Government Operations Committee on Oct. 18th, 2012

[The Chair, NDP, Pat Martin]

I call the meeting to order.

Good morning, ladies and gentlemen.

We'll convene the Standing Committee on Government Operations and Estimates. We are welcoming witnesses today to talk, for our second meeting, about the public-private partnerships issue.

We had a very interesting meeting two days ago with witnesses representing both sides of this debate and we look forward to continuing today with four witnesses: the Canadian Union of Public Employees, represented by Toby Sanger; the Canadian Construction Association, represented by Mr. Michael Atkinson, president; the Federation of Canadian Municipalities, represented by Brock Carlton and Adam Thompson; and by video conference we're going to be welcoming the Edmonton Public Schools board, represented by Edgar Schmidt, superintendent, and Sarah Hoffman, board chair.

Do you hear us in Edmonton?

[Sarah Hoffman, Board Chair, Edmonton Public Schools]

Yes, we do.

Can you hear us?

[The Chair, NDP, Pat Martin]

We can't hear you, Ms. Hoffman.

Oh, there we go; now we can.

Welcome, and thank you very much for joining us.

[Sarah Hoffman]

I'm also pleased to be joined by John Nicoll, our director of facilities and maintenance at Edmonton Public Schools.

[The Chair, NDP, Pat Martin]

Hello, Mr. Nicoll, and welcome.

We invite the witnesses to give a brief presentation of five to 10 minutes, leaving adequate time for the members to pose questions.

The order that we have in our agenda has, as the first in line, Mr. Toby Sanger, senior economist with the Canadian Union of Public Employees.

Welcome, Toby. Please take five or 10 minutes.

[Toby Sanger, Senior Economist, Canadian Union of Public Employees]

Thanks very much for inviting us.

Our president, Mr. Paul Moist, had hoped to be here, but he has to be at an important meeting in Toronto at this time.

I'm really glad that you're investigating this issue, one that I feel has not, despite the increasing number of P3s in Canada, been adequately analyzed in an objective way in Canada.

I'm also delighted to be here with Brock Carlton, Adam Thompson, and Michael Atkinson. We are all members of what's called the Municipal Infrastructure Forum, which is a body that the FCM set up develop some constructive solutions on the whole long-term infrastructure program that the federal government is planning.

I commend the FCM for setting up this organization. It's been a very constructive exercise whereby different sectors of society can get together to try to come up with constructive solutions.

We approach the issue of public-private partnerships very much from a public policy perspective. The overriding concern we have with P3s is concern for public finances and the delivery of quality public services.

I've worked as an economist at the federal, provincial, and territorial level, as well as in the private sector, and I dealt with P3s during that time. I approach this issue very much from an economist's perspective and in terms of the best use of the public's and taxpayers' dollars.

We also want to underline that this isn't about the public sector doing everything or about the private sector doing everything, but about the appropriate role for each.

In Canada, traditional procurement involves the public sector determining its priorities and requirements. It may contract for design and then contract to the private sector to construct infrastructure—the private sector constructs infrastructure in Canada. That's the way it works, and of course we accept that. We see those as appropriate roles.

The public sector provides financing because it can borrow funds at the lowest rate, and it owns and operates public infrastructure because it is a public good and government is ultimately responsible for it. If it fails 10 or 20 years down the line, government has to provide it and make sure that it's available to its citizens.

We are extremely concerned that Canada will soon follow the U.K., which was the model for Canada's P3 program, down the road of massive failures of P3s. These undermine the viability of providing quality public services because governments are under contract to pay billions in excessive fees for P3 projects.

Proponents in Canada claim that we have taken the best practices from elsewhere and that we are a global leader in P3s. From everything I've seen, the Canadian model may be good at promoting P3s, but it doesn't do a very good job of providing objective assessments and evidence, or accountability and transparency, for P3s.

There are many different issues here. You could probably be studying this for a year, but I don't think you want to. I'm going to focus on some economic aspects in the value-for-money reports. The value-for-money reports are key to P3s, and they're supposed to provide evidence for the benefit of P3s.

I and others would say that value-for-money reports are not credible. In fact, some proponents would say this as well.

