Minister Oliver Weighs In On The Economic Benefits Of The P3 Model
Insight The Honourable Joe Oliver, Minister of Finance, and advocate of public-private partnerships, discusses why the model is a responsible way to manage risk on long-term insfrastructural investments.
Mediaplanet: How do public-private partnerships benefit the everyday Canadian?
Minister Joe Oliver: Our Government understands that investing in Canada’s public infrastructure helps to reduce commuting times for families, enhance economic competitiveness, encourage job creation, and strengthen trade corridors. Such investments benefit all Canadians.
What P3s do is help governments better manage risks to deliver these projects on time, on budget, and according to their specifications. Incentives and penalties are provided to the private sector to ensure that the infrastructure — be it a road, a water treatment plant, or light rail transit line — delivers the expected services to Canadians. This allows the private sector to innovate and governments to focus on ensuring Canadians ultimately get the services they need.
MP: How do we decide which projects should and shouldn’t follow the P3 model?
JO: P3s can be a great way to manage project risks to deliver public infrastructure on time and on budget, to the benefit of taxpayers. But not every project can be successful as a P3. Large, complex projects tend to be best suited to the P3 model. Significant planning and analysis goes into advancing a project to assess whether it makes sense to follow the P3 model.
"With each project, we must do a comprehensive analysis to see which approach will provide the best value for taxpayers. In many cases, we find that a P3 option would allow for an effective and cost-efficient transfer of risk to the private sector for a given project."
With each project, we must do a comprehensive analysis to see which approach will provide the best value for taxpayers. In many cases, we find that a P3 option would allow for an effective and cost-efficient transfer of risk to the private sector for a given project. This means a win for hard-working Canadian taxpayers.
MP: How do long term infrastructural investments rank in terms of risk?
JO: The additional cost certainty offered through the P3 approach for both the construction and operation periods of a project allows governments to better manage risks related to infrastructure projects. P3 models where the private sector has its own capital at risk provide an incentive for the private sector to actively manage and mitigate project risks.
For private sector investors, long-term investments in infrastructure can be a way to ensure a steady stream of revenues. In the case of P3s, these revenues typically come from payments from the public sector, which flow as long as the private sector partner is meeting performance expectations. As such, the key for investors in P3s is to ensure the right team is put in place to successfully deliver and manage a given P3 project. It can be a win-win for all sides.
MP: How does Canada ensure the fiscal responsibility of P3 projects?
JO: The Government pursues P3s when they make sense; that is, when they result in better value for taxpayers than under a traditional approach that sees government assume most project risks. Thorough planning and analysis of projects, including credible, rigorous Value for Money assessments, are integral to ensuring fiscal responsibility. Governments across Canada have set up dedicated P3 units to concentrate knowledge and expertise to carry out such analysis and facilitate successful P3 projects, to the benefit of taxpayers.
MP: How has Canada positioned itself to benefit from P3 industry growth in 2014?
JO: Canada is becoming a leader in P3s, and our government continues to contribute to the development of the Canadian P3 market. This includes supporting innovative P3 projects through the P3 Canada Fund, which is now going through its sixth annual round of calls for project applications from provinces, territories, municipalities, and First Nations.
We also want to make sure that when an infrastructure project can generate better value for money by being delivered through a P3, it is delivered as a P3. That is why we are requiring that projects with eligible costs over $100 million seeking federal infrastructure funding under the New Building Canada Fund undergo a screening process to determine whether they would make a good P3. We have a similar requirement for federal capital projects.
We are also bringing major projects to the P3 market. For example, we continue to advance the Detroit River International Crossing project as well as the New Bridge for the St. Lawrence.