RFP)? – Consideration of alternative technical concepts from bidders? – Paying a stipend to bidders not selected? Building Internal Capacity and Engaging Advisors (Chapter 4) Airports that successfully procure a P3 assemble the internal capacity needed to do so and will typically engage external advisors to compensate for any knowledge or experience gaps. Here are some common actions that have been taken by airports to build their ability to manage a complex procurement process: • Define project goals and project delivery goals and describe a vision of success. • Identify a lead staff, or consultant, that can be dedicated to educating decision-makers. A P P E N D I X F Project Development Checklists

166 Evaluating and Implementing Airport Privatization and Public-Private Partnerships • Identify a lead that can serve as a liaison to stakeholders. • Assign a task lead dedicated to managing the procurement process. • Assign a task lead that is dedicated to future contract management, oversight, and perfor- mance of due diligence post-contract award. • Determine if staff have adequate time to manage procurement/future contract and if advisors are needed to act as an extension of the owner’s staff. • Determine if staff are capable of performing feasibility or contract drafting required or if advisors are needed to act as an extension of the owner’s staff. • Determine if training or additional skill-building is necessary for staff engaged in the P3 pro- curement process. • Convene an internal working group to manage the project across disciplines/divisions. • Establish guidelines and regulations for P3 procurement so that process steps and division of labor among staff is clear. • Budget for staff assignments and external advisors (if needed). • Budget for other transaction costs. Assessing Market Interest (Chapter 6) • What are the developers’ P3 qualifications? Financial capability? Track record in meeting performance-based requirements? • Are other studies or information needed to show sufficient due diligence regarding the feasi- bility of the project? • Are there additional responsibilities that a developer can suggest to drive innovation, generate cost savings, or increase lifecycle efficiencies? Are there untapped revenue-generation capa- bilities that the airport owner has not thought of? • What is the developer’s sense of the lease timeframe required to make the project financially feasible to the developer? • Given the desired performance level and broad functional specification of the project, is the project too big or too small to generate private equity’s target return on investment? • Given the project’s characteristics and the airport’s goals, what contract structure is most suitable for the project? What risks are not acceptable for the developer to assume or mitigate? Are there risks that would be appropriate for the developer to assume that the airport has not proposed to transfer? • Is pre-development work sufficient to begin a procurement process, or is there too much uncertainty in areas such as environmental approval, permitting, enabling projects, inter- agency agreements, legal issues, or other factors? • Is the developer interested in bidding on the project and are there any issues that would stop the developer from doing so? Steps to Identify and Allocate Risks (Chapter 6) • Identify the key project risks. • Assess the probability and the level of impact of each risk. • Ensure each discipline (e.g., engineering, operations, finance, asset management, and so forth) is included in the process to avoid omitting or misevaluating risks. • Include risk as a key part of outreach to the private sector in planning the procurement, par- ticularly during the market sounding and RFQ process. Ask what type of risk proponents find acceptable, and which types of risk might best be held by the public. • Once again, it is perfectly OK to have a lot of unknowns early in the project planning. Simply going through the process of thinking about risk will facilitate a better alignment in the procurement.

Project Development Checklists 167 Best Practice Process Steps for P3 Procurement (Chapter 7) As the result of this chapter, best practice indicates that the following actions should be taken up to this point: • Project planning: – Determine project goals and scope. – Conduct a high-level risk assessment to determine the owner’s risk tolerance (in other words, a rough estimate of which risks to retain, transfer, or share based on the owner’s goals and ability to manage or mitigate risks that come with the project). – Conduct a feasibility analysis. – Select advisors to meet capabilities gap: technical, legal, financial. – Conduct market soundings/requests for information/industry forum to assess appetite for the project. – Assess available funding and financing: grants and federal credit programs. – Generate local government, airline, and other stakeholder support. • Structuring of procurement: – Two-step, RFQ-then-RFP process with best value selection. – Industry review process. – Discussions/negotiations with proposers during the RFP. – Avoid potential conflicts of interest. – Have a robust confidentiality regime that works under applicable open records laws. • During procurement: – Public transparency and communication. – Intense monitoring by the airport. – Continuity and well-executed transitions from pre-procurement to procurement and into project operations. Best Practice for Preparing for Contract Management (Chapter 9) • During the planning phase: – Determine internal capacity for oversight, review, and reporting. – Come to a clear understanding of performance measures. – Establish key performance metrics that align with the chosen payment mechanism, incentives/ disincentives, and overall project goals. • During the procurement phase: – Consider the selection of external advisors to ensure contract continuity and interpretation. – Communicate expectations regarding oversight, reporting, and handback to proposers. – Assemble internal contract management staff ready to begin after financial close. – Determine a process for monitoring performance. – Determine how payments and penalties for performance would be assessed. – Design dispute resolution processes. • After financial close: – Continued reporting by the private developer. – Continued monitoring by the airport. – Continued dispute and negotiations over change orders, claims, and other ongoing issues.