Public-private partnerships are not simply about borrowing money from the private sector. As has been proven in other parts of Canada, successful P3 initiatives bring significant benefits to all partners while achieving better "value for money" for ratepayers. The benefits include:
1. Allowing the public and private sectors to focus on and harness their respective responsibilities and strengths;
2. Achieving economies of scale where the private sector partner is involved in similar projects;
3. Accessing specialized and innovative private sector expertise for the design, construction, operation and maintenance of an asset or project over the life of a contract;
4. Taking advantage of the Request for Proposal process, which forces a more accurate and rigorous assessment of what actually needs to be provided;
5. Maintaining the private participants' financial stake in the project which guarantees their commitment to economic efficiency while the government partner protects the public interest;
6. Pursuing an optimal allocation of risk, with each partner taking on the particular risk it is best able to manage.
Public-private partnerships are one of a number of ways of delivering public infrastructure and related services. They are not, however, a substitute for strong and effective governance and decision-making by elected representatives. In all cases, under Council direction administration would remain responsible and accountable for delivering services and projects in a manner, which protects and furthers the public interest.
In entering into a public-private partnership, the City will establish the ground rules and have the ability to shape each P3 to reflect its own objectives, policies and regulations. The City will have well-defined contractual remedies in a P3 arrangement that would guarantee the public interest. However, it is important to stress that no P3 arrangement is risk free. Not all risks can or should be transferred entirely. Risk is the foundation of all business. The more risk a municipality transfers to its private partner, the greater the level of compensation the partner may require in return. The challenge in any partnership is to share the risks in such a way that each partner receives the maximum benefit. It is essential to identify the full range of potential risks and determine which ones should be assumed by the municipality and which should be transferred to the private partner. It is important to maintain enough flexibility to allow innovative risk sharing suggestions from the private sector.
Reporting directly to the City Manager and funded within the existing budget for that office, the proposed Strategic Delivery Unit will act as the centre of expertise for P3 initiatives and other delivery mechanisms, including the development and updating of best practices, procedures and guidance materials. Its broad mandate will include scanning the capital budget for projects approved by Council that could have the potential to move forward as a public-private partnership.
This unit will also participate in the development and implementation of the City's P3 projects, acting as lead advisor to the internal and external teams and as the manager for the project until its hand-over to the line department. It will examine, in collaboration with departmental representatives, the City's capital plans for the expansion, consolidation or building of facilities to determine whether an innovative capital funding arrangement could be applied.
In order to move forward on developing P3 as one of the tools available for capital projects, the City will investigate the immediate potential for using P3 to develop one of the smaller recreation capital projects. Based on research from other jurisdictions and the business maturity of service providers, recreation-type projects have the highest degree of success in the short term. A smaller scale recreation project would also be relatively quick to complete, and provide an opportunity for City staff to evaluate the potential for this concept.
Within the next six months, the SDU will prioritize potential P3 capital projects from the approved 2002 Capital budget, develop a comprehensive communications strategy, initiate a P3 in recreation for an ice pad in the west or east end, and provide orientation and training to staff.
As the work of this unit develops, time will be taken to properly identify and prioritize potential P3 projects. Special attention will be given to projects that can deliver strong 'value for money" results for the City.
To ensure consistency in dealing with the private sector it is important that any P3 initiative be implemented in an open, fair and transparent process. Some of the fundamental drawbacks with unsolicited proposals are a lack of fairness and transparency, loss of control of the process, the solution may be what the private sector proponent deems as appropriate to a municipal need and the lack of determination if value for money was maximized. Therefore, the City is recommending the P3 process not be open to unsolicited proposals from the market. Should unsolicited proposals be received, they could be explored using the following framework:
1. Projects must be part of the approved capital plan to be considered;
2. If an unsolicited proposal is received which does not contain sufficient detail and is merely requesting negotiation of the details of an arrangement, then this proposal should not be further considered;
3. If an unsolicited proposal is received which contains sufficient detail and very strong commitments by the potential partner, the proposal could be considered as part of a "Swiss Challenge". The Swiss Challenge provides a priority to that bidder within the City's formal bidding process by allowing it to make changes to its proposal if it does not provide the best value. In other words, the detailed unsolicited proposal would be subject to a formal process, allowing other bidders to participate and providing the initial bidder the opportunity to make changes to their original submission if it did not meet the best value test.
Staff believe that, given the challenges municipalities face in terms of infrastructure funding, the City of Ottawa should move forward to investigate the potential value-added for its residents from public-private partnerships.