This Guest paper originally appeared in the November/December 2005 issue of the Taxpayer, a regular publication of The Canadian Taxpayers Federation (CTF), a federally incorporated non-profit and non-partisan organization dedicated to lower taxes, less waste and accountable government. This article is reproduced with permission and is copyright to the CTF and Sara MacIntyre © 2005.
Published here April 2006.

Editor's Note | Introduction | Design-Build-Finance-Operate
Capital Projects: What's Good, What's Bad? | Why Now? | Where is Canada on P3s?
Case Example: Abbotsford Regional Hospital and Cancer Centre

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 as such.

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
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.

Why Now?  Why Now?

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