Evidence of meeting #57 for Government Operations and Estimates in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was p3s.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Sarah Hoffman  Board Chair, Edmonton Public Schools
Toby Sanger  Senior Economist, Canadian Union of Public Employees
Michael Atkinson  President, Canadian Construction Association
Brock Carlton  Chief Executive Officer, Federation of Canadian Municipalities
Adam Thompson  Policy Advisor, Federation of Canadian Municipalities
Edgar Schmidt  Superintendent of Schools, Edmonton Public Schools
John Nicoll  Managing Director of Facilities, Edmonton Public Schools

9:30 a.m.

President, Canadian Construction Association

Michael Atkinson

The consideration shouldn't only be, when you're looking at a complex project, whether or not it's a viable option for private financing. I think you should be looking at the domestic market, your supply chain. You should be making other considerations in coming to that decision. It's not necessarily going to weigh it one way or the other, but it's a consideration that you should be making as an ongoing purchaser of the design and construction services. It's something you want to work with in your supply chain to ensure that there is appropriate management. I think it speaks again to what we said before: there's no need to have a situation that's either-or. There should be flexibility built into the long-term infrastructure plan to allow more options in those circumstances.

9:30 a.m.

Senior Economist, Canadian Union of Public Employees

Toby Sanger

I think we all agree that municipalities or other recipients of federal government money should not be forced into doing P3s. That apparently seems to have been the case with Edmonton and the LRTs, according to reports I've read.

9:30 a.m.

NDP

The Chair NDP Pat Martin

We're going to have to move on.

Go ahead, Mr. Carlton.

9:30 a.m.

Chief Executive Officer, Federation of Canadian Municipalities

Brock Carlton

The question was whether there were any additional requests. We noted, not specific to Edmonton but just generally, that there's a P3 municipal guide that covers the need for openness and transparency in the way proposals are developed and in the way you make sure that everybody knows the rules of the game from the start. If you have that along with the other things we've talked about, then you've established a framework that we think is more effective.

9:30 a.m.

NDP

The Chair NDP Pat Martin

Thank you.

Thank you, Linda.

Next, for the Conservatives, is Jacques Gourde. You have five minutes, Jacques, please.

9:30 a.m.

Conservative

Jacques Gourde Conservative Lotbinière—Chutes-de-la-Chaudière, QC

Thank you, Mr. Chair.

My thanks to the witnesses for joining us today.

My first question goes to the representatives from the Federation of Canadian Municipalities, Mr. Thompson and Mr. Carlton.

As you said in your presentation, P3s are a useful tool in getting funding for your infrastructures. Could you talk to us about the experiences you have had with some P3s over the last 20 years?

Also, in your presentation, you mentioned lessons you have learned and referred to those experiences. Could you please give us some more details about that?

October 18th, 2012 / 9:35 a.m.

Adam Thompson Policy Advisor, Federation of Canadian Municipalities

Thank you for your question. It's a very good one.

Obviously our members have been interested and active in exploring all options for delivering municipal infrastructure. In terms of what we've learned, I think it can be summed up most easily this way: our members feel that P3s can go a very long way in supplementing the investments of the past but also, looking ahead, as investments under the new long-term infrastructure plan. P3s can be a great supplemental avenue or mechanism for municipalities.

We caution against P3s being considered to supplant traditional investment. The best thing the federal government can do is, as Brock mentioned earlier, provide a full suite of options for municipalities to deliver municipal infrastructure, meaning traditional investments that are then supplemented by P3s.

In reality, municipalities are construction management experts. Our members build, operate, and maintain a wide variety of infrastructure across the country. P3s really require a different skill set. They require contract management. This is, at times, a very expensive skill set to acquire for a municipality. In providing, as Brock said, stable, secure investments in our communities, it's also important for there to be a recognition that we have a long way to go to arming municipalities with the information they need to be able to determine if a P3 is right for them. Adding to what Brock said in his opening comments, those are the types of lessons we have learned from P3s in the past. Those are the types of lessons we're very much looking forward to in the long-term infrastructure plan, and having a discussion about those.

9:35 a.m.

Conservative

Jacques Gourde Conservative Lotbinière—Chutes-de-la-Chaudière, QC

In your presentation, you said that there were three lessons to be learned. Could you tell us a little more about the third lesson, the need for knowledge and training in P3 infrastructure projects?

Often, the first stage of a P3 is about construction and the second stage is about long-term maintenance. Construction teams change with each project, but maintenance teams remain responsible for 20, 25, or 30 years. Might we be short of workers with the necessary training and knowledge? As maintenance teams remain responsible for infrastructure longer and as more and more P3 infrastructure projects are added each year, might we have a problem there?

