There is a substantial body of empirical evidence indicating that large infrastructure projects procured by governments tend to result in cost overruns and significant delays in delivery schedules. This problem, which is not unique to Canada, has become so widely recognized and documented that it has become known in the literature as the problem of "optimism bias" in major infrastructure projects. For example, one of the original papers on this topic, by Flyvbjerg et al., found that 90 per cent of the 258 transportation infrastructure projects examined in over 20 countries had underestimated project costs by an average of 39 per cent.8 These cost overruns and time delays have also occurred in Canada in both social and transportation infrastructure procurement, and it is likely that these problems were important factors motivating governments to look for more effective ways of procuring large infrastructure projects.
There are several ways to measure the benefits or costs of P3s in Canada. Earlier in this chapter, we discussed the cost and time performance of P3s relative to comparable or equivalent conventional procurements. The best source for this comparison is the VfM studies, which capture the cost and time savings between P3 and conventional modes of procurement for an infrastructure project.
An alternative approach to evaluating the performance of infrastructure projects is to measure their cost and time performance against their own milestones. This performance measure is evaluated relative to the budgets and delivery targets set at different points in the infrastructure planning and procurement process-for example, the targets set when the budget is approved by the level of government responsible for the project, or the targets set when the project reaches financial close. This type of project performance measure is the time and cost certainty with which projects are delivered, and is what we mean when we say that a project is "on time and on budget." We examine the evidence regarding the cost and time certainty of P3s and conventional infrastructure projects below.
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Although Canada has been among the most active jurisdictions in initiating P3 projects, it is still rather early to evaluate the operational or service phase outcomes of the second wave of P3 projects in Canada. |
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8 Flyvbjerg et al., ''Underestimating Costs in Public Works Projects.''