Public-Private Partnership Toll Concessions Model Contract .

Public-Private Partnership TollConcessions Model Contract GuideDecember 2016

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Public-Private Partnership Toll Concessions Model Contract GuideTechnical Report Documentation Page1. Report No.2. Government Accession No.3. Recipient’s Catalog No.FHWA-HIN-17-0014. Title and Subtitle5. Report DatePublic-Private Partnership Toll ConcessionsDecember 2016Model Contract Guide6. Performing Organization Code7. Author(s)8. Performing Organization Report No.Sophie Guiny (Booz Allen Hamilton), Dolly Mirchandani, Benjamin Clark(Allen & Overy), Marcel Ham, Varun Hallikeri, Sasha Page (IMG Rebel)9. Performing Organization Name And Address10. Work Unit No. (TRAIS)Booz Allen Hamilton8283 Greensboro DriveMcLean, VA 2210211. Contract or Grant No.DTFH61-13-F-00057Allen & Overy LLP1221 Avenue of the AmericasNew York, NY 10020IMG Rebel4350 East West Highway, Suite 950Bethesda, MD 2081412. Sponsoring Agency Name and Address13. Type of Report and Period CoveredFederal Highway AdministrationOffice of Innovative Program Delivery1200 New Jersey Avenue, SEWashington, DC 2059014. Sponsoring Agency Code15. Supplementary NotesContracting Officer’s Technical Representative: Mark Sullivan, FHWA Office of Innovative Program Delivery16. AbstractP3s concessions are an integrated service delivery approach where a public transportation agencyenters a contractual agreement with a private sector entity to deliver a service and/or facility for aspecific period. Under the P3 approach, the private sector entity is singly responsible for the design,construction, finance, operations, maintenance, operation and renewal (if needed) of facilities for aspecified concession period. This Guide presents key concepts for the structuring and development oflegal contracts for highway transportation P3s in the United States. The Guide illustrates how P3contracts are developed and structured and explains the major provisions in typical P3 contracts and isdesigned to provide industry-standard concepts, relevant common tools and mechanisms, andsituational examples applicable to P3 transactions.17. Key Words18. Distribution StatementPublic-private partnerships, project delivery, concession contracts, legal, tollroads, availability payment, DBFOMNo restrictions19. Security Classif. (of this report)20. Security Classif. (of this page)21. No. of Pages22. PriceUnclassifiedUnclassified152N/AForm DOT F 1700.7 (8-72)Reproduction of completed page authorized1

Public-Private Partnership Toll Concessions Model Contract GuidePrefaceOn July 17, 2014, the Build America Investment Initiative was implemented as a government-wide effort to increaseinfrastructure investment and economic growth. As part of that effort, the U.S. Department of Transportation(USDOT) established the Build America Transportation Investment Center (BATIC). The BATIC helped public andprivate project sponsors better understand and utilize public-private partnerships (P3s) and provided assistance tosponsors seeking to navigate the regulatory and credit processes and programs within the Department. In December2015, the Fixing America’s Surface Transportation Act (FAST Act) was enacted, which directed USDOT to establish aNational Surface Transportation Infrastructure Finance Bureau, which was renamed the Build America Bureau (theBureau).Building upon the work of the BATIC, the Bureau was established in July 2016 as USDOT’s go-to organization to helpproject sponsors who are seeking to use Federal financing tools to develop, finance and deliver transportationinfrastructure projects. The Bureau serves as the single point of contact to help navigate the often complex process ofproject development, identify and secure financing, and obtain technical assistance for project sponsors, includingassistance in P3s. The Bureau replaces the BATIC and is now home to DOT’s credit programs, including TransportationInfrastructure Finance and Innovation Act (TIFIA), the Railroad Rehabilitation and Improvement Financing (RRIF) andPrivate Activity Bonds (PAB). The Bureau also houses the newly-established FASTLANE grant program and offerstechnical expertise in areas such as P3s, transit oriented development and environmental review and permitting. TheBureau is also tasked with streamlining the credit and grant funding processes and providing enhanced technicalassistance and encouraging innovative best practices in project planning, financing, P3s, project delivery, andmonitoring.Working through the Bureau, USDOT has made significant progress in its work to assist project sponsors in evaluatingthe feasibility of P3s, and helping simplify their implementation. In response to requirements under the Moving Aheadfor Progress in the 21st Century Act (MAP-21) and the FAST Act to develop best practices and tools for P3s, theBureau, jointly with FHWA, is publishing this report on U.S. highway P3 concessions.

