The Right Way To Think About Public-Private Partnerships
Development and Innovation P3s have become an important part of the construction industry, ensuring on time and on budget delivery of public infrastructure.
n a brisk day in January, three elected officials donned hard hats, orange safety vests, and safety glasses to tour the site of a future station on the Confederation Line. They liked what they saw: the first phase of construction for Ottawa’s new light rail transit system was right on track, on time, and on budget.
“Tremblay will be one of the stations that best demonstrates the advantages of light rail in Ottawa,” Mayor Jim Watson said, adding that it would help people get downtown “more quickly and efficiently.”
When it opens in 2018, the Confederation Line will transport 10,000 people an hour in each direction during the morning rush hour and will shorten commute times by approximately 15 minutes.
The LRT is Ottawa’s biggest transportation infrastructure project since the building of the Rideau Canal and is being constructed through a public-private partnership (P3). In recent years, P3s have emerged as an effective way to build first-rate public works structures on time and on budget.
When building a P3 project the government oversees the process to make sure it stays on track but the private sector assumes important responsibilities, including design, construction, finance, and long-term maintenance.
“Big, sophisticated projects require big, sophisticated approaches to manage them. I’s not as simple as hiring a contractor to work on your bathroom.”
These private companies get paid by the government when the project achieves substantial completion and over its lifespan, which often extends 30 years. Governments can withhold payment if the structure isn’t up to standards, and the companies themselves are responsible for cost overruns.
Lenders and private equity partners provide the money needed to launch a project, so they too monitor the process.
Not your home renovation
Companies often form consortiums to meet the myriad requirements of a big project. On the Confederation Line, design, construction, finance, and maintenance teams from partner companies were combined into one during the bidding phase. This setup enabled “the development of a project solution that is optimized for a 30 year operating period,” according to member Michael Westgate, Vice President, Pre-Construction, Civil Division at EllisDon.
When the project launched, consortium members worked together with client and user groups to define roles and responsibilities. They also identified challenges and ways to meet them. When the design was finalized, all members worked together to map how the collaboration would play out moving forward.
“Big, sophisticated projects require big, sophisticated approaches to manage them,” explains Ehren Cory, President, Project Delivery of Infrastructure Ontario. “You need to include in the process experts in design, engineering, and other fields. Everything flows from that. It’s not as simple as hiring a contractor to work on your bathroom.”
The growth of P3s has transformed the construction industry. Westgate says EllisDon has evolved from a bricks-and-mortar construction company into one equipped to deal with every aspect of infrastructure development, including design, construction, financing, operations, and maintenance. The change has been dramatic, he says. “We’ve become a full service cradle-to-grave construction firm.”
P3s are making a huge impact on infrastructure and many people view that as a positive development. Paul Boothe, head of the Lawrence National Centre for Policy and Management at Western’s Ivey Business School, recently summed up their contributions in Maclean’s Magazine as “an important, cost-effective tool to ensure on time and on budget delivery of public infrastructure.”
P3s have quickly proven their value as part of the path to building Canada’s future infrastructure.