Finance Committee on Oct. 8th, 2014

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Mr. Romoff, I understand, as a promoter and fan of the P3 model, you highlight the places where it works. It's not a one-size-fits-all, is it? There are instances where it has not worked in Canada. Is that fair to say?

[Mark Romoff]

There are actually no examples in Canada where a P3 has gone ahead and has been a failure.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

The Brampton Civic Hospital, according to the Ontario Auditor General, ran over $200 million, in part because it was a P3; the Sea-to-Sky Highway was $220 million over, due to the fact it was organized as a P3; and with the UQAM, the University du Quebec at Montreal, the rate of that investment cost the Government of Quebec $400 million, $200 million more than was originally budgeted; and City of Ottawa had to bail out two P3 projects entirely.

To not describe some of those cost overruns to the taxpayer, who eventually picked up the costs of these “not-failures”, I suppose you would call them, is significant. The one size P3s work in all situations and there has never been any kind of failure of expectation or delivery to the public and to the taxpayer?

[Mark Romoff]

I'll make a couple of comments. Several projects you've mentioned are not P3s, so I would have that discussion with you about that.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

I'd love to.

[Mark Romoff]

UQAM is one of those. It's not a public-private partnership.

The second thing, as I mentioned earlier, is P3s are not a panacea, but when they're done for the right reasons and when the contracts are structured appropriately, they have delivered results for us time and time again. That is true right across the country.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Those are two very large conditions for success, if contractors operate in a proper way.

Thank you, Chair.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Cullen.

We'll go to Mr. Saxton, please, for your round.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you, Chair. Thanks to our witnesses for being here today.

I just want to begin by following up on a comment made by Mr. Cullen regarding funding for infrastructure. I just want to confirm that our government has indeed provided over $53 billion in infrastructure funding over the next 10 years, which is the largest and longest federal investment in job-creating infrastructure in Canadian history.

My first questions will be for the Canadian Council for Public-Private Partnerships.

Mr. Romoff, in your opening statement you highlighted some of the benefits of P3 projects, and also how Canada is leading the way in the world in this regard.

As you know, our government has been very supportive of P3s. I just want to ask if you can identify some of the recent examples of P3s that have been successful and also helped to change the mindset around infrastructure funding.

[Mark Romoff]

There are examples right across the country. We could start with British Columbia. The Canada Line, the transit system that connects the airport to downtown Vancouver, is an exemplary case of a successful public-private partnership. It is the best example, in the sense that the private sector took on responsibility for the design, construction, financing, maintenance, and operations of that system. That system was built at significant savings to the Government of British Columbia, in excess of $90 million. That particular transit system is exceeding estimated ridership levels, which was an element of its feasibility at the beginning. It is really quite a great a example of P3s in action.

[Andrew Saxton, Conservative, North Vancouver, BC]

Yes, that's an excellent example. I know many people who love taking that Canada Line. I know my 85-year-old father takes it to the airport, as a matter of fact, when he flies.

Can you give us an example of when P3 projects make sense?

[Mark Romoff]

P3 projects make sense where you can demonstrate that the value for money for taxpayers is better than preceding with more traditional design-bid-build approaches. There are several advantages of a public-private partnership, but the principal advantage comes back to the point that Mr. Cullen was making earlier, which is that if you put in place a public-private partnership that includes life-cycle maintenance of the facility and requires the private sector entity to assume responsibility for that maintenance over the period of 30 to 35 years, you may still have roads and bridges that are degrading, but it will be the responsibility of those consortia to make the repairs, to meet the obligations of the contract, and furthermore to assume the cost.

If you have a look at the Champlain Bridge in Montreal, that bridge, of course, is now in need of serious repair. In fact, it's going to be replaced. It was initially built as a traditional project. As you know, the Government of Canada is moving ahead on an accelerated basis to replace that bridge with a public-private partnership model, which will put the onus on the private sector consortium to ensure that it is maintained over the 30 to 35 years of that contract, to a standard that was agreed to at the outset of that contract. It puts the onus and responsibility on the private sector, and it holds the public sector exempt from those costs that normally end up being assumed by governments when projects are procured in the more traditional way.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you very much.

My next question is for Beatty from KPMG.

Mr. Beatty, if you could talk to us about the state of public-private partnerships in Canada, I would appreciate that. Also, our government understands the importance of P3s and has encouraged large projects to consider P3s as an effective funding option. Should more municipal projects be considered for P3s?

[Stephen Beatty]

The first part of my response is that the state of public-private partnerships is very healthy in Canada. It is one of the two or three jurisdictions around the globe that are held out as true state-of-the-art jurisdictions. It's characterized by a predictable flow of projects, by predictable timeframes for procurements, and public entities that are highly competent and sophisticated in the procurement of infrastructure. Those would be the big three from that perspective.

In terms of the funding options, I'd take us back to my earlier remark: financing and funding. Most of that pertains to financing rather than funding.

[The Chair, Conservative, James Rajotte]

You have about 15 seconds, Mr. Saxton.

[Andrew Saxton, Conservative, North Vancouver, BC]

I have 15 seconds.

I'll ask the Canadian Life and Health Insurance Association very quickly about their opinion of our PRPP, the pooled registered pension plan, and the tax-free savings accounts and how these are helping to encourage Canadians to save for their future?

[The Chair, Conservative, James Rajotte]

Let's have a very brief response.

[Andrew Saxton, Conservative, North Vancouver, BC]

It'll be very brief.

[The Chair, Conservative, James Rajotte]

Mr. Swedlove, do you like them or do you not like them?

[Andrew Saxton, Conservative, North Vancouver, BC]

Have these been a good idea for Canadian savers?

[The Chair, Conservative, James Rajotte]

Order.

Let's have a very brief response.

[Frank Swedlove]

I'll respond very briefly on PRPPs.

I think the fact that we're getting very wide support from a lot of the provinces—four provinces have now implemented them, and Ontario has announced that they will be implementing them shortly—reflects widespread acceptance and a view that this is a real way of providing pension opportunities for people in Canada who don't have them.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Saxton.

Mr. Brison, please.

[Scott Brison, Liberal, Kings—Hants, NS]

Canada has the greatest concentration of expertise in the design, construction, and financing of infrastructure in the world, and we're building airports and highway systems and water treatment plants and transit systems around the world, yet our pension funds aren't investing that much in Canada. Why is this? Is it a matter of bundling? Should we be bundling projects together in similar asset classes and making them more investor friendly?

[Mark Romoff]

This is a question probably best addressed by the pension funds, but I'll take a shot at it.

I think there are a couple of things at play. With respect to pension funds, the bottom line is that they tend to be risk averse, because they have to ensure they have a continuing stream of returns on their investment to meet their pension obligations. So they tend not to invest in greenfield projects because of that high risk, but rather buy assets around the world or invest in brownfield projects.