Experience pays: The growing value of public-private partnerships in Canada
Infrastructure projects completed as P3s on time and on budget
OTTAWA - Canada has emerged as a leader in the creation of efficient public-private partnerships (P3) for building infrastructure. A Conference Board of Canada report, released yesterday, finds that 83 per cent of projects met the goal of being completed early or on time.
"P3 delivery is enhancing the long-term quality of public infrastructure and delivering value for taxpayers. Canadian companies are also developing expertise in P3 projects, which is creating opportunities to export their services around the world," said Vijay Gill, Principal Resource Associate.
"But the P3 model is not intended to replace traditional procurement processes altogether - it is one tool in the toolbox. Any potential P3 project must be rigourously evaluated to ensure that the benefits outweigh the costs."
The public sector has turned to P3 projects as an alternative way to build and maintain roads, institutions, waste management facilities and other public infrastructure. Traditional infrastructure projects are built by private firms funded by the public sector. In contrast, P3 projects are financed by the private sector, which is paid partly depending upon the results - such as the completion of the project on time and on-budget, and/or ongoing operations and maintenance.
"The public is increasingly aware that Canada's infrastructure of roads, transit and health and community facilities is aging and in need of renewal. Meanwhile, there has been a growing public acceptance of a greater role for the private sector in providing infrastructure across the country," said Gill.
• P3s have generally been used to deliver social infrastructure (hospitals, schools) and to a lesser extent transport projects (roads, urban transit infrastructure).
• Canada has maintained a relatively steady pipeline of P3 projects both in terms of value and total number, despite the economic turmoil over the past few years.
• Long-term P3 projects have become favoured investments for investors with long time horizons.
Recent P3 projects in Canada have been mostly delivered successfully. Of the last 42 projects assessed in this study, 35 were completed on time or early. Moreover, 90 per cent of the projects (38 of 42 projects) were delivered no more than four months after the planned completion date; and 95 per cent (40 of 42 projects) were completed no more than six months later than expected.
Provincial governments - especially Alberta, British Columbia, Ontario and Quebec - continue to be the most significant public players in the Canadian P3 arena. Further federal support has come from the P3 Canada Fund, which has to date committed over $700 million covering 15 projects in six provinces and territories.
Municipalities collectively spend as much on infrastructure as the provinces, but they have been slow to adopt P3 projects. Several reasons have been given for this reluctance: a lack of financial resources, political risk, a lack of familiarity with P3 delivery, and smaller project sizes. However, the municipal P3 market is expanding, with 15 projects launched 2009 and 2012, including four in Winnipeg and three in Toronto.
To build on Canada's record on P3 delivery and to make P3s more viable for municipalities, the report recommends that:
• Projects such as wastewater infrastructure be favoured for funding from senior levels of government if they include metered water pricing, which has been shown to reduce consumption
• Evaluations of P3 projects be conducted after completion, in addition to before and during the project.
• Public education is provided to clarify that Value-for-Money evaluations compare all costs (procurement, financing, capital, risk, operations and maintenance) over the total life of the project.
• Funding incentives be amended to encourage projects that include an operating and maintenance phase, in addition to design and construction.
This report, Canada as a Global Leader: Delivering Value through Public-Private Partnerships at Home and Abroad, builds on the 2010 Conference Board research, Dispelling the Myths: A Pan-Canadian Assessment of Public-Private Partnerships for Infrastructure Investments. Financial support for this research came from the Government of Alberta, Infrastructure Ontario, Infrastructure Québec, Partnerships British Columbia, PPP Canada, and The Canadian Council for Public-Private Partnerships.