Public-Private Partnerships Working Group PNWER Summit, Day 3

This was a learning session for how the U.S. can learn from Canada in utilizing public-private partnerships (P3) to build transportation infrastructure. Attended by Alaska and other U.S. legislators who are eager to expand P3 opportunities, presentations were from U.S. and Canadian business leaders and Canadian government officials on best practices. Attendees also included state and provincial agency officials, consulate generals, and business leaders in the transportation, trade, and utility sectors.

 

The following are presentation highlights from this session.

 

This working group is co-chaired by Bruce Agnew, the Policy Director for the Cascadia Center for Regional Development in Seattle, and Idaho State Senator, Chuck Winder.

 

One action item agreed upon was to work with the Transportation Working Group to coordinate lessons learned from Canada in building new and maintaining existing infrastructure and transportation in the U.S.

 

James Hill, Consulate General for Canada in Seattle, began the panel, underscoring the need for infrastructure projects and for more innovation and efforts in each PNWER member state. “Public ownership and private partnership is a winning combination,” he said.

 

Canada has had a successful model of expertise and innovation of P3 and is eager to tell other states and countries about it. A prime example is the Sea to Sky Highway from Vancouver through Whistler, BC. At the consulate in Seattle, Hill says there is a lot of demand to look for more opportunities and models to make P3s work in the U.S.

 

Mark Romoff, President and CEO of the Canadian Council for Public-Private Partnerships (CCPPP), gave a primer on P3 in the Canadian context.

 

Despite large deficits in various levels of governance, there is always a need to invest in infrastructure to drive competition, said Romoff. P3 are simply governments at any level engaging with the private sector to think through the design, construction, financing, maintenance, and/or operation of the project (including roads, bridges, prisons, hospitals and schools) around fixed price arrangements that have worked in Canada.

 

One benefit of P3 includes integration of design, building, financing and maintenance into a single system, whereas governments will piecemeal it across other firms. Another benefit is the allocation of risks to the party most able to deal with all risks creates fewer political risks overall. There are also specific outputs and outcomes rather than inputs, and a set payment system also helps control behavior of the players.

 

The Canadian P3 market has a 22-year history with 229 ongoing projects that funneled $72.7 billion into the national gross domestic product, with more than half of P3 projects are now are in Ontario. Projects are traditionally transportation and infrastructure, but the healthcare sector has been on the rise in employing P3.

 

Of five models of P3 in Canada, each consider the amount of risk for the private sector. The “design-build-finance-maintain” model is the most used model in Canada, said Romoff.

 

Canadian P3 tend to result in on-time, on-budget, on-schedule, and at less cost and less risk than projects exclusively produced by a government. Canadian P3 have created over 290,000 direct jobs, over $25 billion in direct GDP, $10 billion of cost savings, and over $7.5 billion in tax revenue. Canadian P3 agencies are created in most provinces and at the federal level as well.

 

According to Romoff, factors contributing to the success of P3 in Canada include:

  • Commitment from senior government officials, including the Prime Minister, Minister of Finance, and Provincial Premiers.
  • A consistent pipeline of projects to keep activity flowing.
  • A strong legal framework: a big distinction between Canada and the U.S. is there are no restrictions to P3 utilization in Canada and only one overall policy, but in the U.S., there is often more than one framework in each of the 50 states.
  • A high value for taxpayer money using performance-based contracts, appropriate risk transfers, and built-in lifecycle maintenance.
  • Deep markets in place with the financial community.
  • Deep expertise in provincial and subnational agencies.
  • Standardized documentation resulting in streamlined processes and transparent communication.
  • Strong community support that ensures predictability and ease of process.
  • High competition to drive down cost and increase innovative thinking.

 

Canadian projects come to market almost a year faster than those in the United Kingdom, and are highly transparent for each agency. Fairness Advisors ensure the three bidders are treated fairly and equitably.

 

Examples of successful P3 projects in Canada include:

  • Bridgepoint Health hospital in Toronto
  • Confederation Line light rail in Ottawa
  • 48 schools in Alberta
  • Courthouse in Waterloo, Ontario
  • Goderich Water and Wastewater System in Ontario, serving 12,000 residents
  • Disraili Bridges in Winnipeg
  • Montreal Concert Hall
  • Communications Security Establishment Canada in Ottawa (the equivalent of the U.S. National Security Agency)
  • Pan Am Athletes’ Village in Toronto currently in use, and will be used for affordable housing and residences after the event

 

The next generation of P3 in Canada will include more provinces, territories, municipalities, and First Nations. P3 sectors are expanding to including urban transit, wastewater, affordable housing, renewable energy, broadband, and other government services, such as the Canadian equivalent of a Department of Motor Vehicles.

 

To conclude, Romoff gave an overview of his organization, which can be found here.

 

CCPPP also runs an annual conference that brings together 1,200 government and business leaders in early November (more information here) and provides a national database of all P3 projects in the nation.

 

Later in the session, Tesse Rasmussen, Vice President of U.S. company HDR, highlighted challenges in implementation of P3:

  • P3 are not well understood by the public or the media, who are concerned P3 don’t have the best interests of the public in mind.
  • Long-term commitments are required for annual availability payments, and are thus incompatible with U.S. political cycles.
  • The myth of “free money” and the problems associated with the Highway Trust Fund and other congressional appropriations makes it difficult to guarantee any level of public funding.

 

Rasmussen also highlighted the U.S. Department of Transportation’s Federal Highway Administration’s (FHWA) website with many useful resources on P3, including contract guides, basic facts for P3 in the U.S., and statutes that enable P3 in various states that would enable P3.

 

Rasmussen reiterated that the different policies in each of the 50 states to develop P3 makes it confusing for industry consortiums, which is one reason why P3 are more common and effective in Canada where there are streamlined policies.