Thank you, Mr. Chair.
I appreciate this opportunity to share with you information about Ontario's approach to investing in infrastructure using AFPs, or P3s. AFP is the terminology we use in Ontario at IO.
IO is a crown agency of the government. It was created in 2005 to manage major projects on behalf of the government. It was created in response to two things: one, a very ambitious plan to rebuild the province’s capital stock, beginning with hospitals, but also the poor track record Ontario and other governments had at delivering large, complex projects on time and on budget.
Modern projects require modern delivery methods. IO works closely with the Ministry of Infrastructure. While the ministry is focused on policy, IO is focused on delivery. So we’re not a policy agency. IO is assigned the role of delivering projects on time and on budget and in a manner that’s consistent with the following principles—and these are taken seriously. They're in our enacting legislation, and my board certainly takes them very seriously.
First, the public interest is paramount. Second, there must be appropriate public control, and in certain instances—for example, hospitals—public ownership must also be preserved. Third, value for money must be demonstrable. And fourth, accountability must be maintained and processes must be fair, open, and transparent.
In the years prior to IO's creation, the province undertook a limited number of new hospitals. This compares with six hospitals, on average, per year that have been built since IO's creation. Prior to IO's creation there were problems with budgets and timelines on projects. For example, in Peterborough, Sudbury, and Thunder Bay, the hospital projects delivered using traditional methods had major challenges. The traditional delivery method was not working for the Province of Ontario.
Overall, IO has brought more than 60 projects to market, valued at $23 billion in capital construction. This is the largest expansion and modernization of social infrastructure in Ontario's history.
We've constructed state-of-the-art hospitals in every region of the province, delivering 20 health care projects at or below budget. More than 16 million new square feet of modernized space has been built. This simply could not have been done using traditional delivery methods.
IO is now working on a range of transportation projects, such as the Windsor-Essex Parkway and Highway 407 East, and IO is entering into the transit space. IO is involved in regional transit projects such as Toronto's Air Rail Link, the Ottawa LRT, the Waterloo regional LRT, and the Metrolinx projects.
The track record of IO and similar agencies across Canada is clear. A 2010 Conference Board of Canada report that assessed the performance of P3 projects executed in Canada found that large infrastructure projects delivered through public-private partnerships resulted in lower costs, quicker completion, and higher service levels. With our partners, we’re participating in a follow-up study that will be released later this fall.
I'd like to explain why our approach to P3s, or AFPs, has worked.
The first is risk transfer. Under the P3 model, the public sector establishes the desired outcome—for example, a hospital with a certain number of emergency rooms, bedrooms, operating rooms, and so on. The private sector bids to provide the building at the lowest certain cost over the entire life of the building. In this way the public sector transfers design risk, construction risk, and life-cycle risk to the private sector. It gets a building on time, on budget, and one that’s well maintained over its entire life, or it doesn't pay. This is the core of why governments ought to use public-private partnerships in certain instances. Risk is transferred and public payments are conditional on performance.
Each of our infrastructure projects undergoes a rigorous third-party value-for-money assessment to determine if the P3 model offers better value than traditional procurement. Infrastructure Ontario's value-for-money methodology was developed by a group of external and government experts and has been independently reviewed by a professional consulting firm and Ontario's internal auditor. These experts have found that our methodology is sound and yields fair and accurate results. We don't use alternative finance in procurement to deliver a project unless a value-for-money assessment establishes that this methodology makes sense.
For procurement, an important part of our methodology has been the development of a standardized and efficient procurement process. It has shortened the procurement timeline, lowered bidding costs, streamlined the project delivery schedule, and promoted competitive tension between bidders. This sort of efficiency is good for the bidders, and it also translates into more competitive bids and lower costs for government.
Finally, concerning transparency, we make every effort to ensure transparency and maintain accountability throughout our procurement process via regular public updates at each procurement stage and through the release of key documents, including detailed project agreements and third-party value-for-money assessments. Each procurement is monitored by a third-party fairness monitor to ensure an open and fair process.
In a nutshell, partnerships with the private sector can be an extremely effective means of delivering large and complex projects in a way that avoids many of the issues that arose with traditionally delivered projects, such as cost overruns and poorly maintained facilities. Ontario has been an extremely attractive infrastructure market over the last seven years because we are viewed as a leading jurisdiction in which modern, efficient, and fair processes are used to deliver public infrastructure assets.
Thank you again for the opportunity to appear before you.