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Dispelling the Myths: A Pan-Canadian Assessment of Public-Private Partnerships for Infrastructure Investments The Conference Board of Canada, 92 pages, January 28, 2010 Report by Mario Iacobacci

Dispelling the Myths: A Pan-Canadian Assessment of Public-Private Partnerships for Infrastructure Investments

The Conference Board of Canada, 92 pages, January 28, 2010
Report by Mario Iacobacci

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Evidence shows that recent public-private partnerships (P3s) are delivering time and cost benefits relative to conventional procurement. However, not all infrastructure projects are suitable for P3 procurement. Document Highlights Public-private partnerships (P3s) are an increasingly popular procurement vehicle for Canadian governments seeking to build or upgrade infrastructure assets. But is the enthusiasm warranted? Evidence from the latest wave of Canadian P3s suggests the answer is yes, provided governments pick the right projects for P3 procurement. For example, studies comparing what an infrastructure project would cost under a P3 and under a conventional contract show that Canadian P3s can deliver efficiency gains ranging from a few million dollars to $751 million (from 0.8 per cent to 61.2 per cent of the cost of a conventional procurement approach). In addition, the P3s that have completed the construction phase have delivered a high degree of cost and time certainty from financial close through to completion of construction. Factors driving P3 efficiency gains include optimal risk allocation between the public and private partners, upfront assessment of project costs, output-based contracts, and private financing. Table of Contents Executive Summary Chapter 1—Introduction P3s: Definitions, Scope, and Methodology Chapter 2—Assessing the Benefits and Drawbacks of P3s in Procuring Public Infrastructure Cost Savings and Time Performance of P3s Whole Life-Cycle Maintenance Benefits Other Features of P3 Procurements Potential Drawbacks of P3 Projects Chapter 3—The Efficiency Drivers of P3 Procurements Performance-Based Contracts Optimal Risk Allocation Integrating Design, Construction, and Facilities Maintenance Private Financing Chapter 4—Assessing Key Elements of P3 Procurement Processes Screening Potential P3 Projects The Value-for-Money Methodology Transparency of P3 and Conventional Procurement Processes Chapter 5—Case Studies Introduction Alberta: The Southwest and Southeast Edmonton Ring Roads British Columbia: The Vancouver Convention Centre Expansion and the Abbotsford Regional Hospital and Cancer Centre Ontario: The Sudbury Regional Hospital (Phase 1) and the Quinte Health Care AFP Quebec: Autoroute 25 and the Montréal Subway Extension to Laval Chapter 6—Conclusions Appendix A—Bibliography Appendix B—Evidence Base for Second Wave of Canadian P3s Appendix C—Interview Guide Appendix D—List of Interviewees

Evidence shows that recent public-private partnerships (P3s) are delivering time and cost benefits relative to conventional procurement. However, not all infrastructure projects are suitable for P3 procurement.

Document Highlights

Public-private partnerships (P3s) are an increasingly popular procurement vehicle for Canadian governments seeking to build or upgrade infrastructure assets. But is the enthusiasm warranted? Evidence from the latest wave of Canadian P3s suggests the answer is yes, provided governments pick the right projects for P3 procurement. For example, studies comparing what an infrastructure project would cost under a P3 and under a conventional contract show that Canadian P3s can deliver efficiency gains ranging from a few million dollars to $751 million (from 0.8 per cent to 61.2 per cent of the cost of a conventional procurement approach). In addition, the P3s that have completed the construction phase have delivered a high degree of cost and time certainty from financial close through to completion of construction. Factors driving P3 efficiency gains include optimal risk allocation between the public and private partners, upfront assessment of project costs, output-based contracts, and private financing.

Executive Summary

Chapter 1—Introduction

P3s: Definitions, Scope, and Methodology

Chapter 2—Assessing the Benefits and Drawbacks of P3s in Procuring Public Infrastructure

Cost Savings and Time Performance of P3s
Whole Life-Cycle Maintenance Benefits
Other Features of P3 Procurements
Potential Drawbacks of P3 Projects

Chapter 3—The Efficiency Drivers of P3 Procurements

Performance-Based Contracts
Optimal Risk Allocation
Integrating Design, Construction, and Facilities Maintenance
Private Financing

Chapter 4—Assessing Key Elements of P3 Procurement Processes

Screening Potential P3 Projects
The Value-for-Money Methodology
Transparency of P3 and Conventional Procurement Processes

Chapter 5—Case Studies

Introduction
Alberta: The Southwest and Southeast Edmonton Ring Roads
British Columbia: The Vancouver Convention Centre Expansion and the Abbotsford Regional Hospital and Cancer Centre
Ontario: The Sudbury Regional Hospital (Phase 1) and the Quinte Health Care AFP
Quebec: Autoroute 25 and the Montréal Subway Extension to Laval

Chapter 6—Conclusions

Appendix A—Bibliography

Appendix B—Evidence Base for Second Wave of Canadian P3s

Appendix C—Interview Guide

Appendix D—List of Interviewees