The funding of construction projects for public use through public-private partnerships (known as “P3s”) is increasing at all levels, including on federal and federally funded projects. Typically, the public entity will provide the land and authorize the private entity to design, build and frequently operate the resulting public work. In trying to maximize the incentives for the participation of private investment in P3 projects, federal agencies, as well as state and local governments using federal funds to help finance construction, try to minimize government “red tape.” The zeal to reduce “red tape” and minimize costs has damaging consequences, however, when it eliminates traditional requirements related to public procurement, such as the statutory payment protections for work performed, as provided by the federal Miller Act and state and local so-called “little Miller Acts,” enacted by all the states, including Ohio.
The Ohio General Assembly has authorized ODOT to enter into P3s with private entities after soliciting proposals. Fortunately, ODOT is statutorily obligated to require that the public-private agreement include (1) a contract performance bond and (2) payment bond pursuant to R.C. §5501.73(B)(10) and (11). Recent amendments in the Budget Bill (Sen. H.B. 64) clarify that the “construction services” portion of the work must also be bonded.
Those providing labor or material to other P3 projects should not necessarily conclude that the work is protected by a payment bond in the usual public fashion. Further investigation is recommended on such projects if ODOT is not involved.
