Public Transportation Guidebook for Small- and Medium-Sized Public-Private Partnerships (P3s) (2017)

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78 C h a p t e r 4 This chapter accomplishes two primary objectives: • Introducing the reader to the P3 Project Screening Checklist and how to use it and • Offering mitigation strategies for transit agencies to turn to when checklist answers indicate that more information is required to successfully plan and execute a P3. 4.1 Understanding the Checklist The P3 Project Screening Checklist is an interactive, dynamic tool designed to support transit agencies in assessing the appropriateness of delivering a transportation project as a P3. The case study interviews conducted for this guidebook served as the foundation for the tool and the input from transit agencies and private partners helped shape the questions presented in the checklist. After conducting twenty interviews, commonalities were apparent between transit agencies across the country and these findings led to the creation of checklist categories specific to each stage of project development and delivery. The tool provides a preliminary, qualitative screening process that highlights key criteria relevant to assessing the viability of delivering a project via P3. The checklist includes a series of evaluation questions to define and evaluate the potential P3 project, with follow-up questions to document the details of the proposed project/ partnership. The checklist is intended to be an ongoing process that is addressed at various points during the project by the intended user, a sponsoring transit agency. The checklist is not designed to produce an overall conclusion on whether to pursue the P3 project, but presents the user with an overall evaluation of the P3 initiative based on the transit agency’s objectives. The transit agency must weigh each criterion’s priority, which may differ widely among projects and transit agencies, in order to develop a conclusion regarding the overall project and delivery as a P3. 4.1.1 Directions for Using the Checklist This checklist is available for download as an Excel spreadsheet file. Checklist users will need access to Microsoft Excel in order to use the tool interactively. Alternatively, users may print this report as a PDF, and write in their answers to each question. However the checklist user will need to input various department responses into the Excel spreadsheet in order to populate questions tied to each response. Transit agencies will begin by answering some initial questions describing the project and its purpose. The specific user might be a project manager or another individual in the transit agency who is responsible for analyzing whether and how to proceed with a particu- lar project. A series of 57 evaluation questions follow, which are divided into categories specific to the stages of project development and delivery, including identification, enabling authority, Evaluating and Executing a P3

evaluating and executing a p3 79 initiation, planning, implementation, benefits, and other. Depending on the response to each evaluation question, the respondent will be prompted to provide a follow-up narrative detailing the rationale for each answer. After addressing the evaluation questions, the user may then assess the answers as a whole to determine whether it is worthwhile to conduct a more comprehensive evaluation of the P3 project. The tool includes a summary that is an open field where users may enter a qualitative summary analysis of their evaluation. The P3 Project Screening Checklist begins with the user describing the structure and purpose of the P3 (Figure 5). The sections that follow will elaborate on project specifics. Each section presents a topic with a corresponding evaluation question to which the user responds by selecting a response from the drop-down menu. Based on the specific response, a follow-up question will prompt the user to provide additional information if necessary (Figure 6). The checklist does not generate a definitive score but uses a series of probing questions to help the evaluator understand whether a P3 is ready to proceed by working through potential barriers and identifying mitigation strategies. Once the user chooses one of the responses from the drop-down menu (i.e., yes, maybe, no, other, or not applicable) in the Excel tool, a set of corresponding questions will automatically be generated. The user may find that a particular P3 is not ready to move from conception to implementation at this point, but it helps to outline the next steps a reviewer should take to advance the project. 4.1.2 Mitigation Strategies As this chapter describes each section of the checklist, mitigation strategies are identified to help overcome potentially unsupportive elements of the proposed P3. However, there are several fundamental features of a small- and medium-sized P3 that should be addressed before proceed- ing with a project, as described in this chapter and in Chapter 5, which outlines best practices. Initial Question 1 Project Description Describe the project and potential partnerships. Describe how the project sponsor can partner with the private entity to deliver the project. 2 Purpose What is the purpose of the project? What problem is it intended to address? P3 Process Figure 5. Introduction to the P3 Project Screening Checklist. Evaluation Question Response (drop-down menu) Follow-Up Questions Project Definition 3 Need Is there a public (and private) need for the proposed transportation project? (i.e., will the project grow ridership, increase accessibility, improve the state of good repair, etc.?) Yes Please describe the need. 4 Funding Is project funding identified? Partially Please describe the type and amount of each secured funding source and list the type and amount of potential funding sources P3 Process Figure 6. Sample section of the P3 Project Screening Checklist.

