On February 23, 2012, the Snell & Wilmer Infrastructure Development and Project Finance Industry Group hosted “Moving Nevada Forward,” its first annual forum on Nevada public private partnerships. The event was well attended by many public officials and high-level development industry professionals. In the course of the seminar, questions arose about the protections afforded to contractors, subcontractors and materialmen in public private partnerships (P3s).
P3s are cooperative agreements between public bodies and private developers to design, finance, construct, operate and maintain facilities for public use. The types of financing for these projects can be as varied as creative minds can consider, but will be backed by some public obligation ensuring the initial investment and a reasonable rate of return to the private developer in exchange for undertaking the risks inherent in property development, operation and maintenance. The public body, relieved of its risk of liability for construction claims, impacts, cost overruns, change orders, design errors and the like, pays for the facility through long-term lease agreements or concessions, with ownership of the facility usually turned over to the public body at the end of the financing agreement. So the P3 project is not quite a public work, and it’s not quite a private work of improvement. Therefore, the applicability of private work mechanics’ liens and/or public work payment bonds simply may not be available absent mandating legislation or negotiated obligations in P3 agreements.
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