The Canadian Council for Public-Private Partnerships An Overview of Public-Private Partnerships in Canada Presentation to the Economic Developers Council of Ontario Spring Symposium Steven Hobbs, Director, Strategic Planning and Partnerships, CCPPP Sault Ste. Marie, May 19, 2016
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T h e C a n a d i a n C o u n c i l f o r P u b l i c - P r i v a t e P a r t n e r s h i p s
An Overview of Public-Private Partnerships in Canada
Presentation to the Economic Developers Council of Ontario Spring Symposium
Steven Hobbs, Director, Strategic Planning and Partnerships, CCPPP
Sault Ste. Marie, May 19, 2016
P3s: What Are They?
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• Public-private partnerships, or P3s, are partnerships between the government and the private sector to build public infrastructure like roads, hospitals or schools as well as deliver services.
• P3s can be structured in different ways, allocating varying degrees of responsibility for design, construction, financing, maintenance or operation to the private sector, while always maintaining public ownership and control.
What is a P3?
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Design Build Finance Maintain Operate
It goes by many names (P3, AFP, PFI)
• The government contracts with a single entity (“Project Co”) who in turn contracts with consortium partners
• The private sector accepts responsibility for Design, Build, Finance, Maintenance and in some cases Operations of asset
• The facilities management component covers a long-term concession period (25 – 35 years) with pre-defined hand back conditions
• Contracting arrangements are performance based
– Payment from Government only begins upon completion of construction or milestone payments
– On-going payments remain subject to deduction for failures in service delivery
– Private Sector Financing at risk for the duration of the contract
What is a P3?
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Sample Partnership Structure
Developer/ Equity Investors Lenders
Public Authority
P3 Entity (“Project Co” or “SPV”)
FM or O&M Operator Constructor
Architect
DB Agreement
FM/O&M Agreement
Debt Equity
Project Agreement
Typical P3 Timeline
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Market Sounding
2 – 3 Months
Issue RFQ
2 – 3 Months
Issue RFP
5 – 9 Months
RFP Bids Due
2 – 3 Months
Financial Close / Construction Start
3 – 5 Years
Substantial Completion
20 – 30 Years
Concession End
Teaming Phase
RFQ Phase
RFP Phase
Closing Phase
Construction Phase
Operating & Maintenance Phase
When to use P3s
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Typical characteristics that make a project more likely to make sense as a P3:
• Project is large in size
• Project is complex
• The opportunity for risk transfer by the government owner
“Spadina subway extension $400M over budget” the Toronto Star stated in 2015 “Mayor apologizes for cost overruns in construction of city hall,” reported the Guelph Mercury in 2014
Traditional Procurement
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(1) Source: Flyvbjerg, B., Bruzelius, N., and Rothengatter, W. 2003. Megaprojects and Risk: An Anatomy of Ambition. New York: Cambridge University Press - Study of cost overruns on a sample of 258 major roads, tunnels, bridges, urban transit, and interurban rail projects in 20 countries on five continents.
Traditionally procured megaprojects go over budget*
Average cost overrun of traditionally procured megaprojects*
Benefits of P3s
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On Time On Budget Better Value for Money
Well Maintained Risk Sharing Innovation
Top P3 Myths
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1. P3s mean privatization and loss of public control
2. P3s are more expensive
3. P3s are bad for small and local contractors
4. P3s maximize private sector profits 5. P3s lack transparency 6. Unions do not like P3s
Canadian PPP Market
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Canadian P3 Overview
• 25 year history
• 237 projects
• $94.6+ Billion
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Sector Number Value ($B) Transportation 54 48.3 Health 90 25.1 Energy 11 7.3 Justice 19 5.4 Accommodations 7 2.5 Education 15 2.5 Recreation & Culture 15 1.2 Government Services 5 1.0 Water & Wastewater 17 0.9 Information Technology 4 0.4 Total 237 94.6+
P3 Projects by Sector
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Province Number Alberta 20 British Columbia 39 Manitoba 5 New Brunswick 12 Newfoundland & Labrador 1 Northwest Territories 2 Nova Scotia 3 Nunavut 2 Ontario 115 Québec 16 Saskatchewan 10 Federal 12 Total 237
P3 Projects by Location
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Provincial 175 Municipal 49 Federal 12 Aboriginal 1 * Total 237
P3 Projects by Jurisdiction
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* Kokish River Hydroelectric Project (3 other projects also have a significant aboriginal component: Okanagan Correctional Facility, Government of Nunavut Buildings, Iqaluit International Airport Improvement Project, but ownership does not reside with the Aboriginal government)