Why P3 Projects May Be The Future Of Canada's Healthcare Industry
Development and Innovation Partnerships with the private sector allow health authorities to offset financial risks, build new projects faster, and enhance services.
P3s that take the best of both the public and private sector to create new healthcare facilities are flourishing in Canada. New ideas are being tried and tested, and more Canadians are reaping the benefits of better health care infrastructure, faster and closer to home.
“Hospitals in North Bay, Sudbury, and Sault Ste. Marie have transformed the government’s health care program and service offerings in the north,” says Bert Clark, President and Chief Executive Officer of Infrastructure Ontario. “Projects like the Juravinski Hospital in Hamilton serve as centres of excellence for cancer care. Other projects such as the new Centre for Addiction and Mental Health campus in Toronto have reintegrated mental health care into the community and led to a revitalization of an entire area of the city.”
Share the risk
For provinces and heath care authorities, P3 or Alternate Finance and Procurement (AFP) projects allow them to offset the risks of expansion with the private sector, and access private sector investment. The nature of the partnerships varies, and can include operations and facility management after the project is built.
“Under a P3 model, risks such as cost overruns and late delivery are transferred to the private sector who are better able to mitigate and manage them,” says Clark.
The private sector is willing to bear the risks because these projects provide relatively stable, long-term investments. The P3 model also gives the private sector more control over decisions that impact cost and schedule. Additionally, it accounts for the whole-life cost of the project, says Edmund Mahabir, Carillion Canada’s Executive Vice President of PPP Infrastructure Development and Construction.
“Under a P3 model, risks such as cost overruns and late delivery are transferred to the private sector who are better able to mitigate and manage them.”
“Since the private sector financing in a P3 is only repaid if the project is successful in the long term, there are many stakeholders to insist that risks are adequately managed and reasonably priced,” says Mahabir.
When included, facility maintenance is typically locked in for the project term — 30 years in most cases, says Olivia MacAngus, VP of Corporate Development for the Plenary Group, whose projects include Toronto’s innovative Bridgepoint Hospital.
“Healthcare facilities are often large and complex infrastructure projects, which is why the risk-transfer objective of a P3/AFP approach is well suited to them,” she says.
The traditional model for health care developments often ran into problems with a lack of coordination between private sector activities such as design, construction, and maintenance, says Clark. “Under an AFP model, they are brought together under one project team umbrella.”
In B.C., the partnerships approach has emerged as a significant method for cost-effective health care infrastructure with over 15 projects underway or completed in the last 12 years, according to Amanda Farrell, the President and Chief Executive Officer of PartnershipsBC.
New projects include the BC Children’s and BC Women’s Redevelopment and the North Island Hospitals.
“Partnership projects have benefited from up-front disciplined planning and analysis to capture both global best practices and local knowledge and experience,” says Farrell, adding that contracts with the private sector are performance-based. The result is B.C. communities are accessing health care and certain services closer to home, and in some cases, for the first time in their region, she says.
MacAngus is excited about the emerging P3/AFP markets in Alberta, Saskatchewan, and the Northwest Territories. She says health authorities now have access to market-tested procurement documents and a “critical mass” of client and industry experience that can deliver world-class healthcare facilities. The healthcare P3 is coming of age in Canada, with more projects built and moving into the operations phase.
“Governments across Canada are able to help procure more health care projects sooner by using private sector resources,” says Clark. “In turn, these new facilities are better prepared to respond to the growing health care needs of our population.”
He adds, “it’s exciting when you’re able to immediately see the direct benefits to a community from a project that you helped deliver.”