FOCUS: INFRASTRUCTURE ONTARIO

Proof is in the pipeline

Infrastructure Ontario has closed more than 35 projects since its inception in 2005. And with another 14 projects now in procurement, Vas Georgiou, senior vice president of project delivery, says the province's pipeline is the 'proof in the pudding' for why investors should come to Ontario

JUST AS AN investor wishing to do business in Quebec would do well to pick up some French, anyone hoping to bid on one of the nine PPPs coming to market in Ontario in the next 12 months would do well to pick up a few new words. In Ontario, the name of the game is AFP, short for "Alternate Financing Procurement" - not PPP.

"A lot of people joke and say, 'oh, it's just another way of describing PPP,'" says Vas Georgiou, senior vice president of project delivery at Infrastructure Ontario, the province's infrastructure procurement body. "The reality of it is we are more than just a PPP financing body - we have looked at different approaches to public procurement and how to select our private sector partners," he adds.

In 2005, when Infrastructure Ontario was first created, its founding team came up with two core models of procuring projects: "build finance" and "design, build, finance, maintain".

In the former, the province provides the general design for a piece of infrastructure and asks a contractor to deliver it for a fxed price at a fxed date. So if it takes, say, 36 months instead of 34 to deliver a project, the contractor has to eat the two months' worth of construction cost.

"They're putting in the construction financing because we don't pay a penny until the keys are delivered to us with a finished product," Georgiou says. As a result, "our projects for the most part, I'd say nine out of ten of them are finishing on schedule or shorter than schedule."

Ontario uses build-finance procurements more for smaller projects where an existing facility is being upgraded or expanded. "I'd say in the early days we had more build-finance," says Georgiou. But as its mandate expanded and larger projects came to market, Infrastructure Ontario began looking more toward the design, build, finance, maintain model, which is used primarily for the delivery of new facilities costing more than $50 million.

 "Some refer to that at the PPP," he says. "But we have, since our inception, been flexible and tweaked a few other models and scenarios. That's why we're known as Alternate Financing and Procurement, because we're open to the alternate."

Georgiou: a busy man

For example, for three hospitals in Sault St. Marie, North Bay and Woodstock, the province's ministry of health had already designed them. So Infrastructure Ontario structured the contract as a "BFM", or build-finance-maintain contract.

But rather than making an alphabet soup, Georgiou sticks to the two "pillars" of build-finance and design-build-finance-maintain. About one-third of the province's projects have been build-finance, and two-thirds design-build-finance-maintains, he says.

The latter have included marquee procurements such as the $334 million durham Consolidated Courthouse, the $594 million Toronto South detention Centre and the recently-closed $293 million Ontario Provincial Police modernisation.

"I think our track record is probably the proof in the pudding," he says. "We've got more than 35 projects closed. I don't know of any jurisdiction in the world that, in the last four years, has closed that many projects." This includes projects across all of Infrastructure Ontario's forms of procurement (not just PPP) and represents an estimated $15 billion worth of capital costs, according to a recent presentation.

Looking forward, Georgiou sees an even stronger pipeline of opportunities as the province upgrades is highways, transit system and prepares for the 2015 Pan-American Games in Toronto. In June 2010, Infrastructure Ontario issued a request for qualifications for the extension of Ontario's Highway 407. Infrastructure Ontario is also working with a provincial agency, Metrolinx, to scope out potential transit projects such as subway extensions in southern Ontario. And, as the official procurement body for Toronto's 2015 Pan-American Games, Infrastructure Ontario has issued the request for qualifications for athletes' village and aims to bring the aquatic centre and stadium to market in the next 12 months.

With some 20 projects in procurement just now, Georgiou isn't shy about asking investors to come to Ontario.

"We probably have double what the rest of the country has in its pipeline on our books as we speak and I don't think there's a lot happening on the public infrastructure side of things south of the border," he says, referring to the United States.