Canada leading the way in public-private partnerships
Question: How have public private partnerships changed the way we build major infrastructure projects in Canada?
Answer: With consortiums of experts from multiple fields, P3s deliver projects on time and on budget with the complete life cycle in mind.
The public-private partnership business model (P3) is the natural evolution of business. Today we see the numerous benefits of P3s drawing attention from major industry players around the world. It’s a positive ongoing story that puts Canada in the midst of an enormous infrastructure boom with new hospitals, roads, airports, energy stations, and public transit projects popping up across the country.
Mitigating the risks
P3s allow the government to transfer financial risk to the private sector. In this tumultuous economic time, we can’t afford to have projects go over budget. Dollars are scarce, and when a project team sets a certain budget target that is the only price they can afford to pay.
“In traditional projects, the owner contracts every thing separately and has to manage the interface between all of them,” says Sarah Clark, CEO of Partnerships BC. “[If not, then] the owner can become the one that is the meat in the sandwich and may have to pay for cost overruns or schedule problems.”
Neill McQuay, chief of strategic planning at Alberta Infrastructure, says that the strength of a P3 lies in combining experts from multiple disciples. “The whole concept of P3s is that you have all the contractors, designers, and maintenance guys looking for efficiencies. Then the financing guy will come in and add more discipline to it,” he says.
Looking at the life cycle
P3s look at the entire life cycle of the project which can be up to 30 years. This is a fresh way of looking at things because under a traditional model developers would mostly be concerned with building the project at the lowest possible bid. It’s not unheard of for project to go up and then never be used because developers did not consider the real cost of operations.
“It makes the owners of these projects consider the long term viability of the type of facility they’re planning as well as the affordability, not just from a capital point of view but being able to afford the maintenance and the operations within it,” says Clark.
Benefits to the public
Ontario minister of infrastructure and transportation Glen Murray points out the benefits of P3s for citizens. “The government is trying to find greater value for tax dollars. So how can you be as strategic and creative as possible in getting those dollars working harder so you get more value, more things built, and more kilometers of road,” he says.
But P3s aren’t always about saving costs. Murray says, “We look at the evidence of the public good. We want a safe work place.We want people to get well paid jobs, and we want high quality, high value for tax dollars in that, and we want to have a high quality product in the end.”
P3s are also looking at new ways to incorporate commercial structures like restaurants and retail stores into infrastructure projects. This creates added value with new venues for investment.
Flexing its financial strength
During the economic downturn in 2008, many sectors were hit hard. Even Canada’s P3s had to take a moment to catch their breath and adjust to changing market conditions.In the end, they pulled through stronger than ever.
“We didn’t have a single project that failed during the financial crisis,” says Bert Clark, President of Infrastructure Ontario. “In fact, during that period we broadened the pool of investors. We ended upwith one of the most reliable P3 bond markets in the world.”
Today we have companies from all over the world looking to Canada as the sterling example of what P3s can achieve.For them, anything is possible.