Indigenous and Northern Affairs Committee on May 14th, 2015

[Carolyn Bennett, Liberal, St. Paul's, ON]

Are you able to suggest potential partners? Are you a bit of a marriage broker, too?

[Michael Mills]

We don't play much of a marriage broker.

In terms of finding the private partner, we promote a competitive procurement process as a means to actually find your private partner. We're able to help first nations work through those kinds of competitive processes, but in terms of other types of partnerships in which we would say to the first nation, maybe, here are the municipalities you could work with or here are other first nations, we don't typically play that role.

[Carolyn Bennett, Liberal, St. Paul's, ON]

Obviously, Brookfield was the one that did the Kokish hydroelectric plant. How would first nations know where to go to find a partner?

[Michael Mills]

The first area I would counsel them in is looking into their territories at the resources. Companies would have to take out permits or whatnot to actually do water studies, so typically, they could get a sense of who's actually doing work in those areas. There is a model where, if first nations were to undertake some of that early work, they could potentially use the leveraged competitive processes that we use in the P3 to find the partner that's going to be the best match.

[Carolyn Bennett, Liberal, St. Paul's, ON]

Thank you.

[The Chair, Conservative, Blake Richards]

You have about a minute and a half.

[Carolyn Bennett, Liberal, St. Paul's, ON]

That's fine.

[The Chair, Conservative, Blake Richards]

Okay.

We'll move then to Mr. Seeback for the next seven minutes.

[Kyle Seeback, Conservative, Brampton West, ON]

Thank you.

Can you walk me through a transaction from the beginning to the end? I'll give you sort of a hypothetical transaction.

Let's say a first nation community is looking at building a new or a better water treatment facility, or expanding one. How would that interaction begin with PPP Canada?

[Michael Mills]

I think the first stage we look at is really this project identification. The community would typically engage a technical consultant to flesh out what their needs are and to look at what are feasible solutions to meeting their needs, and then develop a scope of project. Once they have completed what would be a fairly preliminary feasibility study for their project.... We run annual rounds of applications, so we would get an application that would say they were looking at pursuing a water treatment plant that's going to have this much capacity, and initial figures are that it's going to cost $75 million and they're interested in pursuing a private partner to develop that as a DBFM.

When they come to us, again it's at that preliminary stage, if they were screened in—we have narrow criteria where we screen in projects based on a level of intensity, the readiness, and the potential for that to deliver value—we would work with the first nation to basically engage more financial advisers to develop and look at the business case, to look at the risk profile, to look at the economics of the project, to see if it can achieve value for money.

In parallel, they would continue their development work, looking at fleshing out a representative project on about a 25% to 30% design basis, and to solidify more of their costs. Typically, we will end up having, at the time that we make an investment decision, 25% design. We'll have a schematic design. We'll have schematic cost estimate. We'll have plus or minus 15% certainty on the cost side, while the business case that shows the risk profile of the project will talk about the interest of the market.

We'll do market soundings to make sure the market is interested in pursuing that project and we know we have something that is feasible and we have the technical solution. At that point, we'll make an investment decision. We make a recommendation to the Minister of Finance. If he approves, then we will work to move to the procurement phase.

Looking at the next phase, we work with the first nation to implement a two-stage procurement process. That would start with a request for qualifications, where we would look to find the best partner based on their past experience in designing typical projects, constructing them, operating them, maintaining them, financing. Typically, you qualify three firms, or three consortia comprised of teams that can provide all of those functions. That's usually about a two-month process.

Once you've short-listed your two-month process, we would give a draft contract project agreement and a request for proposals to the partners, which would really give out more detail of the nature of the performance that we're seeking from the partner, the risk allocation that we're looking for. We'll have an open period where we'll have a dialogue called “commercially confidential meetings” with each of the partners separately, to really explain what the intent is, the performance we're looking for, and the risk allocation.

After that period of dialogue has taken place, we'll fix the contract and they will come back with a proposal that will provide their version of a 30% design, with a whole series of plans of how they intend to staff the plant, run the plant, look after safety, look after different considerations that may have been in there in terms of environmental considerations, land use issues, anything else in terms of.... We have seen, for instance, in the Iqaluit airport project, a strong need to have Inuit participation in that project, so there would be elements of that. They'll have to have a plan as to how they're going to involve local members in the project.

Finally, you will have an evaluation where you'll look at whether they have a technically feasible solution and who, ultimately, gives us the best price.

[Kyle Seeback, Conservative, Brampton West, ON]

How many projects from first nation communities have gone through and applied to PPP Canada for projects, do you know?

[Michael Mills]

I do have the number. In terms of applications, we're around 40 applications.

[Kyle Seeback, Conservative, Brampton West, ON]

Four...?

[Michael Mills]

Forty—I'm sorry, it's 36.

[Kyle Seeback, Conservative, Brampton West, ON]

Thirty-six applications, and one has been approved.

[Michael Mills]

One has been approved.

[Kyle Seeback, Conservative, Brampton West, ON]

Is that based on the recommendations of PPP Canada?

[Michael Mills]

That is based on the recommendations of PPP Canada, yes. Most of them on the recommendation, but in most cases working with communities toward their business case and then pursuing different options.

[Kyle Seeback, Conservative, Brampton West, ON]

One thing you did mention is that it then goes to the Minister of Finance for approval. Have there been cases that have gone to the Minister of Finance for approval and have not been approved?

[Michael Mills]

I don't believe so.

[Kyle Seeback, Conservative, Brampton West, ON]

You don't believe so. How long does the approval process in general take from the beginning when you receive an application, to approval from the Minister of Finance and off we go?

[Michael Mills]

When we do our open call for applications, people are applying with that technical feasibility study, and by the time we go for an investment decision they need to have completed technical work, advanced the business case as well as political approvals on their side to lock down their sources of funding. It's quite typical that we will get a project that has merit that will come in one round, and they will work on the business case, the technical program, and work through the entire round, and then they will have to reapply when the next round comes. Typically I would say when someone comes in we're looking at probably 18 to 24 months just to do that stage.

However, once we have a robust business case, it takes us usually six to eight weeks to actually make an investment decision. Depending on the time of year or whether people are around, we would say it's two to four months for an actual investment decision from the minister.

[Kyle Seeback, Conservative, Brampton West, ON]

I'm not sure if my question was clear when I said how many projects. Were you saying there were 40 first nations that have made an application, or is this just that 40 projects, in general, have been brought to PPP Canada since 2009?

[The Chair, Conservative, Blake Richards]

I'll ask that it be brief as well because the time has almost expired.

[Michael Mills]

No. We're well over 200 applications for the whole program. These are 36 projects that are first nations based.