Government Operations Committee on Oct. 4th, 2012

[The Chair, NDP, Pat Martin]

Thank you, Mr. Chisu.

Next Linda and Denis will share a time slot.

Is that correct?

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Yes. Thank you, Mr. Chair.

Those were good questions. I'm looking forward to reviewing our proceedings.

Under the trade agreements that are in place and that the government is pursuing, increasingly contracts are opened up to foreign entities. Do P3s allow for foreign entities? If so, how do you provide for enforcement of those contracts?

Second, is the bidding process different for P3 projects? In other words, when the department comes to you with its proposal, has it already put out the call for bids and it has an idea of what the costs might be? Are there many stages to this? Do you now have a completely different bidding process in the government for P3s that includes the costs of long-term maintenance?

[John McBride]

That's a great question. There are foreign players here in Canada that are bidding: HOCHTIEF, Bouygues from France, Carillion. These are companies that have established Canadian components. Those companies partner with Canadian companies. When they are bringing capital or expertise, the reality is that these works happen here in Canada; therefore, the vast majority of the economic benefits, the employment...you don't ship concrete from Germany to build things here.

In terms of enforcement, these are contractual agreements set under Canadian law and enforced under Canadian law. How do you ensure that you can realize on any kind of contractual difficulty? Well, you haven't paid them yet. Their private sector capital is at risk. Not only do you have the contractual outcomes, but you have the hammer of their money at risk to ensure enforcement of the contractual obligations.

In terms of the bidding process, yes, it's different, but the principles are fundamentally the same. When we're talking with federal departments, it's long before the bid process. This is when projects are being conceptualized. We want to do X, Y, or Z. There is quite a process. Is a P3 the right approach? Potentially. Then it's a more detailed analysis of the issues, the risks, the costs. When you are going to construct or undertake a project with just a capital cost of over $100 million, there's a significant amount of upfront work. We're involved in the upfront work. When it comes to the bidding process, it's a two-stage process with both an RFQ and then an RFP process. Given the fact, as was identified, that bidders actually have to take things through the design, it's actually a lot of cost for a bidder to put forward a proposal. Generally, three companies are qualified from the RFQ list. Those bids are evaluated during the whole course of the process. Another mandatory requirement for us is that an independent fairness monitor must be hired who monitors the bidding process and has to produce an independent report on its transparency and its fairness.

[The Chair, NDP, Pat Martin]

I think the time is to be shared with Jean-François Larose. Is that correct?

[Jean-François Larose, NDP, Repentigny, QC]

I have just one question.

I would like to begin with a correction. A little earlier, I talked about the Chartrand commission, but I was thinking about the Charbonneau commission.

As I said earlier, we have been seeing the development of PPPs in Quebec for 30 years on the roads, where material has been falling off bridges. Earlier, you said that a lot of the risk was transferred to the private sector. That worries us owing to the market fluctuations and many unknown reasons. In the long term, projects are often carried out over several years.

What kinds of control mechanisms are in place to ensure quality despite the fluctuations? Private companies tend not to notice hidden flaws, but we are seeing more and more of those. They are now coming to light.

[John McBride]

There are two ways to discipline the process. There is a contractual agreement that establishes performance standards. That requires a follow-up. We are talking about a public-private partnership. So a partnership does exist, but the relationship is contractual.

[Jean-François Larose, NDP, Repentigny, QC]

So it is based on good faith.

[John McBride]

It is based on a legal structure, where each party's obligations are well established.

[Jean-François Larose, NDP, Repentigny, QC]

In other words, if a beam collapses on an individual, those involved can be sued 20 years later. However, there is no guarantee that the beam will not collapse, correct?

[John McBride]

That is never a guarantee.

[Jean-François Larose, NDP, Repentigny, QC]

Based on what I know, when the public sector is in charge of contracts, inspectors are on site over the life of the contract.

[John McBride]

That is exactly right, since there is a contractual relationship with the government. Nothing diminishes safety standards. As we said in the beginning, an independent engineer assesses what is being done, and the project is evaluated.

[Jean-François Larose, NDP, Repentigny, QC]

Okay, but you are talking about the beginning. I am talking about the long term.

[John McBride]

The long-term issue in terms of infrastructure is a lack of maintenance. Governments do not invest enough in the maintenance of current infrastructure. The advantage of PPPs is that they establish agreements and a budget at the outset. That way, governments have no choice but to maintain an infrastructure.

If we are looking for evidence, we will surely talk about the collapsing bridges. There are two potential problems—a design issue at the outset or a lack of maintenance. For their part, PPPs try to tackle those two issues by integrating design into construction and maintenance, and by establishing a contractual way to proceed. Paying for the maintenance is the government's obligation.

All too often, the government will announce budget cuts and postpone the maintenance of infrastructure to some other year. However, that is not an option with PPPs.

[The Chair, NDP, Pat Martin]

Thank you very much, Mr. McBride.

Now we have Peter Braid, finally.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you, Mr. Chair.

Thank you, Mr. McBride, for being here.

I certainly appreciate the update today and your presentation. I understand you've had the twin priority of creating a brand-new federal government department and crown corporation, and everything that entails, and at the same time executing your mandate.

I think I heard earlier that thus far in the early phases of your mandate you have approved 12 projects. I'm curious to know the nature of those projects, what the majority of those projects are. Are they municipal? Are they bridges? Are they roads?

[John McBride]

They're quite diverse. That's one of the things we've been looking for, diversity in terms of who and diversity in terms of what. For example, we've worked with the City of Winnipeg to do the Chief Peguis Trail, which is a portion of...it's essentially a ring road in Winnipeg, which was delivered a year early and under budget. We've worked with urban transit in Montreal to build a train maintenance facility in Montreal. We have waste water treatment in Kananaskis, the Evan Thomas project. In Sudbury we've worked on biosolids, which is the last part of a waste water treatment project. In Lac La Biche, a very small community, we've worked again on water treatment. In Barrie we've worked on their urban transit, but in that case they are engaging the private sector to provide full bus operation. We've worked with the B.C. government on social housing, with GO Transit in Toronto, and a whole range of things.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

There is a wide array—

[John McBride]

All across the country, in municipalities and provinces in a whole range of sectors.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

I have two great universities in my riding of Kitchener—Waterloo. Is post-secondary education infrastructure eligible under P3, and if not, why not?

[John McBride]

The infrastructure categories that are eligible are set by my shareholder. Broadly speaking, educational infrastructure is not, mostly respecting the constitutional jurisdiction of the two levels of government.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Okay. I understand.

Do you have any thoughts or suggestions on how, generally speaking, we raise the profile of P3s in Canada and increase the number of projects you're involved in?

[John McBride]

Events like this do so. Thank you very much for the awareness. I appreciate that.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

You do lots of things—

[John McBride]

Yes, we do lots of things. For example, last year we ran 26 workshops across the country in every province and territory in partnership with provinces, engaging over 500 municipal and provincial decision-makers who are dealing with real projects. We're at industry associations as a national regional infrastructure summit getting a dialogue about P3s.

I think the real way of doing it, and I think it's true for everybody, is...people want to see it in practice, so our real goal is to give good examples of how it can be done well and how it works. That's why we're looking at doing it at the municipal level. In fact, the best champions and awareness builders are our clients. If you had Mayor Katz here and he could speak about his personal experience as a mayor, he'll now speak about that to other kinds of people. So we're gradually creating a network, and it's also how we connect a network of people on these kinds of things.

The profile has gone up quite a bit. I can say that we have seen over 200 applications. The interest, in terms of volume and numbers of projects, has been exponential since our start.