Building A Stronger Canada With Public Private Partnerships
Development and Innovation How the public-private partnership (P3) model has been used to develop, and upgrade critical infrastructure across Canada.
Despite the broad scope of public-private partnerships (P3s) currently being built across Canada, the P3 model's history within this country is relatively short. Federal, provincial, and municipal governments only really began to embrace P3 procurement in the late 90s.
According to Lee Clayton, VP of Global Strategic Initiatives at PCL Construction, there is a good reason why the idea took root when it did, as well as why it subsequently took off.
“In the 90s there was a huge infrastructure gap, a backlog of neglected infrastructure, that was no longer acceptable,” explains Clayton. “The government had to find a way to accelerate infrastructure development, which is when Canada looked to see what had been done around the world, and then embraced the P3 model. At the end of the day, if projects can be built without significant cost overruns, that money can be invested into other projects. And because they don’t need 100 percent capital expenditure on day one, they can bring forward more projects simultaneously.”
Infrastructure development stimulates the economy
The model was successful in the 90s at helping to close the infrastructure gap, and it helped again following the 2008 financial crisis when governments needed a way to continue expanding services, while also stimulating economic recovery.
“Investing money into infrastructure is a great way to prime the economy,” says Clayton. “And, while the economic stimulus of a given project is roughly the same whether it's done as a P3 or procured traditionally, there is no way the government could have done the volume of projects they did if they were procuring them traditionally. They just wouldn’t have had the capital.”
Beyond giving governments the ability to build more quickly, Canada has also found a direct improvement in timeliness and cost efficiency through the model. Their operation and maintenance outcomes were subsequently improved.
“The average Canadian project is 39 percent over budget, and 12 months behind schedule when they use traditional types of procurement,” says Clayton. “These projects also see major maintenance backlog issues because when the budget is stretched, the first thing that goes is ongoing maintenance.”
The results with P3s have been dramatically different.
“Looking at P3 projects in Canada, you see broad-brush, zero cost overruns, and largely on-time completion across a whole raft of projects,” says Clayton. “And you get that same degree of certainty for the whole lifecycle of the asset in terms of operation and management.”
The private sector has the experience
It shouldn’t be a surprise that the public sector’s primary obligation is to deliver services, not to develop, own, and operate assets. Consequently, it is not hard to understand when even skilled and knowledgeable public sector agencies and employees get bogged down in the realities of construction, operation, and maintenance.
“They are very competent, but they don’t have the experience in building and maintaining assets, and frankly that isn’t, and shouldn’t be, their primary concern,” says Clayton. “Their primary concern should be delivering the best services. Once you accept that fundamental premise, it’s very clear that P3s have a place in building and operating large mission-critical assets.”
Canadian agencies are increasingly accepting that premise and realizing that it applies across a wide swath of infrastructure categories.
“The P3 market is strong in Canada right now,” says Clayton. “We have seen it start to develop across all the asset classes, from hospitals to courts to bridges to rail.”
Which is not to say that P3 procurement is a panacea, but where it works, it works very well. “It’s not the ultimate procurement,” says Clayton. “It’s a tool to be used on the right projects where appropriate.”