Public-Private Partnership Toll Concessions Model Contract GuideTable of Contents1Introduction . 1-11.1Public-Private Partnerships. 1-21.2Contractual Terms of P3s . 1-21.3P3s, the Federal Highway Administration, and the Moving Ahead for Progress in the 21stCentury Act . 1-21.4Background . 1-31.5Objectives/Purpose . 1-31.6Description of Chapter Topics . 1-41.7Suggested Use of the Toll Concession Contracts Chapters . 22.62.72.7.12.7.22.7.3GRANTING OF THE TOLLING RIGHT .2-1DURATION OF TOLLING RIGHT.2-2User Classification . 2-2TOLLED AND EXEMPT USERS .2-2CHANGE OF USER CLASSIFICATION .2-3Toll Rates . 2-4Toll Collection. 2-6TOLL COLLECTION SYSTEM AND ADMINISTRATION .2-6ENFORCEMENT OF TOLL COLLECTION.2-7Use of Toll Revenues . 2-8Other Matters Related to Toll Regulation . 2-9SUSPENSION OF TOLLING .2-9DEMAND RISK . 2-10COMPLIANCE WITH FEDERAL REQUIREMENTS RELATED TO TOLLING . 2-10Benefit-Sharing . 3-13.1Introduction . 3-13.2Revenue-Sharing Triggers. on. 1-7Tolling Regulation . 2-12.1Introduction . 2-12.2Right to Collect Tolls . 2-12.2.12.2.23EDUCATIONAL REFERENCE .1-6ILLUSTRATIVE AND EXAMPLE-BASED .1-6GLOSSARY OF TERMS AND EXAMPLE PROVISION DEFINITIONS .1-6TYPES OF TRIGGERS .3-1USING ONE OR MULTIPLE TRIGGERS .3-2DERIVING TRIGGERS THROUGH A FINANCIAL MODEL.3-3SHARING CAPS AND COLLARS .3-4Revenue-Sharing Mechanics . 3-4TREATMENT OF OPERATING COSTS, CAPITAL COSTS, AND GRANTS.3-4TIMING ISSUES .3-5REFINANCING .3-5Supervening Events . 4-14.1Introduction . 4-14.2The Role of Insurance to Mitigate Against Risk. 4-14.3Categorization of Supervening Events. 4-24.3.14.3.24.3.34.3.44.3.54.4COMPENSATION EVENTS.4-2COMPETING FACILITIES.4-3DELAY EVENTS .4-5UNANTICIPATED CIRCUMSTANCES DURING CONSTRUCTION .4-6FORCE MAJEURE EVENTS .4-6Types of Contractual Relief Generally Granted . 4-8i

Public-Private Partnership Toll Concessions Model Contract Guide4.4.14.4.24.4.3NOTICE OF OCCURRENCE OF SUPERVENING EVENT .4-8RELIEF FOR NONPERFORMANCE AND EXTENSION OF TIME TO KEY DATES .4-9WHEN IS COMPENSATION APPROPRIATE?. 4-105Changes in Equity Interests . 5-15.1Introduction . 5-15.2When Does a Change in Ownership Occur?. 5-15.3Common Equity Member Concerns. 5-25.4Permitted and Prohibited Changes in Ownership . 5-36Change in Law. 6-16.1Understanding the Concerns of All Parties. 6-16.2Unforeseeable Changes in Law – Relevant Considerations . 6-16.3Trends in the United States P3 Market . 6-26.4Compensation, Relief from Delay, and Mitigation. 6-26.5Discriminatory Changes in Law . 6-36.6Example Provisions. 6-36.7Tax-Related Issues . 6-46.8Example Provisions. 6-47Defaults, Early Termination, and Termination Compensation . 7-17.1Introduction . 7-17.2Termination for Department Default . .58Termination for Developer Default . 7-6EVENTS GIVING RISE TO DEVELOPER DEFAULT .7-6CURE PERIODS FOR DEVELOPER DEFAULT .7-8DEPARTMENT’S RIGHT TO TERMINATE FOR DEVELOPER DEFAULT AND PROCEDURE .7-9COMPENSATION ON TERMINATION FOR DEVELOPER DEFAULT . 7-10Termination for Extended Force Majeure Events or Uninsurable Risks .7-13RIGHTS OF EITHER PARTY IN THE EVENT OF EXTENDED FORCE MAJEURE EVENTS AND PROCEDURE. 7-13COMPENSATION ON TERMINATION FOR EXTENDED FORCE MAJEURE EVENTS . 7-13COMPENSATION ON TERMINATION FOR UNINSURABLE RISKS . 7-14TERMINATION FOR CONVENIENCE AND PROCEDURE . 7-14COMPENSATION ON TERMINATION FOR CONVENIENCE. 7-15Other Issues Related to Calculation of Compensation for Early Termination .7-15INCREASED TERMINATION LIABILITIES ARISING FROM CHANGES TO FINANCING DOCUMENTS . 7-15RIGHTS OF SET-OFF ON EARLY TERMINATION . 7-16TIMING OF PAYMENT . 7-16TREATMENT OF ASSETS ON EARLY TERMINATION . 7-16COMPENSATION ON TERMINATION AS AN EXCLUSIVE REMEDY . 7-17Handback . 8-18.1Introduction . 8-18.2Handback Requirements . 8-18.2.18.2.28.2.38.38.48.4.18.4.28.59EVENTS GIVING RISE TO DEPARTMENT DEFAULT .7-1DEPARTMENT DEFAULT CURE PERIODS .7-2DEVELOPER’S RIGHTS TO TERMINATE FOR DEPARTMENT DEFAULT AND PROCEDURE .7-3COMPENSATION ON TERMINATION FOR DEPARTMENT DEFAULT .7-4DEFINING HANDBACK REQUIREMENTS .8-1RESIDUAL LIFE .8-2ADDITIONAL HANDBACK REQUIREMENTS .8-3Handback Inspections . 8-4Handback Reserve Accounts and Letters of Credit . 8-4HANDBACK RESERVE ACCOUNT .8-4LETTERS OF CREDIT .8-5Payments in Lieu of Meeting Handback Requirements. 8-7Construction Performance Security. 9-19.1Introduction . 9-19.2The Role of Performance Security in Traditional Contracting . 9-19.3The Approach Taken in Mature P3 Markets Outside of the United States. 9-29.4The Approach Taken in the United States P3 Market to Date. 9-3ii