January 29, 2020

By: Jason Ebe, Partner at Snell & Wilmer LLP

Many of our readers are aware of the ConsensusDocs family of construction industry contract templates from prior articles in this newsletter as well as our seminars to clients and industry groups. These templates have been developed through a collaborative effort of organizations representing a wide cross-section of the design and construction industry, including, for example, Construction Owners Association of America, Construction Financial Managers Association, Associated Builders and Contractors, Associated General Contractors of America, American Subcontractors Association, Construction and Lean Construction Institute. ConsensusDocs recently published its ConsensusDocs® 900 Standard Public-Private Partnership (P3) Agreement and General Conditions template (“CD 900”). Public Private Partnerships are a long-term approach to procuring public infrastructure where the private sector generally assumes a major share of the risks in terms of financing and construction, from design and planning, to long-term maintenance. This CD 900 facilitates a simplified approach to contracting between public agencies and private entities to deliver P3 projects. Whereas many manuscript contract templates may range from several hundred to over one thousand pages in length for a multi-million dollar project, this relatively short CD 900 (16 pages plus exhibits) may be a good starting framework for a smaller scale P3 project.

The anticipated parties to this agreement are identified as the project owner, also called the “User,” and the Concessionaire. Nonparty participants include the General Contractor or Design-Builder, Design Professional, and O&M Contractor. The layout and feel of the CD 900 is similar to other ConsensusDocs templates. In addition, as is common for these documents, the CD 900 establishes a team relationship and ethics, stating that each party agrees to act on the basis of good faith and fair dealing, and to perform with integrity, avoiding conflicts of interest.

The template identifies a number of suggested exhibits, without providing templates for these exhibits, for such topics as: initial funding agreements; basis of design/User’s program; unavailability events; O&M noncompliance events; equity members; schedule; financial model formulas; insurance and bond requirements, and federal requirements. The extent to which each of these needs to be developed will depend on the nature and complexity of the P3 project. By identifying these exhibits to be developed at a later date, the template provides placeholders for further thought and negotiation without unnecessarily expanding the agreement length.

Article 3 of the CD 900 sets forth the Concessionaire’s comprehensive services to develop, design, construct, finance, operate and maintain the project. The document provides that the Concessionaire may procure design-build services using the ConsensusDocs 415 Design-Build Agreement and operations and maintenance services using the ConsensusDocs 910 O&M Agreement. Article 3 also includes terms relating to financing and risk sharing.

Later articles of the CD 900 provide terms for User’s responsibilities, source of funds, term, handback, payments, changes, force majeure, risk of loss, insurance, bonds, indemnity, default, suspension, termination, and dispute resolution. Similar to other ConsensusDocs templates, the CD 900 provides terms intended to provide a commercially reasonable and balanced risk allocation to encourage a ‘win-win’ relationship among project participants and stakeholders.

Finally, as indicated in the template itself, the document has important legal and insurance consequences, and is not intended as a substitute for competent professional services and advice. Consultation with legal counsel and insurance advisors is encouraged.

The views expressed in this article are not necessarily those of ConsensusDocs. Readers should not take or refrain from taking any action based on any information without first seeking legal advice.