Promotion and analysis of the value-for-money reports in Canada is done by P3 agencies. They involve both promotion and analyses, and those roles should be separated, as far as I'm concerned. There is very little transparency of key information in the value-for-money reports; high discount rates are used to minimize future liabilities, and I'm going to talk about that a bit later; and risk transfers are exaggerated. Auditors in pretty much every province in Canada have frequently found particular P3s to be bad deals, and in the U.K.—I don't know whether you're following this—there have been massive P3 failures in recent years.

To help you understand why the mixing up of promotion and advocacy is a problem, here's a quote from Larry Blain, a former CEO of Partnerships BC, which pretty much established the Canadian model for P3s. He said: Public sector comparators won't do you much good anyway, because I can make the public sector comparator as bad as I want to, in order to make the private sector look good.

The public sector comparator is an essential part of a value-for-money assessment, because it's upon that basis that the costs of a P3 are compared. You can't have a value-for-money report without a PSC.

It is a remarkable admission. He is basically saying they are useless because they can change it with creative accounting.

I want to get into the way they do this. I'm sure some of you may be aware of the issue with discount rates. I am taking a hypothetical example of a P3 that runs for 30 years and pays $10 million. It could be a million dollars; the ratios are the same. Over 30 years the government would be paying $300 million in nominal dollars, assuming there was no cost escalator there. People use discount rates. The federal government can now borrow at 2.5% over 30 years. That's a yield on a 30-year bond. If you use a discount rate of 2.5%, you come up with a present value of $209 million. A lot of accountants argue that's what the federal government should use. Provincial governments in Canada can borrow at 3.5% over 30 years right now. That would give a present value of $184 million.

Unfortunately, in B.C. the government uses a present value of $7.5 million. They use a private sector cost of capital. What is actually a cost and a liability of $300 million would be more than that because usually there is an inflator there. Actually, in current dollar terms it looks like $118 million. It should be $184 million. That's a massive difference there.

The federal government's Treasury Board guidelines are for a discount rate of 8% real, plus inflation. That would amount to a discount rate of 10%. When you see the value-for-money assessment, that $300 million in future liabilities is reported as $94 million in liabilities. They are hiding these future liabilities by using discount rates. Unfortunately, the value-for-money assessments don't show those future liabilities. They just show the present value on that.

That's the first form of what I would call creative accounting on this. B.C uses it.

The second form of creative accounting that is used is assuming very high levels of risk transfer to justify P3s without evidence. I have a few examples here.

This is what Ontario uses. For instance, for the Bridgepoint Hospital in downtown Toronto, the traditional all-in procurement costs were supposed to be $452 million. The P3 cost was substantially more than that, but what the Ontario government assumed was that $352 million was transferred to the P3 operator.

Now, is there any evidence for this? There is absolutely no evidence provided for this. Even in Infrastructure Ontario's methodology, they just provide a short document. I have a copy of it here. They just have a little matrix. They don't provide any empirical evidence for why those risks should be transferred. Now, in Ontario, if you add it up, there is about $3 billion or $4 billion, probably about $5 billion now, that they assume is risk that is transferred to the private sector.

In the case of Bridgepoint, the risks transferred amount to over 60%. The average risk supposedly transferred to the private sector in Ontario is about 50%. There is absolutely no evidence for that.

As a former public servant, I'm appalled there is no evidence for this. People in California asked me.... Schwarzenegger was interested in pursuing P3s. They got some of the information and the methodology from Ontario. They were flabbergasted. I was embarrassed as a Canadian on that.

What does this creative accounting lead to? I'll just go back on the whole risk transfer. Typically with P3 projects, a private operator only puts up about 10% or 15% equity, and they set them up as what are called “special purpose vehicles”. That means that even though there are big companies behind them, they can walk away at any point and only lose that 10% to 15% equity.

As far as I'm concerned, there's absolutely no rationale for assuming any risk transfer beyond that, because private operators frequently do work away from that. It's happened here in Ottawa. It's happened all around the world.

I'm going to quickly sum up. I can talk later about what auditors in Canada have found, but the U.K. experience now is that there'll be massive P3 failures with what they call the private finance initiative.

