Where is Canada on P3s?
Canadian governments have been slow to the idea of public private partnerships.
However there are several good homemade examples, even though they are often not recognized
Confederation Bridge connecting Prince Edward Island to New Brunswick, see Figure
2, is perhaps one of Canada's greatest public-private partnerships. Like most
design, build, finance and operate public private partnerships, the Confederation
Bridge is a long-term contract spanning 35 years. In exchange for bearing the construction,
financing, revenue (toll collection), operation and maintenance risks, the private
partner in this case receives a fixed annual service payment of $41.9 million (1992
dollars), which represents an estimated annual cost savings of $9.2 million.
Figure 2: Confederation Bridge connecting Prince Edward Island to New Brunswick
(Reproduced with permission, courtesy The Marketing Department,
Confederation Bridge and Strait Crossing Bridge Ltd.)
The 13 km bridge was built in three-and-a-half years and the 100 year service life
means the government will save an amount equal to the level of the subsidy every year
for 65 years once the P3 contract (35 year service payment) ends. At the end of the
contract, the public partner can either extend the contract with the private partner,
or the bridge, its operation and maintenance will be returned to the public partner.
The contract also stipulates that when the bridge is returned to the public partner,
its condition must meet the standards agreed upon by both partners.
There have also been several ad hoc P3s, such as the Fredricton-Moncton highway
in New Brunswick, the William Osler Health Centre in Ontario, the Charleswood Bridge
in Manitoba and the Calgary courthouses.
But it is British Columbia where the Campbell government in 2002 set a clear, coherent
and decisive policy direction to aggressively pursue public-private partnerships.
The government adopted the "Capital Asset Management Framework" which applied to all
ministries and new capital projects. The initiative was based upon Australia's highly
successful, Partnerships Victoria. The province created Partnerships BC, an independent
agency to facilitate public-private partnerships.
To date, Partnerships BC has 11 major infrastructure projects on the go and has
managed the competitive contract process. The most widely recognized project is the
Abbotsford Hospital and Cancer Centre. Construction has already begun on this 300-bed
hospital and includes cost assurances and an on time delivery schedule. Should, for
example, labour costs soar during construction, it is the private partner that absorbs
the cost, not taxpayers.
Quebec has also followed suit, introducing enabling legislation to create an agency
similar to Partnerships BC. New Brunswick has a P3 policy and Alberta has started
to expand the role for the private sector for its public infrastructure projects.
Canada has been slow to see the benefits of P3s but as infrastructure demands continue
to grow and governments realize the advantages of using market incentives to safeguard
taxpayers, the P3 model will be used more often.
P3s are merely contracts and each project is only as good the contract and the
competitive bidding process. As is always the case, it is up to the government partner
to be mindful of the taxpayers' interest.