Chapter Summary ♦ Canadian governments are increasingly turning to public-private partnerships (P3s) to build or upgrade infrastructure assets, with over 100 P3 transactions concluded since the early 1990s. ♦ Despite this activity, there remains some opposition to P3s, which have been criticized for higher financing costs, less transparency, and lower service standards than conventional procurement methods. ♦ This report reviews the performance of the second wave of Canadian P3 projects-those that reached financial close under the auspices of the P3 agencies (or offices) set up in the early 2000s. ♦ P3s are characterized by the integration of two or more phases of a project, output-based contracts, payment upon delivery, private financing, and private sector project stewardship. ♦ P3s in Canada are not about the privatization of public assets, nor do they typically involve replacing public provision of assets or services with private provision on a large scale. |
Public-private partnerships (P3s) have become an increasingly important procurement vehicle for Canadian governments seeking to build or upgrade infrastructure assets ranging from hospitals, bridges, and highways through to courthouses, wastewater facilities, and concert halls. This is partly the result of a long-standing infrastructure deficit.1 The growing importance of P3s is reflected in the fact that three provincial governments-British Columbia, Ontario, and Quebec-have set up specialized infrastructure agencies to handle P3 procurements and to support the development of P3 markets. Other provinces-such as Alberta and New Brunswick-either have set up equivalent offices within their central government agencies or have at least put in place guidelines for P3 procurements. And the federal government recently set up a Crown corporation (PPP Canada), whose responsibilities include managing a $1.2-billion fund to support innovative P3 projects. As a result of these and other Canadian government initiatives, over 100 P3 transactions have been concluded with private sector consortia in Canada since the early 1990s.
Yet, despite all this activity and the major efforts by provincial governments to use innovative procurement methods for building and maintaining infrastructure, there remains some opposition to P3 procurement methods.
The criticisms have been wide-ranging. They include arguments that, compared with traditional procurements, P3s have higher financing costs, are less transparent, an lead to lower standards of service provision.
P3s are also facing new market conditions and possibly further changes in policy. The global credit crisis led to a major contraction in the availability of private financing which is a key element of P3 projects. And the financing that remains available is also more costly relative to government bonds. However, the global economic down turn has also led governments in Canada and worldwide to look to infrastructure projects as a source of economic stimulus.
In light of these changing conditions and continued opposition from certain quarters, several P3 agencies and procurement authorities asked The Conference Board of Canada to undertake an assessment of the benefits and drawbacks of P3s for Canadian infrastructure investments.2 The remainder of this chapter describes what we mean by P3s and conventional infrastructure procurements, and the methodology used for this study. Chapter 2 provides an assessment of the benefits and drawbacks of P3s, while Chapter 3 discusses the key drivers of potential efficiencies in P3 projects.
P3s account for only a fraction of total spending on public infrastructure. In most of the provincial jurisdictions in Canada that are active in this type of procurement public spending on P3s is usually between 10 per cent and 20 per cent of total spending on public infrastructure3. This means that there can be considerable discretion in determining which infrastructure projects are procured using a P3 approach. But as we will see later in the report P3 procurements are not suitable for all infrastructure projects. The issue of how projects are selected to be procured as P3s is therefore important. Chapter 4 reviews this and other key issues in the P3 procurement process, such as transparency. Chapter 5 presents eight case studies, consisting of four P3 projects and four conventional infrastructure projects. Chapter 6 presents the conclusions of the report.
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1 This has been documented by several sources, including Mirza in Danger Ahead, a report prepared for the Federation of Canadian Municipalities.
2 The project funders consist of the Alberta Treasury Board, Infrastructure Ontario, Infrastructure Québec (formerly the Agence des partenariats public-privé Québec or "PPP Québec"), Partnerships British Columbia (henceforth "Partnerships BC"), PPP Canada, and The Canadian Council for Public Private Partnerships.
3 For example, according to the Chair of the Conseil du Trésor, Monique Gagnon-Tremblay, "only about 10 per cent of the $42 billion the [Quebec] government is currently spending on infrastructure projects is for P3 projects." See Dougherty, "Quebec Renames Agency."