The first of these was Metronet subway. It was a P3 failure that amounted to $2.7 billion and an extra cost to taxpayers of about $640 million. The real problem now is that more than 60 U.K. hospitals are in financial difficulty due to PFI debt payments. They need bailouts.

The total cost of the PFI now was recently calculated to be £300 billion or $480 billion. Those are big figures. That's about one-third of Canada's total GDP. In the U.K. it works out to about $20,000 per household.

The U.K. health minister, a Conservative, said that the PFI deals are millstones and have brought parts of the health system to the brink of financial collapse. Other people have described them as debt time bombs and staggering mountains of debt.

Thank you.

I'm sorry to go through this in some detail, but I think it's important to understand some of the accounting that goes on behind this. I'll be very happy to hear your questions.

[The Chair, NDP, Pat Martin]

Thank you very much, Mr. Sanger. That's very helpful.

Next we have the Canadian Construction Association and Michael Atkinson.

Welcome, Mr. Atkinson.

[Michael Atkinson, President, Canadian Construction Association]

Thank you very much, Mr. Chair. We'd like to thank the committee for providing the Canadian Construction Association, the CCA, with the opportunity to appear before you today.

Our association represents the non-residential sector of the construction industry, so we, in fact, build Canada's infrastructure. We have more than 17,000 member firms from coast to coast to coast, many of which are small and medium-sized businesses. In fact, if you use the definition that Industry Canada uses of fewer than 100 employees making an SME, then 99% of the companies that operate in our sector of the construction industry are SMEs, so when you talk about small business, you're talking about us. Given the fact that the construction industry in total employs almost 1.5 million Canadians or about 10% of the workforce, the old saying that “as construction goes, so goes the Canadian economy” is not far off.

Your subject matter and your review are extremely timely. We have the current Building Canada fund running out on March 31, 2014. The consultations that have been ongoing over the last year or so with some of my colleagues here to create the new long-term infrastructure plan are absolutely key. It's absolutely key that that plan be announced in the next federal budget in order to ensure there is no gap in funding when the current Building Canada fund expires and to ensure we don't miss a construction season in those circumstances.

There will definitely be a role for the private sector in that plan if it has the kind of flexibility that's required to ensure we meet the needs of Canadian infrastructure at all levels of government from coast to coast to coast in Canada, so your review couldn't be more timely.

From CCA's perspective we're neither for nor against public-private partnerships. We see them as a potentially effective delivery methodology for construction projects in the right circumstances, not unlike design-build, construction management, and a whole host of other methodologies that we have for delivering infrastructure.

For us, P3s are an important tool in the tool box and should be used under the right circumstances. What are those right circumstances? They are those in which both parties, the public sector and the private sector, seek to take the best advantage of the particular skills and abilities both bring to the table. There are three Ps in public-private partnership, and the key one is the last one, partnership.

In the case of the private sector, what we bring to the table is often the innovative, out-of-the-box approach to a complex project. From the public sector, what we're seeking is your ability to manage and mitigate certain project risks that are best managed and kept with the public sector.

P3s can be an extremely effective method, especially on larger, complex projects in which the private sector's innovative approaches can bring solutions that would not be permitted, would not be practicable, or would be highly complicated if delivered in a traditional crown construct model.

P3s also allow for the opportunity to look at the development of infrastructure that may not even be on the government's radar screen. A perfect example of that is the P.E.I. bridge, the Northumberland Strait crossing. That project was not on the radar screen for Public Works and Government Services Canada, or any other federal department, and was very much a proposal, an idea, that came from the private sector.

However, as I mentioned earlier, P3s are not a panacea, nor should they be viewed simply as a solution to fiscal pressures. P3s invoke a complex, multi-party legal web of contracts that is an expensive proposition for would-be participants. Transactional costs are extremely high, making the P3 option really only viable on the larger projects, typically in the $50 million range and above. In our view, P3s should be used to leverage additional funding from the private sector and not used simply to replace traditional public sector commitments.

We should also be concerned, and we are concerned, about the arbitrary bundling of construction projects simply to create a critical mass for viability of a P3 approach. The main reason is, as I mentioned earlier, 99% of our members, of the construction companies active in our industry, are SMEs. If projects are being considered to be bundled to create that viable mass, we believe that one of the criteria that needs to be examined before making that decision is the impact it has on the local domestic supply chain in those circumstances.