9:35 a.m.

Chief Executive Officer, Federation of Canadian Municipalities

Brock Carlton

Michael could answer questions about construction teams better than me. But the reason why we are saying that it is important to have a capacity-building program for municipalities is so that we can be sure that municipal employees understand exactly how contracts have to be prepared and how P3 programs have to be managed. At the moment, we are short on capacity and experience like that.

Canada has another problem, a demographic one. A lot of people are going to have to retire. That means that we have to recruit new employees without experience. In that long-term infrastructure program, therefore, the need to build capacity is very important.

9:35 a.m.

Conservative

Jacques Gourde Conservative Lotbinière—Chutes-de-la-Chaudière, QC

Does your federation have data on the percentage of P3 infrastructure projects in recent years? Is the number of P3 projects growing? For example, is it 15% or 25% of all infrastructure projects that are being done as P3s?

9:40 a.m.

Chief Executive Officer, Federation of Canadian Municipalities

Brock Carlton

I do not have that data in percentages. We are a national organization, so we are not aware of everything that goes on in each of the municipalities in Canada. However, according to our figures, about 150 P3s are in place or in development in Canadian municipalities. Imagine the total number of projects in all the municipalities of Canada. Those 150 projects are certainly a small percentage.

9:40 a.m.

NDP

The Chair NDP Pat Martin

Thank you, Jacques. I'm afraid your time has expired.

Next, for the NDP, we have Denis Blanchette. You have five minutes, Denis.

9:40 a.m.

NDP

Denis Blanchette NDP Louis-Hébert, QC

Thank you, Mr. Chair.

My thanks to our guests. The evidence today is very interesting.

My first question is for Mr. Atkinson.

P3 or no P3, a school or a public building is going to be built anyway. If a P3 is chosen, the SMEs in your area are going to be automatically shut out because of the scale of the projects. What is the impact of P3s on SMEs?

9:40 a.m.

President, Canadian Construction Association

Michael Atkinson

In many cases they would still be engaged, particularly if they're trade contractors—mechanical, electrical, etc. It would just be that they may be working for somebody other than they would normally be working for, or there would be another layer of contracts between them, which is also not unique to P3s. You will see that in other types of delivery methodologies.

The bigger concern, though, is that if there is no method or planning going on, it's very difficult for a company to turn around and reorganize, look to co-venture, build the capacity, when it doesn't know whether the market is going to be there or not.

Again, I keep stressing it, but the long-term planning is so important and so critical here. If a lot of my SMEs knew that there was a volume of work coming up, at whatever level of government, and that just the size alone of some of these projects would mean—and it doesn't matter how they were going to be delivered or financed—that they were going to have to build up capacity, look to co-venture, and look for partners, then they could do it in a reasonable, prudent, and planned manner.

The problem we have right now is it's knee-jerk; we're reacting to a situation without knowing what's coming around the corner. I think if there's one message I can leave here today, the need for long-term planning on how we're going to deal with Canada's critical infrastructure at all levels of government is absolutely critical.

9:40 a.m.

NDP

Denis Blanchette NDP Louis-Hébert, QC

Thank you very much, Mr. Atkinson.

When P3s come up, the discussion is often about risk management and transferring risk to the private sector. Now, this morning we were told that, when we talk about risk transfer, it is no longer, strictly speaking, a partnership. How do you respond to that?

Is a P3 that is seen as a transfer of risk, with the risk being managed by the private partner, a good way to go? Instead, do you not really need an assurance of long-term funding, whatever the formula is?

The question is for each of you, but I would like you to start, please, Mr. Carlton.

9:40 a.m.

Chief Executive Officer, Federation of Canadian Municipalities

Brock Carlton

Do you want to answer that, Adam? Go ahead.

9:40 a.m.

Policy Advisor, Federation of Canadian Municipalities

Adam Thompson

Sure.

It's an interesting way of looking at the issue. I would echo what Michael said: above all, when you boil all of this down, the need for stable and secure funding is what's paramount. Not only does it send the signals to the public sector that there are going to be investments continuing in the future, but it also sends the signals to the private sector, as Michael was saying, that they can plan their activities for the coming years as well.

The key there is that it has to also be for the long term, while being stable and secure. At the risk of being too repetitive, I'll say that the long-term nature is of critical importance.

On the question about risk transfer, this is exactly part of the reason that the goal of the federal government should be to build the capacity of municipalities to manage those contracts, which, as I said before, is a skill set that's relatively newer on the procurement side and will allow municipalities to have a greater understanding of what exactly a P3 entails.

