Public-private teamwork gets job done

As public-private partnerships, known as P3s, the projects are backed by investors such as the Alberta Teachers Retirement Fund, whose members get a sizeable return. Innovation and economies of scale save taxpayers hundreds of millions of dollars, the government says.

It’s the formula behind roads, hospitals, courthouses, transit systems and sewage treatment plants sprouting up across the country.

It’s expected to be applied to big-ticket items, such as replacing Montreal’s Champlain Bridge ($5 billion) and constructing a light-rail system in Ottawa ($2 billion), as well as projects at the municipal level and the delivery of services.

“It’s a creative approach to the challenges at hand,” says Mark Romoff, CEO of the Canadian Council for Public-Private Partnerships, a P3 advocacy organization based in Toronto.

He says Canada is embracing P3 projects. More than 50 hospitals recently built or underway are using the approach. Half of all P3s are in Ontario. Around Toronto, P3s planned or underway include projects such as the Billy Bishop Airport Pedestrian Tunnel, Bridgepoint Health, Pan Am Games facilities, the Hwy. 407 east extension and the Toronto South Detention Centre.

The projects go to competitive bids, based on fixed prices and conditions. Investors are paid back on a schedule, similar to a domestic mortgage, with a typical profit of 10 to 15 per cent. There can also be a mechanism for a financial return, such as charging tolls on bridges or roads.

Sham Madhok, an associate partner at PricewaterhouseCoopers LLP, says P3s originated in Britain in the 1990s and have migrated to Australia, Canada and beyond, evolving to cover a range of projects requiring capital and innovation.

Madhok says three-quarters of infrastructure projects still happen through traditional procurement. Those that lend themselves to the P3 approach are “highly complex,” and require advance planning and include long-term maintenance, often ignored in infrastructure, she says.

P3 contracts specify expectations for the life-cycle of projects and can extend for 25 to 35 years. A private consortium is motivated to keep to timelines and maintain things in good working order when there’s equity at risk, she says. “That brings a level of rigour and due diligence to these facilities that you may not get with the traditional way of doing things.”

Madhok says P3 investors include banks, insurance companies and pension funds. So anyone with money in a pension plan may have a stake in such projects.

P3 money is available in other ways, such as through the P3 Canada Fund, a pot of federal cash dedicated to P3 projects. Municipalities account for more than half of the applications to the Crown corporation running the fund. For example, it recently gave $5.8 million to Barrie to hire a private company to renovate its transit facility and operate its bus fleet.

Berry Vrbanovic, president of the Federation of Canadian Municipalities, says P3s are “one of the tools in the toolkit” to deal with the infrastructure deficit.

At the latest count, it was estimated that it will cost municipalities $123 billion to fix crumbling infrastructure and $115 billion for new projects.

“Any long-term infrastructure plan is going to need to involve a partnership between all three orders of government, in collaboration with the private sector,” he says.

Critics of P3s worry that turning infrastructure projects over to the lowest bidders will limit their aesthetics, while lining the pockets of huge private, even international, conglomerates, and lead to a loss of control over public institutions and critical infrastructure.

Romoff says competition breeds creativity in areas such as design, as contracts go to the most compelling proposals.

The projects create local jobs and often include local investors, he says, and the resulting assets remain in public hands. “This is not privatization.”

The projects are also costed at the start using traditional procurement methods and don’t go ahead as P3s “unless there’s value for money,” he adds.

Canada is quickly becoming a global leader in the public-private approach, which is vital in coping with infrastructure needs, he says.

Monsignor William Irwin Catholic School is already feeling the crunch. There were 335 students when the school opened 15 months ago. Now, there are 470, and another 70 are expected by next fall.

There are plans to add four modular classrooms on to the back of the school. And there’s word that two more schools will be built just down the road.

It’s the kind of growth that has education officials in Alberta hitting the books for innovative ways to make it happen.