Another consideration is to ensure that there is a level playing field for Canadian firms and Canadian-based firms. Where the lead concession or financier is foreign, which has been the case in a number of our P3 projects, Canadian contracting firms are often at a disadvantage when it comes to performance security. The reason for this is surety bonding.

The use of surety bonds is something that's unique to North America and unknown to Europe, for example. Many of our construction firms do not have the healthy balance sheets required to get letters of credit. They've used the surety bond vehicle to leverage their balance sheets by as much as a factor of times 15, times 20, but this is foreign for European concession-holders and financiers, and it's created a problem for participation by some—not all—of our Canadian and Canadian-based firms, in that foreign concessions will not accept surety bonds as performance security. They want the liquid property and a letter of credit, etc. This causes a problem for many of our firms.

What has been helpful is the domestic powers given to EDC, Export Development Canada, as part of the stimulus package. EDC has played a role in some projects in enabling Canadian-based firms to participate in P3 projects through the kinds of guarantees and financial instruments they have.

In trying to sum up, it would be foolish to completely cross out P3s as an option in your tool box. P3s can be an extremely effective tool, but they cannot be the only tool in the tool box. There are many circumstances in which P3s are just not the right tool or the best tool.

One of the clear benefits of the P3 approach, from our perspective, has been that it forces a consideration of the total life-cycle operation and maintenance of a project. It puts a certain regimen or discipline on the public sector to ensure it has thought out the entire life cycle of that project—not just where the initial capital cost is going to come from, but how it is going to fund this thing over its 30-, 35-, or 40-year life in terms of operation and maintenance. Perhaps we need to also import that kind of discipline for all our major complex projects, regardless of how they're funded.

In closing, we believe that the P3 option can be extremely effective, but it's not necessarily the best approach in every circumstance. It can be an effective delivery mechanism where appropriate and where it truly is a partnership, not simply an attempt to relay all of the risk to the private sector. That's not even a P2.

With that, Mr. Chair, I will conclude my opening remarks, and I certainly look forward to your questions and discussion.

[The Chair, NDP, Pat Martin]

Thank you very much, Mr. Atkinson. That was very interesting.

Next it's very fitting that we hear from one of the largest consumers of construction industry services, the Federation of Canadian Municipalities. We have Mr. Carlton and Mr. Thompson.

[Brock Carlton, Chief Executive Officer, Federation of Canadian Municipalities]

Thank you, Mr. Chair. We really appreciate the invitation this morning.

I would like to start by saying that the FCM is the voice of the municipal governments. We have 2,000 members from all over Canada. Our members represent 90% of the Canadian population. So we have some perspective on what is happening in the trenches all across Canada.

We believe that this morning's question about P3s is very important in trying to find a way to better deliver services to Canadians in their communities.

As Toby mentioned, we have a municipal infrastructure forum that has many discussions about infrastructure, this being one of them. With Michael, Toby, and a few other folks around that table, you can imagine that we have some really interesting discussions.

Finally, I should say that Karen Leibovici, our president and an Edmonton councillor, sends her warm regards. She couldn't make it into town for this morning, but she asks me to send those regards on to you.

We really think that over the years we the municipalities, the government, and Parliament have started to work more closely together to find the best ways to seek solutions that improve the quality of life for Canadians, and clearly the question on the table is infrastructure and P3s.

The economic action plan was a really important opportunity to demonstrate the value of those relationships and the capacity of orders of government to work together. As you may have seen, we estimate that around 100,000 Canadians were kept in jobs as a result of that economic action plan and the work that was done on infrastructure in continuing to build the economic foundations in this country's communities.

As Michael said, this is a critical moment. We are at a period when our infrastructure is crumbling, and we are having a very dynamic conversation on what to do about it. This idea that there should be a long-term infrastructure plan is an opportunity to continue moving forward with the job of rebuilding our municipal infrastructure to ensure that Canadians have safe drinking water, shorter commutes to and from work, and the other benefits of solid infrastructure that create a more competitive and productive society on the world stage.

