One of the benefits of a P3 project that incorporates a service or operating phase is that the P3 partner is required to provide a specified level of service and to maintaining the facility in a satisfactory condition. In conventional procurement, maintenance and rehabilitation budgets have historically been subject to the vagaries of annual budget allocations and perennial budget constraints. However, by incorporating the maintenance and rehabilitation work within the P3 agreement, the public sector owner is essentially pre-committing future governments to providing the resources (through service payments to the P3 partner) for a specified level of maintenance and rehabilitation work on the facility over the term of the contract. If the P3 partner does not meet the minimum service levels, P3 contracts generally provide for penalties to be imposed on the P3 partner. At the end of the concession period, the P3 partner is contractually obliged to "hand back" the facility in satisfactory condition. Penalties for non-compliance serve as a powerful motivator to deliver quality maintenance services for the facility.
Delayed maintenance and rehabilitation have affected many types of infrastructure, including health facilities, transportation infrastructure, and social infrastructure. The benefit of providing for maintenance and rehabilitation services in long-term P3 agreements is sometimes quantified in VfM reports. This was done in the VfM reports carried out for British Columbia's P3s and in some of the VfM reports for more recent projects in other jurisdictions, such as the concert hall for the Montréal Symphony Orchestra. Otherwise, it is mentioned in qualitative terms, as in the VfM reports for the Autoroute 25 and Autoroute 30 projects.21 It is well known that roads and bridges in many parts of Canada have, historically, suffered from delayed maintenance and rehabilitation spending, which in turn has reduced the useful life of certain structures and led to higher capital spending. (See box "Delayed Bridge Maintenance.") The poor condition of the road network in many parts of Canada (until recently) suggests that the maintenance and upgrade standards stipulated in P3 agreements, such as those for the A25 and A30 projects, are at least as high as and probably significantly higher than the quality standards delivered over the last decade. The observation of high P3 service standards relative to prevailing standards for similar facilities is not unique to road networks.22 Anecdotal evidence suggests that there is little basis to the criticism that service standards suffer under a P3 relative to conventional maintenance contracts or even in-house provision.
Delayed Bridge Maintenance The Commission of Inquiry into the Collapse of a Portion of the de la Concorde Overpass (the Johnson Commission) reported that between 46 per cent and 49 per cent of bridges in Quebec were considered structurally deficient in 2005. "Structural deficiency" is a standard indicator meaning that the bridge structure has deteriorated to the point where it needs to be rehabilitated or replaced within five years. In the case of Ontario, about 32 per cent of the province's bridges were considered structurally deficient according to a 2004 report by the Ontario Auditor General. By comparison, the Johnson Commission reported that several northeastern U.S. states had far lower proportions of bridges classified as structurally deficient (New Jersey: 11 per cent; New York: 12 per cent; and Pennsylvania: 25 per cent- all data for 2006). Interestingly, the average age of bridge structures in these three U.S. states was 50 years at the time, compared with 36 years in Quebec. Hence, the average age of the bridge structures did not explain the differences in condition observed between Quebec and the northeastern U.S. states. Source: Commission of Inquiry Into the Collapse of a Portion of the de la Concorde Overpass, Report of the Commission of Inquiry, p. 190. |
A related benefit of having maintenance standards incorporated in a long-term P3 agreement is that the P3 partner responsible for the maintenance work on a facility operates at arm's length from the government department responsible for monitoring the facility. This means that the department is better able to identify lapses in service quality and impose penalties on the P3 partner when service levels fall below the thresholds specified in the maintenance contracts. When the same department of government is responsible for undertaking the maintenance and upholding the maintenance guidelines, lapses in service standards can more easily go unnoticed.
By way of example, it is worth noting that in 5 of the 12 P3 projects that have entered the service phase, the P3 partner has already incurred penalties for instances of substandard performance.23 This occurred with the Abbotsford Regional Hospital and Cancer Centre (for a housekeeping and portering issue), with Phase 2 of the Kicking Horse Canyon Project (once for an unscheduled traffic stoppage during construction and once for lack of lane availability), with the Britannia Mine Water Treatment Plant Project (for failure to meet certain environmental criteria-the zinc concentration in the treated water exceeded permissible levels), and with the Anthony Henday Drive Southeast Leg Ring Road and the Sea-to-Sky Highway (for some aspect of the operational phase of the two projects). These episodes do not suggest persistent or endemic service problems, but they do provide some confidence that the contractual performance standards are being enforced. In principle, it is certainly possible to enforce similar performance standards in conventional facilities maintenance contracts; however, it is unclear to what extent this happens in practice when the public sector outsources facilities maintenance. In cases of in-house provision by the public sector, we are not aware of any documented lapses in service standards. This does not mean that there are no such lapses in service standards with in-house provision.
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21 Transports Québec and Partenariats public-privé Québec, Value for Money Report for the Design, Construction, Financing, Operation and Maintenance of the Completion of Autoroute 25, p. 20; Value for Money Report: The Completion of Autoroute 30, p. 20.
22 We have learned about one other instance-an Ontario P3 hospital from the first wave of P3s-in which the performance standards for the facility maintenance period were set very high relative to standards prevailing in hospitals at the time. The public and private sector partners are now considering adjusting the standards to be closer to levels prevailing elsewhere in the hospital sector.
23 These are the only performance penalties we are aware of among all the P3 projects in our evidence base.