New York's plodding pace on P3s

Despite Gov. Andrew Cuomo's support for design-build procurement in certain instances, New York still lags behind many other states when it comes to public-private partnerships, also known as PPPs or P3s. As of January 2017, 37 states had legislation allowing the use of P3s to complete a variety of projects while New York has not enacted any.

Andrew Cuomo Tappan Zee

Andrew Cuomo Tappan Zee Judy Sanders/Office of the Governor

Gov. Andrew Cuomo recently indicated that he supports legislation to authorize the use of design-build procurement in New York City on a project-by-project basis, including the revitalization of the Brooklyn-Queens Expressway, according to new reporting from the Daily News.

But despite the governor’s support for design-build in certain instances, New York still lags behind many other states when it comes to public-private partnerships, also known as P3s. As of January 2017, 37 states had legislation allowing the use of P3s to complete a variety of projects while New York has not enacted any.

Cuomo did sign into law in 2011 legislation allowing design-build procurement for a few state agencies to use for various infrastructure projects. One high-profile project that is utilizing design-build is the building of the new Tappan Zee Bridge. Cuomo has also introduced legislation as part of his 2018-2019 executive budget to expand the list of agencies that could utilize it. He did not mention authorizing design-build for New York City anywhere in his executive budget.

Design-build is a type alternative procurement delivery method that bundles the design and build phases of a project into one step to be completed by a single company. While this saves time and often times money, it also entails the state to give up some control over the project. It is also not considered a true P3.

Traditionally, projects have been completed through what is known as design-bid-build. In this process, one company does the design, and then a second company comes in to build it. The state is responsible for all the upkeep. This gives the state total control over design details and later construction, but at the cost of spending more time to get it done. Design-build cuts out a step, enabling certain aspects of construction to begin while the design phase is still happening, thus speeding up the process.

Public-private partnerships inevitably entail certain tradeoffs in terms of public control to gain the benefits of privatization. If one were to look at alternative procurement delivery methods on a spectrum, design-build is at one end with the least amount of privatization and the least public tradeoff. It also provides the least benefits, proponents say.

At the other end of the spectrum would be a full-fledged P3, or what would be called design-build-finance-operate-maintain. In those cases, the private company not only designs and builds the project, but also partially finances it, then maintains and operates it for an agreed upon number of years. The idea is that this takes some the risk off the state while providing a better end product more quickly that the private company could also better maintain. That is the ongoing “partnership” in a public-private partnership. However, the state also gives up some control over aspects like planning and design to the company in that case.

New York state law currently does not constitute the full utilization of P3s, and does not even fully allow design-build, so the state is not considered to have P3 legislation. In 2013, then-state Sen. Greg Ball introduced a bill that would broadly authorize the use of P3s, thus allowing public agencies to navigate around certain construction requirements that prohibit them.

Matthew Neuringer, an associate at the law firm Ashurst specializing in P3s who helped Ball craft that legislation, argued that public-private partnerships would be an invaluable tool to help rebuild and maintain the state’s crumbling infrastructure. Neuringer said the bill had support, but when state senator announced he would not seek re-election, it lost its champion and thus its momentum.

“In every state where there’s been (P3 legislation), there’s been a key champion who really gets it, really understands it and really wants to see public-private partnership legislation become a reality,” Neuringer said. “And we have not seen that champion emerge in the state of New York since Sen. Ball.”

That is one reason Neuringer thinks New York is behind so many other states in the country when it comes to P3s. He said the other reason is for Gov. Andrew Cuomo to avoid a fight with some public-sector unions who would not want public-private partnerships widely used in the state. Neuringer said when he worked with Ball on crafting his legislation years ago, they included protections for unions and the state AFL-CIO was close to giving its approval.

Neuringer added that Cuomo is currently able utilize P3s to a limited extent without the fight through certain public authorities and quasi-governmental groups like Empire State Development and the Port Authority of New York and New Jersey that are not subject to the same restrictions as state agencies. The replacement of the Goethals Bridge and renovations at LaGuardia Airport, both overseen by the Port Authority, are full-fledged P3s.

“The governor, I think, doesn’t necessarily see the need to fight the fight to get public-private partnerships enabling legislation through for all state agencies, for all municipalities, because he is already able to get the win without it,” Neuringer said.

Samara Barend, senior vice president and PPP director for North America at AECOM, as well as the founder of the pro-P3 Performance Based Building Coalition, agreed that a champion hasn’t emerged in the state Legislature. She added that while Cuomo is a supporter of P3s who has pushed for alternative methods to construction projects, he needs help from lawmakers to get more done.

“The governor can’t carry this alone,” Barend said. “It’s asking a lot of him to take on all that political weight and capital if there’s going to be no support from key legislators to help muscle it through.”

However, Neuringer said design-build is a stepping stone to full-fledged P3s and believes the state will naturally move towards them, even if it takes several years.

Assemblyman Michael Benedetto agreed that design-build legislation is a necessary first step before moving forward with alternative procurement delivery methods that are more comprehensive.

For the past several years, Benedetto has tried to get legislation passed to allow New York City’s government to utilize design-build. He said there have been concerns in the past about design-build legislation, but believes its successful implementation on the state level has paved the way for the city to follow suit, adding that he hopes disagreements between Cuomo and New York City Mayor Bill de Blasio will not factor into the decision.

“I would hope that any petty squabbling between executives on the city and state level would not cause the taxpayers of the city of New York their tax dollars to be used unwisely,” Benedetto said.

Although Benedetto strongly supports design-build, he stopped short of supporting full-fledged public-private partnerships. He thinks the state should evaluate the full effects and benefits of design-build before moving forward with anything more comprehensive.

The logical next step in the direction of P3s after design-build is design-build-finance, a step state Comptroller Thomas DiNapoli suggested as one in need of study in a report he published in 2013. This type of alternative procurement delivery method involves slightly more privatization than design-build and the use of private funds towards the public project.

Barend said the state should also try to focus on enabling P3s on a smaller scale and for specific projects in direct response to a need, rather than enacting sweeping legislation. She said when other states took this approach, legislators felt more compelled to pass the legislation. One bill introduced in New York that takes that narrower approach to P3s aims to encourage public-private partnerships to expand broadband across the state.

“We have to be creative,” Barend said. “A majority of other states in the U.S. are being creative. It’s time for us to step up.”