NO

ASPECTS

DESCRIPTION

12.

Facilities Available to Facilitate Project Structuring and Transaction Advisory

PPP Canada is the Government of Canada's source of PPP expertise as it relates to federal public-private partnership initiatives and can help facilitate the structuring of transactions. PPP Canada supports the implementation of the federal screen for all projects over $100M, and advises on the procurement options analysis and value for money analysis on federal projects. PPP Canada can also leverage a number of external advisory firms, such as cost consultants, financial advisors, and legal advisors through a standing offer of qualified firms that have significant P3 expertise.

Outside of the federal context, Canada is home to a number of provinces that have established PPP programs. As a result, many of the larger domestic consulting firms possess a great deal of PPP related expertise that is available to project sponsors contemplating PPP project delivery.

13.

Role of Local Government

In cases where the local government is the public sector sponsor of the PPP project, the same role that the federal government would play in the approval and management of a federal PPP project would be played by the local government.

In cases where the local government is not the sponsor of the PPP project, various permits and licenses may have to be granted related to local matters (construction permits, land use, traffic disruption during construction, etc.)

14.

Risk Sharing Policies/Practices

Risk sharing methodologies vary from jurisdiction to jurisdiction. The general principle is that the party best placed to mitigate its impact should bear the risk. In other words, the objective of a PPP should not be to transfer risks to the private sector at any cost, as this would by definition undermine the value proposition of the PPP approach.

Risk quantification is a critical component of a value for money analysis, and is often accomplished through risk workshops, whereby cross-disciplinary teams meet and discuss the impact and probability of all project related risks with an attempt to quantify these values for the public sector sponsor and private sector in scenarios for both traditional project delivery and PPP project delivery. The outcome of these risk workshops allow for probabilities and values to be generated, which are then modeled using Monte Carlo methods in order to ascertain an overall risk distribution for all project related risks. The value of retained risks for the public sector sponsor are then used as an input to the financial model in determining the overall value for money of PPP project delivery.

Mechanisms are put in place to ensure effective risk transfer, including having private financing at risk for the duration of the project and monitoring of performance against output specifications.

15.

Financing Mix Options Allowed

While variations exist primarily on the basis of project size, most financing solutions for PPP projects in Canada include 80-90% of debt (a combination of shorter term construction financing and longer term debt raised through the bond market or through bank debt) and 10-20% equity provided by the consortium participants in the joint venture underpinning the special purpose vehicle (the legal entity that constitutes the private partner in the PPP). This structure has the benefit of ensuring lender third party due diligence while also forcing private sector participants to be exposed to an equity position in the project.

Payments are made to the private sector partner on demonstrated performance (i.e., meeting project output specifications) through a substantial completion payment (where the asset is deemed available for user) and annual availability payments from the public sector. Considerations are given to ensure that sufficient capital is at risk for the private sector consortia to incentivize their involvement in the project and anchor the risk transfer.

16.

PPP Promotions/ Marketing Mechanisms

Market Soundings, Requests for Expression of Interest and a Request for Qualifications are some approaches used to solicit and assess private sector interest in a PPP project prior to the RFP phase of procurement. Other forms of industry engagement, such as project champions addressing industry conferences and "industry days" to support private sector partnering initiatives can also be used to increase market awareness and interest in a given project.

It should be noted that most project-related documentation in these early phases of project definition are also usually posted on national tendering websites that allow for maximum visibility and domestic coverage of the opportunity. A number of leading publications (such as Inspiratia) also closely monitor the project development pipeline for domestic projects in the Canadian market and assist indirectly with facilitating market awareness of PPP projects.

17.

Monitoring and Evaluation

PPP projects are often cited for their ability to deliver on time and on budget, as any performance related delays are borne by the private sector partner at a high financial cost. Delays in achieving substantial completion, and failures to meet performance specifications results in financial penalties for the private sector partner which impact the risk to the lender and the private sector's equity return. As such, a significant component of monitoring and evaluation is done by third party due diligence and oversight by financiers given the capital at risk.

From the public sector perspective, PPP contract management is required to ensure that the private sector is meeting its obligations in the project agreement and that appropriate contract enforcement is being leveraged where required. Audit and verification mechanisms are also part of public sector oversight mechanism, and the Office of the Auditor General, at the federal and provincial levels, can undertake audits of PPP projects to validate that the outcomes of the project reflect value for money assumptions.

18.

Dispute Resolution Mechanism

PPP project agreements in Canada contain detailed clauses to allow the public or private partner to bring disputes to a timely and orderly resolution via amicable resolution, escalating to mediation and arbitration where required, while minimizing delays on the project. While risk allocations are usually clearly defined in project agreements, litigation is also a recourse, although is not usually in the interest of either party given the broader implications of project related delays and potential increased financial costs for both parties

Special project related considerations have also been implemented to fast track arbitration on more significant issues where schedules are considered critical. Project sponsors should be cognizant of the fact that conflicts will arise through the life of a PPP agreement and ensure that a streamline process exists to facilitate quick resolution of issues before they become larger and more significant issues that have a material impact on schedule and project costs.