By way of background, the Indiana public bid statutes were amended in 1995  and again in 1998 to include a new Article 23 in Title 5, the State and Local administration statutes. This  new Article 23 was called the “privatization” statute or “P3” statute (being public-private partnerships). It  is codified at I.C. §5-23. It was intended to provide an alternative procurement system in lieu of the then required competitive bid procurement requirements of design-bid-build, which was largely driven by price  considerations.  

This new Article defines public-private agreements and applies to the state or local government political  subdivision created under Title 36 of the Indiana Code. I.C. §5-23-1-1. Specifically, the use of BOT  Agreements are covered by Chapter 3 of the Public-Private Agreements statute.

Among the benefits of the  P3 Statute and the BOT provisions is that the selection of the contractor is to be done on a merit based,  “best selection” basis. Notably, subsequent to the creation of the P3 Statute and BOT Agreements, the  Indiana legislature also created for use on public works projects at the local government level the use of  design-build project delivery system and later construction manager at-risk, or CMc, project delivery system. Thus, a public owner at the local government level now has three (3) delivery options besides low  bid traditional procurement.

Under the P3 Statute, a state or political subdivision may enter into a “BOT Agreement” with an operator  for the acquisition, planning, design, development, reconstruction, repair, maintenance, or financing of any  public facility on behalf of the governmental body. A “BOT Agreement” means any  agreement between a governmental body and an operator to construct, operate and maintain a public facility  and to transfer the public facility back to the governmental body at an established future date.

BOT Agreements may provide the following: 

(a) The design, construction, operation, maintenance, management or financing of the  cost of a public facility shall be partially or entirely the responsibility of the  operator. 

(b) The governmental body shall lease the public facility and real property owned by  the governmental body upon which the public facility is to be located to the  operator for a predetermined period. The BOT Agreement must provide for  ownership of all improvements by the governmental body, unless the  governmental body elects to provide for ownership of the public facility by the  operator during the term of the BOT Agreement. In this case, ownership reverts  back to the governmental body upon the termination of the BOT Agreement. 

(c) The BOT Agreement must identify which costs are to be the responsibility of the  operator and which costs are to be the responsibilities of the governmental body. 

(d) The operator may be authorized to retain a mutually agreed upon percentage of the  revenues received in the operation and management of the public facility or the  operator may be paid an established amount by the governmental body, which shall  be applied as follows: 

(1) Capital outlay costs for the public facility and public service, plus  

interest and principal repayment for any debt incurred. 

(2) Costs associated with the operation, management and maintenance of  the public facility. 

(3) Payment to the governmental body for reimbursement of the costs of  maintenance, law enforcement and other services, if the services are  performed by the governmental body under the BOT Agreement. 

(4) An agreed upon return on investment to the operator. 

(e) The operator may pay the governmental body either a lease payment or a  percentage of gross revenue per month for the operator’s operation and use of a  public facility. 

(f) The BOT Agreement may require a performance bond and provide for the payment  of contractors and subcontractors under I.C. §4-13.6, I.C. §5-16-5, or I.C. §36-1- 12, whichever is applicable.

Under the P3 statute, public-private agreements are not required to be bid. Any public-private  agreement contemplated by the chapter must be acquired through a Request for Proposals. I.C. §5-23-5-1.  A Request for Proposals must be prepared and administered under the provisions of I.C. §5-23-5-2, which  spells out the following procedure. 

Proposals for public-private agreements shall be solicited through a Request for a Proposal, which must  include the following: 

(a) The factors or criteria that would be used in evaluating the proposals; 

(b) A statement concerning the relative importance of price and the other evaluation  factors; 

(c) A statement concerning whether the proposal must be accompanied by a certified  check or other evidence of financial responsibility; and 

(d) A statement concerning whether discussions may be conducted with the offerors  for the purpose of clarification to assure full understanding of, and responsiveness  to, the solicitation requirement.