SUMMARY AND OBSERVATIONS

The results of VfM studies of the second wave of Canadian P3 projects suggest that the public sector (i.e., taxpayers) can expect significant savings from having these major infrastructure projects procured using a P3 approach rather than a conventional approach. These savings can vary from just a few million dollars to over $750 million in the case of the Autoroute 30 project south of the Montréal area. When the savings are expressed as a proportion of the cost of procurement through conventional contracting methods, they range from 0.8 per cent through to 61.2 per cent of the PSC. However, these savings are necessarily prospective in nature and represent a considered view of the savings at the outset of a project (i.e., at financial close). Whether the actual savings match the expected savings by the end of the P3 project depends on the degree of cost and time certainty of P3 projects.

The Canadian evidence on the cost and time certainty of P3 projects is limited-only 19 of the 55 second-wave P3 projects have reached substantial completion-but these early results point to a strong performance. Seventeen of the 19 projects have been delivered either early or according to schedule. The other two projects were delivered no more than two months behind schedule. The interim results for the P3 projects that remain in the construction phase provide little reason to expect significant cost or time overruns, based on the information available regarding contract variations and claims against the public sector. Therefore, the preliminary evidence indicates that the second wave of Canadian P3 projects is providing a high degree of cost and time certainty for the period from financial close through to completion of construction.

These results are also consistent with the international evidence, which indicates that P3 projects have provided greater cost certainty than conventionally delivered projects over the entire period from project announcement through to commissioning. The time performance of P3s over the same period is not significantly different from that for conventional projects, but the P3s out-perform for the period from financial close through to commissioning.

The reasons why P3s tend to outperform conventional procurements have much to do with the greater upfront effort required with P3s in the period before the financial close. This work includes detailed consideration of performance-based metrics and associated penalties and bonuses; of the potential risks and how these risks are allocated between the public and private sector parties (and in turn between the consortium and its contractor, designer, and operator); of life-cycle costs; and of the funding agreements that need to be put in place. However, P3 procurements can also be subject to procurement delays or even to aborted procurements, particularly where the procurement process is not clearly set out in advance or where the appropriate procurement expertise is not available.20 These problems underline the importance of an efficient procurement process to ensure that the benefits of a P3 project delivery are not squandered through an extended procurement process. We examine this issue further in Chapter 3.

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20 Perhaps the most notable recent delays and failures in P3 procurements have occurred in U.S.-based P3 projects, such as the Port of Miami Tunnel, which finally reached financial close on October 15, 2009, after several years in the making, and the Bay Area Rapid Transit (BART) Oakland Airport Connector project, where the competitive procurement process was aborted in 2008 after some of the private consortia dropped out of the bidding process. However, these delays are not unique to the United States. The Australian benchmarking study discussed above found that P3s are delayed by about 15 per cent on average prior to financial close and that conventional projects reach contract award 4 per cent early.