80 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) 4.1.3 Project Definition This section of the P3 Project Screening Checklist is intended to help transit agencies better define the parameters of its proposed P3. Need It is essential for P3 proposers to be able to clearly identify and articulate the need for the partnership. Without a true need, the P3 may have trouble garnering support and will likely take a backseat to other priorities of the transit agency. Funding The user will also want to be able to identify the total cost of the partnership, including capital costs, internal staff time, and resources. Once the cost has been estimated, the user can begin to identify funding sources available to support the project. If funding sources have not been identified, then the user should define a funding strategy. If there is a revenue stream associated with a P3, it may provide all or part of the funding required to deliver the partnership. Project sponsors may work with private sector partners to identify new and innovative ways to raise funds for the P3 and/or the public transit agency in general. Support Possibly the single most important question when reviewing a P3’s viability is whether there is support for the project. This support can (and should) come from many angles: community stakeholders, internal staff, industry associates, and local politicians. The single most commonly cited element for a P3’s success among case study interviewees was the identification of at least one—but typically two—project champions, one on each side of the transaction. If the user cannot identify a project champion, the user should begin introducing the concept of the P3 to people of influence within and outside the organization. A project champion is critical to a P3’s success as they work toward securing approvals, raising funds and awareness, keeping project delivery on schedule, and facilitating communication between both parties. Opposition The user should identify any existing or potential opposition to the P3. This may come from public transportation riders or local stakeholders. Transit agencies might consider an educa- tional campaign alerting riders to the proposed benefits of the P3. Open communication and local outreach can work to address opposition to the project. Long-Term Vision A P3 project checklist user should be able to specify the long-term vision for the proposed P3. This may change with the type of P3 in question. An operations P3, for example, might consider the nature of services to be provided, the length of the contract, and the desired performance out- comes. For a technology P3, a user might consider the pace at which technology is changing and how the P3 might adapt. This may include specifications that can be outlined by the public partner ahead of the P3’s implementation or developed in collaboration with a private partner who may have deeper insights about the future of the non-transit aspects of the P3, such as a technology or real estate partner. Figure 7 summarizes the questions associated with the project definition section. 4.1.4 Partnership Definition The partnership definition section is intended to identify the legality of any proposed partner- ship. It is not typical for states to specifically regulate transit agencies’ small- and medium-sized

evaluating and executing a p3 81 P3s. However a transit agency may have its own internal regulations regarding the competitive bid processes, procurement, contracting, and project delivery. These potential conflicts should be identified early in the P3 planning process in order for the public partner to express these limitations to a private partner up front, or to be included in an RFP when selecting a partner (Figure 8). Public and Private Partners Both partners should be able to clearly identify the specific benefits they will each receive by engaging in the P3. Benefits are not always strictly monetary compensation but can also be found in long-term savings or operational optimization. Evaluation Question Response (drop-down menu) Follow-Up Questions Project Definition 3 Need Is there a publ ic (and private) need for the proposed transportation project? (i.e., will the project grow ridership, increase accessibility, improve the state of good repair, etc.?) Yes Please describe the need. 4 Funding Is project funding identified? Yes Please describe the type and amount of each secured funding source. 5 Funding Strategy Is funding sufficient to cover anticipated project costs? Yes Please describe the funding strategy. 6 Budget Has the project budget been developed (capital and operating costs)? Yes Please describe the status of budget. 7 Schedule Has a general project schedule been developed? Yes Please describe the schedule. 8 Internal Costs Does the project budget account for the public transportation provider's staff time and any required consultant support? Yes What is the estimated staff/consultant cost? 9 Champions Are there project champions on either the publ ic or private side that will serve as advocates of the project? Yes Identify these project champions and their roles relation to the project. 10 Stakeholder Support Is there strong support among the general stakeholders to pursue the project? Yes Please describe the nature of the general stakeholder support. 11 Local Support Is there strong support among the local community to pursue the project? Yes Please describe the nature of the local community support. 12 Opposition Is the project free of organized or other significant opposition? Yes No follow up required. 13 Industry Interest Has a private entity demonstrated interest in the project? Yes Identify the private entity or entities that have demonstrated interest. 14 Long-Term Goals Is the project consistent with long-term transportation goals and plans of the provider and the region in general? Yes Describe how the project is consistent with these goals and plans. Project Summary Based on the answers above, determine if a re-evaluation is needed before proceeding. Tally of 'Maybes': 0 Tally of 'Nos': 0 P3 Process in Figure 7. Project definition section of the P3 Project Screening Checklist.