When all the parties are at the table with the same level of information and with an adequate skill set, that's when P3s really shine as an example, but getting there is where we're at now. Especially at the municipal level, we have a little ways to go. That's why we so appreciate being here today to talk about it.

9:45 a.m.

Senior Economist, Canadian Union of Public Employees

Toby Sanger

I absolutely agree that long-term infrastructure planning is extremely important. We'll work together with them.

On the issue of risk transfer, I think a number of studies have said that.... Well, first of all, in terms of construction, most of the risk is at the upfront stage. Unless you're dealing with somebody who is going to have toll booths, there actually isn't a lot of risk in longer-term operations and maintenance. I think the Vining and Boardman study from UBC basically said that a lot of that risk, frankly, is not transferred.

At the end of the day—and I haven't seen any of the risk analyses that have done this—it's always the public sector that's responsible for providing that service. Pretty much all P3s in Canada are set up as special purpose vehicles, as I said, which means that the private sector can either go bankrupt or walk away. In Ottawa here, there are two small P3s that are profitable, but the big companies that own them—they're in arenas—walked away because they weren't making enough profit. Actually, one of them walked away; one of them demanded more money from the government.

The issue of capacity is really important. There was an experience in Nova Scotia with P3 schools. The contracts were about 2,000 pages long. The auditor there found that basically nobody in government had a handle on these. Some of the schools were owed hundreds of thousands of dollars. They didn't know about it. Nobody in government.... That's the provincial government.

Therefore the issue of having capacity to deal with these is really important, but as a number of people have said—and this gets back to another question—it's really only the big projects that should be viable in any sort of way for that, because of such high transaction costs and the need to have that ability.

9:45 a.m.

NDP

Denis Blanchette NDP Louis-Hébert, QC

Thank you.

9:45 a.m.

NDP

The Chair NDP Pat Martin

You're well over time, but I would like to give others the opportunity to share their views.

First I'd like to ask if the trustee of the Edmonton school board has any views she'd like to share on these or other questions.

Ms. Hoffman, would you like to chip in, seeing as school boards have been raised in other jurisdictions?

9:45 a.m.

Board Chair, Edmonton Public Schools

Sarah Hoffman

I'll ask if our superintendent, Mr. Schmidt, wants to comment.

9:45 a.m.

Edgar Schmidt Superintendent of Schools, Edmonton Public Schools

I think we very much appreciate the dialogue and the responses to the questions. As well, they're very good questions.

Relating back to our own experience, we've known about and recognized the necessary upfront work. The long-term planning, in my opinion, is a critical piece, because it takes so long for the multiple partners to come together from the construction side and for Alberta infrastructure and Alberta education to come together to build capacity. Then, of course, there is our own capacity within our own school board, where we need to have a common and greater understanding around what the implications are going to be for how we need to operate the P3 schools, the ASAP schools, from our perspective.

There is a lot of learning and there's a lot of necessary capacity-building. Now that we've experienced this in a number of schools, we certainly have built some of that capacity. Of course, the question remains as to how we continue this in a long-term, planned way. It's a very important question. A long-term, sustainable funding approach is a feature that's going to be critical for us in moving forward as our capital needs continue to grow.

9:50 a.m.

NDP

The Chair NDP Pat Martin

Thank you very much, Mr. Schmidt.

I'm afraid we're out of time, Denis. We'll have to move on.

Next, for the Conservatives, we have Costas Menegakis. Welcome, Costas.

9:50 a.m.

Conservative

Costas Menegakis Conservative Richmond Hill, ON

Thank you, Mr. Chair,

I want to thank our witnesses for appearing before us today. There was certainly very informative testimony from all of you.

My first question is for the Federation of Canadian Municipalities. Given that governing is really a collaborative effort from all levels of government—and we include in that, of course, the private sector—can you highlight for us some of the key advantages of engaging the expertise and innovation of the private sector?

9:50 a.m.

Policy Advisor, Federation of Canadian Municipalities

Adam Thompson

Sure. It's a great question. In some ways it's a very easy question, and in some ways it's not so easy.

Certainly what we're talking about in Canada is an environment where we have been doing design-build infrastructure investments for hundreds of years—maybe not hundreds, but certainly since the private sector has been involved in providing infrastructure. On that note, local communities have developed excellent relationships in dealing with their private sector partners, and local businesses are working alongside municipalities to build the infrastructure that supports our long-term competitiveness. Also, the private sector industries benefit from our high-quality infrastructure in Canada, so in that sense, especially at the local level, you see great working relationships because it's business as usual, and it has been for very many years.

Beyond that, there has been a growing interest in how we can procure smarter and maximize some of the innovations and technology in the construction and engineering fields to build top-grade infrastructure.