Clearly there's a lot at stake here. A lot of resources are required to ensure that our infrastructure is in good shape. The question on the table really is this: is there more than public money available to leverage towards those objectives? We really do believe that a key element in any new infrastructure plan is to encourage private sector involvement. P3s are a way of doing that in order to build and maintain and finance municipal infrastructure.

Of course, as has been said by my colleagues, we know you understand that P3s are not a magic bullet. In and of themselves, they will not solve the municipal infrastructure challenges in this country. This is what our partners have echoed, and this is what we've talked about at the municipal infrastructure forum with these guys and others.

However, P3s are an important instrument in a variety of infrastructure projects at the local level if we do them right. If we do it right, P3s can strengthen the implementation of a long-term infrastructure plan.

In the last few years, we have learned a few things about P3s and how to use them to deliver better services to the community. We believe that there are three very important lessons to be learned from our experience.

We think the experience to date with P3s has taught us three really important lessons.

The first is stable, secure investments. Making stable, predictable investments is the most important thing governments can do to improve our infrastructure. These investments extend the life of our infrastructure by supporting regular repair and maintenance, which is the single most important factor in keeping infrastructure costs down, but they also create the necessary conditions for P3s by providing municipalities with the secure revenue streams they need to enter into 20- or 30-year P3 contracts. On their own, short-term funding programs cannot meet the needs of public or private sector partners.

The second lesson is to make the P3 option more accessible. The current approach presents municipalities with an either-or perspective. A municipality can apply for cost-shared infrastructure dollars through something like the Building Canada fund, or it can access P3 funding. That's it: it's either-or.

Future federal infrastructure programs must ensure traditional investments and potential P3 project funding are available and delivered under a single framework. This will allow, for example, a community to apply for an application-based program like the Building Canada fund while still considering the P3 option alongside their application. If it is determined that the P3 approach is the most appropriate, then it can follow that path, but if it's not, then the municipality has other options. It has project funding opportunities through the other vehicles.

The third and final lesson is that we need investment in knowledge, support, and training.

When to use P3 models should be up to the individual municipalities, but municipalities need the information and expertise to make an informed choice and the support to manage new and complicated partnership agreements.

Costly business cases, lengthy program application processes and upfront legal fees can discourage municipalities from pursuing the option. Current P3 programs do not provide the support municipalities require to do this. Without this, increasing the use of P3s in Canada will continue to be a challenge. Support for building this capacity should be integrated into a new infrastructure plan.

In summary, there are three things. The first is to make secure, predictable, long-term infrastructure investments the cornerstone of a new long-term infrastructure plan and your P3 strategy. Second, make the P3 option more accessible by delivering P3s and non-P3 programs under a single integrated policy framework: future programs must integrate support for P3 in a design for all programs, rather than segregating it as a dedicated fund and, as I mentioned earlier, creating that either-or position that municipalities find themselves in. Finally, invest in knowledge, support, and training so that communities have the resources to cover high front-end costs and the expertise to develop and manage successful P3s.

Once again, Mr. Chair, thank you very much for giving us the opportunity to make this presentation to you this morning.

[The Chair, NDP, Pat Martin]

Thank you, Mr. Carlton. You have about three minutes left in your presentation, if Mr. Thompson has any thoughts he'd like to add. If not, we'll move on to the next presenter.

[Brock Carlton]

That's fine, Mr. Chairman.

[The Chair, NDP, Pat Martin]

Thank you very much. I'm sure there'll be questions from the witnesses.

Finally, and thank you very much for waiting, we have the Edmonton Public Schools via teleconference. We have Mr. Edgar Schmidt and Ms. Sarah Hoffman. You have five to 10 minutes, Ms. Hoffman, if you like. Thank you very much for your patience.

The floor is yours.

[Sarah Hoffman]

Thank you for the invitation. We're really happy to participate.

Mr. Martin, I appreciate your encouragement for us to enter into debate, but I'm going to decide to reflect on some of our experiences and I'm going to do my best not to editorialize throughout that.

We'll share some of the background with you on our experiences with the Alberta schools alternative procurement program, and I'll refer to it as ASAP, or ASAP 1 and 2, because we've gone through two rounds here in Edmonton Public Schools.