82 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) Public and Private Risk One of the greatest benefits public partners can receive from a P3 is the transfer of risk from the public partner to the private sector. The private partner will be willing to assume these risks if the benefits identified above provide a positive financial return over time. The public partner should closely review the level of risk they are expected to assume in a potential P3. 4.1.5 Initiation Once the user has defined its P3 project and has established that the partnership has defined elements key to successfully pursue a P3, the user should carefully review what types of resources will be needed, and are subsequently available, for actually implementing the P3 (Figure 9). Procurement As described above, the type of procurement process that a transit agency follows will impact the implementation of the P3. The user must identify how a P3 can be facilitated given the relevant procurement process, identify any changes or deviations from the usual process, and recognize the approvals that may be required to facilitate a P3. Efficiencies The user should be able to quantify cost- or time-saving efficiencies that may be derived from the P3. Presenting these efficiencies as a core benefit to any P3 will help to build a strong case when garnering support. If the P3 does not achieve any efficiencies for the transit agency, the user should evaluate what other benefits the P3 may bring to justify the time and expense required to advance the P3. Evaluation Question Response (drop-down menu) Follow-Up Questions Partnership Definition 15 Legislation Can the project be undertaken as a P3 under the existing P3 legislation? Yes Please describe the enabling authority. 16 Other Regulations Are there any other approvals or clearances that need to be performed to deliver this project as a P3? Yes Identify what approvals are needed. 17 Public Agency Benefit Will the public transportation provider benefit from the P3? Yes Please describe how the public transportation provider will benefit from the P3. 18 Private Entity Benefit Yes Please describe how the private entity will benefit from the P3. 19 Public Risk Will the transit agency assume risk? Yes Please describe the risk. 20 Private Risk Will the private entity assume risk? Yes Please describe the risk. Partnership Summary Based on the answers above, determine if a re-evaluation is needed before proceeding. Tally of 'Maybes': 0 Tally of 'Nos': 0 P3 Process Will the private entity benefit from the P3? Figure 8. Partnership definition section of the P3 project checklist.

