Procurement Example: P3
Long Beach Civic Center
The Civic Center Project involves 14.89 acres in downtown Long Beach that is currently utilized for the existing City Hall, Main Library, former State Courthouse, a destination park and related parking.
Background
The City commissioned an architectural firm to carry out detailed planning and engage with stakeholders, aiming to transform the Civic Center through the "Re-envisioning the Civic Center" initiative:
The project's goal is to transform the Civic Center into a dynamic area blending public and private spaces, including a prominent Civic Plaza. Objectives include:
Enhancing connectivity between the new Civic Center and Downtown.
Turning Lincoln Park into a sought-after park with amenities for visitors, residents, and Downtown employees.
Lowering maintenance costs, improving energy efficiency, consolidating offsite leases, and achieving cost neutrality.
Exploring private development opportunities and/or selling surplus property for private development.
Evaluating Alternatives
Three alternatives were considered:
Retrofit Alternative
Relocation Alternative
Re-Build Alternative
The Retrofit and Relocation Alternatives were determined to be infeasible. The Re-Build Alternative under a P3/ DBFOM (Design, Build, Finance, Operate & Manage) delivery model was determined to offer the best value and lowest risk to the City.
Risk Transfer
Value for Money
Benefits
Fastest path to new, seismically superior facilities
City transfers to the Project Team design and construction risk, including entitlements, change orders, cost overruns and construction delays
Lower maintenance and operation costs at the same performance level over life of the facility, resulting in lower cost
City does not pay Project Team until City occupies the new facilities. At that time, the City will be obligated to make lease payments for 40 years
At the end of the 40 year lease, the facility is transferred to the City at no cost at a Facility Condition Index of 15% or less, indicating the building is in Good or better condition
Project Goals
Ensure the City's lease payments for the new City Hall and Main Library, including operations and maintenance, approximate current costs, but include annual CPI increases
Shift risks associated with design, development, entitlement, financing, construction, operations and maintenance to the Project Team
Incorporate a 40-year life-cycle Operations and Maintenance contract for the Civic Center as part of the City's current costs
Require ownership of the facilities to revert at no cost to the City at the end of the contract at a "good" or better condition.
Process
DBFOM (Design, Build, Finance, Operate & Manage) Process
Issue a Request for Qualifications (RFQ) for DBFOM in April 2013.
Issue an RFQ for a P3 Consultant in September 2013.
Announce a shortlist of RFQ respondents on October 22, 2013.
Collaborate with the P3 Consultant to prepare and issue a Request for Proposals (RFP) on February 28, 2014, along with an evaluation matrix to score the proposals.
Review, evaluate, and score the RFP responses.
Recommend a preferred Project Team to the City Council.
Enter into an Exclusive Negotiating Agreement (ENA) with the Project Team to exclusively negotiate the general technical and financial terms of the Project, including risk allocation.
Develop a Term Sheet that details those terms and risk allocations in a formal agreement, guiding the project through the entitlement period.
Formulate a Global Executory Agreement to oversee the negotiation process and the obligations of the parties in preparing and executing agreements for the lease/leaseback, conveyance of development rights for private development, and achieving commercial and financial closure.
Timeline
Team Members
Owner’s Consultants
P3 Consultant
Architectural services
Assist in the development of the Request for Proposal
Assist in RFP Evaluation, due diligence and selection
Project Management including a workplan and schedule to ensure identification, coordination, tracking and completion of necessary tasks
Advisory Services including financial, commercial, and technical support to help the City manage risk, lead negotiations, and prepare the needed documents to reach commercial and financial close
Community Outreach Support including maintenance of the City's website, tracking of comments and surveys, monitoring and analyzing site traffic and participating in public and community meetings
P3 Consultant’s Team
Architectural firm
Various engineering disciplines
Cost consultant
Community outreach consultant
Legal representation
Economic consultant
Legal Advisor
Negotiation, preparation, revision and finalization of the legal documents necessary to achieve commercial and financial close:
Exclusive Negotiation Agreement
Term Sheet
Memorandum of Understanding
Global Executory Agreement
Closing Documents:
Concession Agreement
Ground Lease
Space Leases
Development Agreement for Private Development
Creation of one or more special purpose non-profit entity for the purpose of issuing bonds
Bond counsel
Financial Advisor
Perform as peer reviewer and attend all meetings through financial close
Assessing factors that may impact City finances, budget or risk
Provide advice and support with regard to development of the final financial plan, the financing entities and debt structuring
Assess and advise with regard to non-financial issues that may impact overall benefits, cost and risks of the Project
Selection
Original Proposal Teams
Long Beach CiviCore Alliance (LBCCA)
Lead Equity Member: Macquarie Capital Group
Equity Members: Lend Lease Investments and Mar Ventures/Continental
Contractor: Lend Lease
Lead Architect: Fentress
Landscape Architect: Civitas
Legal: Milbank
Underwriter: Bank of America Merrill Lynch
Facility Manager/ Operator: ABM Facility Services
Plenary Edgemoor Civic Partners (PECP)
Lead Equity Member: Plenary Group
Equity Member: Edgemoor Infrastructure & Real Estate (subsidiary of Clark Construction Group)
Contractor: Clark Construction Group
Lead Architect: SOM/ Kelly Sutherlin McLeoad
Landscape Architect: Gustafson, Guthrie Nichol
Legal: O’Melveny & Meyers LLP
Underwriter: Stifel
Facility Manager/ Operator: Johnson Controls
Proposal Evaluation & Scoring
Winner: Plenary Edgemoor Civic Partners
Agreed Contract Terms:
Design, build, finance, operate and maintain for 40 years post completion.
$520 million