ARTBA P3 Conference July 2016

Authorities often include insurance benchmarking provisions to provide relief in the event that the cost of insurance exceeds a pre-determined benchmark

Benchmarking provisions highlight the importance of accurately evaluating risk transfer in the market space

While there are several types of liquid bond forms in the market, all forms take the place of a letter of credit or reduce letter of credit requirements Bond Type Description PPP Bond Includes both a liquid component and a traditional surety component. The liquid value typically equals between 5%-15% of the total construction value. Demand Bond Stand-alone liquid bond that may or may not be written in conjunction with a traditional performance bond. The demand bond value typically equates to 5%-15% of the total construction value. Either/Or Bond Gives the obligee the option either to fully draw an established liquid amount, or to allow the surety to remedy a principal default through traditional performance bond methods. If a bond has an established liquidity amount of 15% of a 100% performance bond, and the obligee chooses to fully draw the 15% liquidity amount, then the surety has no obligation to remedy the contractor default and complete construction. Accelerated Dispute Resolution Bond A performance bond with a contractually determined maximum investigation period. This bond remedies a principal exactly like traditional surety, but it establishes a set period of time for the surety to investigate the claim.

Innovative surety gains steam in North America over the past 18 months Bond Type Project Type Delivery Model Approximate Construction Value $ (m) Location PPP Bond City Center DBF 60 New Brunswick Compost Center DBOM 115 Alberta Hospital BF 190 Ontario 160 Either/Or Bond DBFM 540 North West Territory School 200 Saskatchewan Accelerated Dispute Resolution Bond Bridge Infrastructure DBFOM 1,120 Pennsylvania “The project has proposed a new form of performance bond, which we view as providing liquidity equaling as much as 10% credit to the performance bond for contractor replacement.” - S&P’s Presale: Plenary Walsh Keystone Partners LLC Accelerated Dispute Resolution Bond “Based on the mechanism of the [Either/Or Bond], we are of the view that the on-demand component is similar to a letter of credit and provides liquid security for the DBJV’s obligations.” - Moody’s Presale: Boreal Health Partnership Either/Or Bond