evaluating and executing a p3 83 Team Members Building a competent team of both core and support staff from within the user’s organiza- tion was identified as a critical element of success by all interview participants. The user should evaluate whether a group has the internal sources and staff capacity to implement and oversee a P3 and, if not, what additional resources may be required. While a small- and medium-sized P3 often does not require a dedicated team of staff members, key personnel in applicable depart- ments should be involved during the P3 planning process. These team members will vary based on the type of P3. For instance, a real estate P3 will likely be overseen by a real estate department and require input from the operations, financial, capital, maintenance, and planning teams. If the user is taking inventory of staff and is concerned that a very small agency may not have the bandwidth to proceed, they should consider the magnitude of the particular P3 being evaluated. One case study was implemented almost single-handedly by a public transit agency staff member. While the staff person received some support, the size of the P3 did not require a team of personnel assigned to overseeing the day-to-day operations of the partnership. The staff person was unwavering in her efforts to implement the P3, illustrating that a tenacious project champion can make all the difference in a P3’s success. Evaluation Question Response (drop-down menu) Follow-Up Questions Initiation 21 Procurement Do existing procurement processes adequately support delivery of this project? Yes What is the procurement process? 22 Efficiency Is there potential to achieve cost savings and/or schedule reductions by delivering the project as a P3? Yes Please describe the nature of savings (time, cost, etc.)? 23 Project Team Have project teams (private and public) been identified and their roles and responsibilities clearly defined? Do they have the skills and capacity required for carrying out their assigned roles and responsibilities? Yes Please describe teams and capabilities. 24 Support Team Have all internal resources required to support this project been identified and informed of roles/responsibilities supporting this project? Yes Please identify the internal resources required. 25 Project Team Availability Does the agency have adequate time and staff available to deliver the project? Yes No follow up required. 26 Permissions and Approvals Have you identified any internal or external permissions required? Yes Identify what permissions or approvals are needed. 27 Internal Communications Does the project have a plan for internal communications? Yes Please describe the communications plan. 28 External Communications Does the project have a plan for external communications? Yes Please describe the communications plan. 29 Stakeholders Will all stakeholders be participating in the initial meetings for the project? Yes Will the stakeholders continue to participate in the project delivery meetings? Summary Based on the answers above, determine if a re- evaluation is needed before proceeding. Tally of 'Maybes': 0 Tally of 'Nos': 0 P3 Process Figure 9. Initiation section of the P3 Project Screening Checklist.

84 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) Communications Interview participants also identified the need for clear and open communications between internal staff, the public, and their private partners. If the user does not have a plan for internal and external communications and answers “no” to the question, the checklist will prompt the user to consider how a plan may be created. This can be as simple as setting up a monthly or weekly phone call or an in-person meeting with the internal team or private partner, or develop- ing a template for standardized reporting on a periodic basis. When devising a communications plan, it is crucial to identify a lead contact person on each side of the transaction and within each internal department to make sure that responsibilities are clearly defined and the line of communication remains open. Stakeholders As a transit agency, the importance of customer satisfaction is second to none. By encourag- ing stakeholder participation early on in the P3 implementation process, the public and private partners can work together to ease potential public concerns and to optimize the benefits of the P3 to best suit the needs of riders. If the user did not include local stakeholders in initial meet- ings, they can still create ways to disseminate information on the P3s to the public through social media or a website. The user can also host meetings or charrettes with stakeholders to gather feedback and to bolster the inclusionary nature of the planning process. 4.1.6 Planning The planning section is designed to help the user identify potential risks and to best structure the P3 in a way that will minimize those risks to both partners (Figure 10). Evaluation Question Response (drop-down menu) Follow-Up Questions Planning 30 Mutual Objectives Do both the public transportation provider and private partner understand each entity's objectives with this project? Yes Please describe each party's objectives for this project. 31 Risk Have project risks been identified? Yes Describe the risks of the project. 32 Risk Allocation Is there potential to allocate risks to the private partner for which they are in a better position to manage? Yes Please describe how risks can be appropriately allocated. 33 Quality Is there an advantage to having the private partner operate or maintain the assets? Yes Please describe the advantages. 34 Monitoring Does your agency have the resources to monitor and lead this project through delivery? Yes Please describe the resources in place to monitor and lead this project through delivery. Planning Summary Please describe what you will do to resolve the "no" answers above. If there are any "no" questions that cannot be resolved and suggest the P3 should not be pursued/suspended, please describe why these cannot be pursued. Tally of 'Maybes': 0 Tally of 'Nos': 0 P3 Process Figure 10. Planning definition section of the P3 Project Screening Checklist.

