Thank you, Mr. Chair.
It is my pleasure to be here today on behalf of PPP Canada to speak about P3s and the Canadian market.
As members of Parliament, you are acutely aware that Canada faces a great need for infrastructure. As a consequence, governments across Canada are pursuing ways of getting better results for their infrastructure dollars. Many have recognized the value of engaging private sector expertise and innovation through public–private partnerships, more commonly known as P3s. P3s are a means to inject greater accountability, whole life-cycle cost optimization, and financial discipline into governments’ contractual relationships with the private sector.
P3s can refer to an umbrella of concepts related to the role of the private sector in procuring public infrastructure. In Ontario, these types of arrangements are known as AFP, or alternative financing and procurement. In the United Kingdom they are known as PFI, or private finance initiatives.
PPP Canada defines P3s as a long-term, performance-based approach for procuring public infrastructure where the private sector assumes a major share of the responsibility in terms of risk and financing for the delivery and the performance of the infrastructure, from design and planning to long-term maintenance.
In practice, this means that governments only pay for the infrastructure once it has been completely built. A substantial portion is paid for during its life cycle, if it is well maintained and if its performance is adequate. The costs are known in advance for the entire life cycle of the asset in question. This means that taxpayers are not financially responsible for cost overruns, delays or performance issues during the life cycle of the infrastructure.
Imagine for instance that the business that built your house were also responsible for all of the repairs and maintenance for the duration of your mortgage loan of 25 years. Since the amount you would pay each month would be determined before the construction of your house, your payments would not increase if there were some breakdown or some components in your house had to be replaced. For that reason, the builder would consider the most financially effective way of building something. He might choose a metal roof rather than tile. Moreover, if your air conditioner broke down and was not repaired in the agreed upon time frame, you could deduct that from the next payment you owed him.
Concretely, P3s do not mean privatization; they are, rather, a contractual relation with the private sector in order to design, build, fund and maintain public infrastructure. The public sector continues to own the infrastructure.
P3s, quite simply, are a tool in the tool box to deliver the public infrastructure investments Canadians need. They are not always the right solution, but when applied to the right projects, they can provide many benefits, including greater value for money for taxpayers, on-budget and on-time delivery of public infrastructure, greater consideration of the whole life cycle of a project, and fiscal planning certainty. The involvement of private sector finance is critical to achieving the benefits as it ensures risks are transferred, and the disciplines and incentives to achieve better results exist.
There are benefits and there are costs to P3s, but P3s are the right solution when the benefits exceed the costs. This requires thorough analysis. Our experience is that this up-front work produces better projects even if a P3 approach is not the preferred option, as it requires a more systematic consideration of costs, risks, and performance expectations. In general, P3s are more suitable for larger, more complex projects where performance expectations can be clearly specified and are stable over time.
Canada is recognized as a global leader in P3s. Increasingly, people everywhere are looking to the Canadian experience. It has a diverse and growing pipeline. The strong historical deal flowing from leading provinces in the areas of health care, education, and highways is now being supplemented with projects at the federal and municipal levels.
The use of P3s is also broadening to new asset classes, such as water and waste water treatment facilities, local roads and bridges, public transit, and solid waste disposal. This growing and diverse pipeline is increasing in experience and is attracting more competition, which results in lower costs for taxpayers.
PPP Canada's mandate is to improve the delivery of public infrastructure while increasing the rapidity of execution, strengthening accountability and obtaining more for taxpayers' money. PPP Canada is committed to working with all levels of government to ensure the best value added for Canadian dollars invested into infrastructure. Our organization is knowledge-based; we have developed tools and equipment to support our work and the work of our clients.
The organisation has established relationships with the procurement authorities at all levels of government so as to share lessons learned and experience.
PPP Canada is looking for opportunities to increase knowledge and capacity while working to mold the P3 Canadian market by promoting a culture that encourages P3s and the sharing of best practices.
PPP Canada has hands-on experience reviewing and providing advice on more than 300 projects for the P3 Canada fund, the federal P3 screen, and the new building Canada fund P3 screen. We work with our clients to assess projects for P3 suitability and advise on P3 procurement practices to assist in delivering quality public infrastructure assets on time and on budget that meet the needs of Canadians and deliver better value for tax dollars.
To date, over $1.3 billion in P3 Canada fund investments have been announced to support more than 20 P3 projects across eight provinces and territories, including 13 municipalities. These investments will in turn leverage more than $6.5 billion in public infrastructure investments across the country.
In addition, economic action plan 2015 proposed the creation of a new public transit fund to be managed by PPP Canada. While the government intends to announce further details on the program parameters at a later date, we do know that the fund would provide $750 million over two years, starting in 2017-18, and $1 billion per year ongoing thereafter to public transit projects. Federal support would be allocated based on merit to projects that would be delivered through alternative financing and funding mechanisms involving the private sector that demonstrate value for money.
PPP Canada's experience is also facilitating the consideration of P3 procurements at the federal level. Our most established federal advisory engagement to date is the new bridge for the St. Lawrence project.
Throughout 2014, PPP Canada played an important advisory role, collaborating with Infrastructure Canada and Public Works and Government Services to ensure the successful procurement of the government's largest infrastructure project.
As the Government of Canada's source of P3 expertise, we'll continue to lead federal efforts in encouraging use of P3s where they can generate better value for money.
Thank you. I look forward to your questions.