In Alberta, the provincial government's analysis of the economic climate and evaluation process determined during the last five years that a combined procurement model was the most effective delivery approach for building new schools. In Edmonton Public, that included six K to 9 schools, and later three K to 9 schools. Edmonton Catholic also built three during the same period using the same model.

The key goals of the ASAP projects were to build a large number of new schools in developing and developed neighbourhoods; consolidate schools into a single package for design, construction, and maintenance; and use public/private partnerships—P3s—to design, build, and finance the schools and maintain them for 30 years. This means that the contractor will oversee the design and construction of our schools using designs already developed in consultation with school boards and municipalities. It means a contractor also finances and maintains the buildings for that 30-year period.

The design of these schools is called a core school design. The core school concepts incorporate a permanent central space that includes a gymnasium, library, administration offices, classrooms, and specialty classrooms such as a music room, art room, and career and technology study labs, or CTS labs. Additional classroom space is provided through the use of modular classrooms that can be added and removed in response to changes in enrolment. From the governance perspective, the use of core school designs can improve the efficiency of construction, creating optimal value of public funds for a large-scale construction project.

Another important feature relates to the fact that all schools meet high-quality provincial standards and are built to achieve LEED—leadership in energy and environmental design—silver certification, an independent rating system used to measure environmental efficiencies. LEED-based construction will result in up to 45% greater energy efficiency and provide a healthier environment through improved air quality and the use of natural light.

What role did our school district play? Since our initial involvement with a project at Edmonton Public Schools, district staff had some general input into the core design process, as did several other school districts. Once the final design for the three basic school models was approved, the government engaged in a tendering process to complete the DBFM approach. The school board reviews its capital plan on an annual basis, and the board had already determined its need for new school construction and reflected this in its plan. The priority listing for construction was adopted by the government, and we immediately had to take concrete action to finalize sites, secure appropriate permits, and support the contractor with access to the sites.

Edmonton Public Schools has a joint-use agreement, or JUA, with the City of Edmonton and Edmonton Catholic Schools to allow community use and access after school hours for organized recreation and community activities. These new schools had to allow for this kind of use, and this was permitted in both rounds of construction.

The challenge for the community arose when local community groups wanted to lease space for activities such as play schools and other community services. The initial project did not allow for any leasing of space to third parties because of the complexities and potential risks associated with a contracted agreement. The agreement was also very complex, and adding another party would have made it even more so. We are happy to say, however, that the second round of schools provided some flexibility in this area.

It is a jurisdiction's decision whether or not to make these facilities available for other community uses outside the traditional joint-use agreement. School boards were encouraged to consider joint school and community use and plans to ensure that schools are child- and community-focused. We have partnered with the YMCA to create before- and after-school programs, which provide valuable services within the community. The ability to lease commercial operations is subject to meeting the requirements of the school board's purpose as defined in the Municipal Government Act, and would include child care operators, daycare operators, and other community use operations connected to school use.

Although it is still limited, it's definitely a move in the right direction when we look back at phases 1 and 2.

I'll describe some of the challenges that we've seen with the ASAP projects. I'm happy that Toby's here today and I want to highlight that we've worked really closely with our CUPE staff groups.

We work with three CUPE staff groups, namely support staff, custodial staff, and maintenance staff. Each of the groups presented dissenting and concerning arguments for the board not to enter into these agreements, but the real and pressing need for new schools was great, and the board of the day chose to move ahead.

The one group most affected by the project is the maintenance group. Maintenance is provided through the 30-year agreement. All maintenance of the buildings is conducted by the external party, Honeywell. After some initial relationships and quality issues, all groups have moved much closer together to address immediate and pressing issues.

Second, any small changes within the building required a formal change order, adding considerable time to the process. Modification may be needed to address student need, making the process less responsive than it might be in a traditional construction school. This will continue to be an area of focus for the term of the agreement.

Finally, in this area, custodial staff provides all services except for heating, ventilation, and air conditioning management, as is the case in most district buildings. Again, adjustment to the HVAC system requires calling Honeywell to address it. The response times have improved dramatically, but of course when we use our own maintenance staff, we think we have the best maintenance staff anywhere.