evaluating and executing a p3 85 Mutual Objectives The premise of a P3 is built on two parties mutually benefiting from the proposed partner- ship. A clear understanding of the ultimate objective of each partner was identified as a crucial element of success. Make sure in early conversations with private partners that each entity’s objective is clarified and the steps to achieve those objectives are agreed upon. Risk and Risk Allocation As discussed above in the partnership definition, the amount of risk each partner is willing and able to assume should be identified and agreed upon early in the P3 planning process. Quality A typical P3 benefit to the public partner is taking advantage of the private partner’s expertise in a particular area that falls outside of the traditional transportation sphere, such as wireless technology or retail property management. If the user cannot identify the benefits of increased quality in project delivery using the P3 rather than completing the project internally, the user should further evaluate the need for the P3. If the user can articulate the benefit, they should use this to promote the need for the P3. Monitoring Once a P3 project is implemented and operational, the user should know who will monitor the private partner’s activities. If performance standards have been agreed upon or a schedule for payment established, the public partner should have a clear process identified for moni- toring the health of the P3 and continuing communication with the private partner. If the user has not yet identified monitoring procedures, they should consult relevant internal staff persons to identify previously successful monitoring processes and to inventory the staff ’s capabilities. 4.1.7 Implementation To help the user understand if a potential P3 will be successful, the user must understand how to mitigate any potential problems that may arise (Figure 11). Evaluation Question Response (drop-down menu) Follow-Up Questions Implementation 35 Mitigation of Complications Is there a contingency plan in place to mitigate additional costs, schedule delays, or other complications? Yes Please describe the contingency plan. 36 Costs Is there a mechanism in place to manage costs associated with the project? Yes Please describe the mechanism in place. Implementation Summary Based on the answers above, determine if a re-evaluation is needed before proceeding. Tally of 'Maybes': 0 Tally of 'Nos': 0 P3 Process Figure 11. Implementation definition of the P3 Project Screening Checklist.

86 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) Mitigating Complications Understanding what issues may arise and how to troubleshoot before they occur can save both parties money and time. The user should be able to describe how the P3 would survive when complications arise. If the public partner cannot foresee potential conflicts, they should talk to industry experts who have had experience delivering similar P3s and who many have lessons learned and greater insights into potential issues. Costs A large part of contingency plans is sound financial planning. Building a partnership on accu- rate cost estimates is crucial to successfully delivering a P3. Building in the appropriate financial contingencies should be done in accordance with the public transit agency’s financial standards. 4.1.8 Benefits At the very initial stage of a P3’s conception, it is likely that the user has not fully developed an approach to measuring the P3’s future success but they should begin to understand the best ways to quantify and track success. A public partner will need to report the P3’s continued suc- cess to a board and to local stakeholders. Identifying early on what the performance metrics for success will be can help the user sell the P3 to decision makers and potentially help the case for future P3s. Furthermore, tracking the P3 can help shape the transit agency’s objectives and frame the expectations of the private partners accordingly. Measuring the P3’s success also provides an objective framework for looking back on whether the P3 measured up to the original expecta- tions, which can be useful for refining an existing P3 or planning others (Figure 12). 4.2 Summary and Review After each section, the user should review how the potential P3 is taking shape. Users should not be discouraged if they answer “no” and are required to gather more information to answer additional questions. Crafting these responses with an internal team provides the user a unique opportunity to fully develop the basis of the P3 before presenting it to a private partner or the public. The following chapter will identify nine best practices users should keep in mind while answering the checklist and structuring the P3. The best practices also provide insights on the elements of the checklist that hinder delivery of a P3 and should receive the most focus moving forward. Evaluation Question Response (drop-down menu) Follow-Up Questions Benefits 37 Success Have you developed an approach to measure the success of this project? Yes Please describe how you will measure project success. Benefits Summary Based on the answers above, determine if a re- evaluation is needed before proceeding. Tally of 'Maybes': 0 Tally of 'Nos': 0 P3 Process Figure 12. Benefits definition section of the P3 Project Screening Checklist.