The Council applauds the Government's acknowledgement that a long-term strategic approach to infrastructure investment is the most sensible methodology. Without a comprehensive plan, Ontario will continue to patch the holes in its current infrastructure until it finally needs to be replaced. Life cycle costing dictates that this approach to infrastructure management is shortsighted and extremely costly.
The inherent nature of public-private partnerships lends them to long term planning. A sound design-build-finance-operate agreement ensures that the asset is adequately maintained over a number of years and returned to the government in peak form. The nature of government budgeting means that capital maintenance is subject to annual budget fluctuations. A long-term P3 contract ensures that sufficient funding is available to maintain an asset in good condition over the life of the contract.
Municipalities and school boards typically expense the cost of an asset in the year of acquisition, rather than capitalizing the cost of the asset and depreciating it over its useful life. This accounting treatment discourages long range planning and encourages a piecemeal approach to infrastructure financing. Changes in these accounting practices as well as increasing the use of P3s will help government agencies institute long term infrastructure planning.
When a private partner is responsible for the design and construction of an asset as well as the operation and maintenance for 20 or more years, it must take into account the life cycle costs. As a result, construction and operational practices are employed which maximize the long-term value of the asset. Traditional government procurement often defeats such long-term forecasting in favour of cheaper construction costs.
Much of the success of the PFI program in the United Kingdom can be attributed to the government and public's fundamental belief in the value of delivering infrastructure through the private sector. As evidenced by the start of PFI under the Conservative government and the expansion of PFI under the Labour Government, the program has clearly transcended political doctrine. It is no longer viewed as an ideology, but rather as a prudent business practice to get infrastructure developed better, faster and cheaper. While the scale of P3 activity in Canada is relatively small compared to the UK, there are many lessons to be learned from three consecutive UK governments expanding the use of P3s.