In terms of design, some design challenges emerged, particularly around exterior drainage and sidewalk entrances, in addition to the main entrances. These were rectified in the second round of the design. Adjustments were made to the interior design in the second round, making some spaces slightly larger for special purposes, such as the CTS labs for career and technology studies. For slight modifications and improvements in designs, the parties worked to be accommodating and supportive.

Finally, I'd like to say how grateful we are to have these schools. The children in these schools are happy to have shorter commutes to and from school as well as top-quality buildings to learn in. I also want to say how proud we are of our staff and all workers who were involved in the construction and opening of these buildings. The projects were completed on time, and we were happy to fill these sites with students who are keen and who are working very hard, although they're probably still sleeping this morning.

That said, we'd be pleased to respond to any questions you might have.

Thank you.

[The Chair, NDP, Pat Martin]

Thank you very much, Ms. Hoffman. That's very helpful.

We'll go right to questions, then, and the first round of questioning is for the official opposition, the New Democratic Party's Linda Duncan.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Thank you, Mr. Chair.

Excellent, panel. Thank you for being so concise. Actually, I think you've given us lots of food for thought for an eventual report we might produce.

I will go to Mr. Atkinson first.

Given your presentation, could you give us some advice on what percentage of infrastructure projects you would see as appropriate for P3s?

Feel free to answer, but my second question is one that I think Mr. Carlton might want to deal with, and maybe Mr. Sanger. Given that Canada's pursuing a trade agreement with the European nations under CETA, do you foresee additional potential issues for you about putting forward security, as raised by Mr. Carlton?

[Michael Atkinson]

On the percentage, or what the appropriate percentage is, I think it's very difficult to provide that. It depends on the need and the type of project and its complexity, it depends upon the kind of infrastructure. That really is a function of the identified priorities, but it does speak to what my colleagues have both said about the need for long-term planning.

Here we are, arguably the largest industrial employer in the country, and we often don't know six months out what our largest clients--governments plural--in Canada are doing with their real property inventory. We need that long-term planning. The question is an appropriate question once you have those needs and those priorities identified and can look at them in an intelligent manner and say how best to deliver that, given the construction market and a number of other factors.

I think it speaks to something that should be part of a plan, but you need that plan in place, and that plan cannot be in place unless you have, as my colleague has said, a long-term plan with a long-term commitment.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

You are suggesting that the federal government should be putting a lot of eggs in the P3 basket and establishing the separate entity, and should be providing leadership along with municipalities and the provinces and territories in a long-term plan for municipal infrastructure.

[Michael Atkinson]

I would agree that it doesn't make much sense to force parties to make that decision right up front, without having a further evaluation done. It would be kind of foolish to burn bridges during that process. To have a more integrated approach makes a lot of sense.

Mr. Carlton would probably want to talk about the need for capacity-building at the municipal level.

[Brock Carlton]

I agree with what Michael just said about the need for an integrated approach so that we're not faced with this either-or scenario.

As to the original question about the percentage, the real issue for us is that there should be no conditionality about it. There are options, and it's a tool among a variety of tools. It is one tool in a tool kit for addressing infrastructure issues, and it should not be a conditionality forced upon municipalities.

Did you want me to continue in response to the CETA question?

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Please go ahead.

[Brock Carlton]

With respect to CETA, our position has been pretty clear from the very beginning. We've had very good dialogue with the government on this matter. There are a variety of issues, but ultimately there are three things that are really important. One is reciprocity: if we're giving access, then our companies should also have access in the same way. Two, we need appropriate thresholds. Three, and most important, we believe there should be exemptions for strategic services or infrastructure questions, the most notable being water.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Mr. Sanger, did you want to respond to that?

[Toby Sanger]

I agree. CETA will cause problems if municipalities and governments go the route of public-private partnerships. CETA can cause problems because, under any investor-rights provisions, if governments later want to change that, they will be restricted from doing so or will have to compensate the private-sector operator.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

I would like to throw this question out to all four of you.

A lot of you have already given us some good advice on how we might vary the criteria currently applied to P3s. I'm just giving you an opportunity. The City of Edmonton said to do a P3 or you're not getting federal money for your LRT. I wonder if you could elaborate on whether or not you think there are additional criteria, which you might not have mentioned yet, that would be useful to include about the way P3s are being used at the federal level.