This document discusses public-private partnerships (P3s) and provides an overview of their key aspects. It defines P3s as cooperative ventures between public and private sectors that allocate resources, risks, and rewards to best meet public needs. The document outlines various P3 models and their characteristics. It also addresses the advantages and challenges of P3s, how to allocate risks, examples of P3 experience in Canada and other countries, and generally positive public opinion of P3s.
3. Presentation Roadmap
1. Introduction and Outline
2. Advantages and Disadvantages of P3
3. Project Scope
4. Risk and Liability
5. P3 and the Global Economy
6. Canadian Experience
7. Public Opinion
8. Conclusions
4. P3 Defined
A cooperative venture between the public and
private sectors, built on the expertise of each
partner, that best meets clearly defined public
needs through the appropriate allocation of
resources, risks and rewards
Most partnerships encompass the financing,
design, construction, operation, and maintenance
of public infrastructure and services
Definitions, online: Canadian Council for Public-Private Partnerships ,http://www.pppcouncil.ca>.
5. Terminology
• Design-Build (DB): The private sector designs and builds infrastructure to meet public sector performance
specifications, often for a fixed price, so the risk of cost overruns is transferred to the private sector. (Many do not
consider DB's to be within the spectrum of P3's).
• Finance Only (FO): A private entity, usually a financial services company, funds a project directly or uses various
mechanisms such as a long-term lease or bond issue.
• Operation & Maintenance Contract (O & M): A private operator, under contract, operates a publicly-owned
asset for a specified term. Ownership of the asset remains with the public entity.
• Build-Finance (BF): The private sector constructs an asset and finances the capital cost only during the
construction period.
• Design-Build-Finance-Maintain (DBFM): The private sector designs, builds and finances an asset and provides
hard facility management (hard fm) or maintenance services under a long-term agreement.
• Design-Build-Finance-Maintain-Operate (DBFMO): The private sector designs, builds and finances an asset,
provides hard and/or soft facility management services as well as operations under a long-term agreement.
• Build-Own-Operate (BOO): The private sector finances, builds, owns and operates a facility or service in
perpetuity. The public constraints are stated in the original agreement and through on-going regulatory authority.
• Concession: A private sector concessionaire undertakes investments and operates the facility for a fixed period
of time after which the ownership reverts back to the public sector.
• RFEI: Request for Expressions of Interest
• RFQ: Request for Qualifications
• RFP: Request for Proposals
“Models of Public-Private Partnerships”, online: Canadian Council for Public-Private Partnerships <http://www.pppcouncil.ca>.
6. Key Elements
• Investment in the development of infrastructure
• Distribution of risk – allocated where it is most effectively
assumed
• Clearly defined responsibilities and timelines
• Interchange of public resources and initiatives and
private finance and innovation
• Sharing in the mutual advantages of the partnership
7. Advantages
– Efficient method for allocating
risks and responsibilities to the
party most able to manage
– Reduce political hazards for
the government and private
partners
– Increase accountability and
added transparency
– Mitigate financial and
development risks
– Shift in public control
– Increased costs, complexity
and effort
– Potential source of job loss
– Diminished quality standards
– Insufficient oversight
Challenges
8. Risk and Liability
• Proper management of the procurement process, founded on strong quality
control policies and standards focused on P3
• Establish communication channels to make the entire process transparent
and information flow uninhibited
• Private partners can face construction, operations and maintenance risks:
– Marketing or financing risks
– Infrastructure design risk
– Construction cost overruns
– Project completion within deadlines
– Meeting performance or delivery standards in the short and long term
– Managing service delivery and lifecycle costs
• Risk assessment is critical
9. P3 and the Global Economy
• Global financial crisis has destabilized financing transactions across
all asset classes and sectors
• United Kingdom:
– $23B lending initiative to safeguard 100 projects
– Treasury Infrastructure Finance Unit (TIFU): ensures projects reach
financial close and jobs remain secure
• France:
– $41B stimulus plan focused on infrastructure projects
– “Government Guarantee Program”: $15B fund to provide partial
guarantees for P3
– Regulatory changes: Private partners to source 50% project financing
instead of all financing
10. P3 and the Global Economy
• European Investment Bank (EIB):
– Over $50B given to infrastructure projects to counter credit
crunch
– Provide loan guarantees to help transportation projects deal with
early risk
– European PPP Expertise Center (2008): best practice
frameworks and other know-how
• United States:
– Transportation Infrastructure Finance and Innovation Act Credit
Program: secured loans, loan guarantees, and standby lines of
credit to US transportation investments
– American Recovery and Reinvestment Act: TIGER grants for
transportation infrastructure
11. Canadian P3 Experience
• P3 active in Canada over 20 years
• PPP Canada: Crown corporation to improve
public infrastructure delivery utilizing P3 and
deliver value, timeliness and accountability
12. • Mix of Markets:
– Advanced: Significant capital infrastructure budgets
and institutionalized P3 procurement capacity.
• British Columbia, Alberta, Ontario, Quebec
– Emerging: Established or developing policy
framework for P3s and support general P3 advice.
Lacks institutional capacity to support P3s
procurements. Little experience executing P3
arrangements.
• Saskatchewan, Manitoba, New Brunswick, Nova Scotia,
Prince Edward Island, Northwest Territories
– Undeveloped: Limited understanding of P3 approach
or weak institutional and financial capacity.
13. Canadian P3 Experience
• Municipalities:
– Significant market: $15B construction capital
expenditures in 2008
– Alternative forms of infrastructure:
• Moncton, Saint John, Toronto, Montreal, Vancouver, Calgary,
Edmonton, Ottawa
– Key sectors:
• Transportation (roads and bridges), public transit, water and
wastewater treatment, civic buildings (administration,
courthouses)
14. • Aboriginals:
– Advancing framework to promote economic and
social development based on partnerships between
communities and private sector.
– Minister of Indian and Northern Affairs: infrastructure
financing structured to facilitate P3s.
– Challenges: remote locations, small scale projects,
Indian Act
Canadian P3 Experience
15. Canadian P3 Experience
“What Does The Canadian P3 Market Look Like?”, onine: PPP Canada <http://www.p3canada.ca>.
16. Public Opinion
• High initial expectations from the community
• Demonstrate benefits and limitations of a project through
scheduling and reporting
• Survey in 2007 on support for P3s:
– 2/3 of respondents believe that P3s can keep pace with the
demand for new or improved facilities
– Public attitudes consistent over the last 5-10 years
– Support strongest in Quebec and the Atlantic provinces
17. Conclusions
• Now have several decades of experience with the P3 framework
• Diverse array of projects have been completed worldwide
• Positive impact on public and private spheres
• Successes in water treatment, technology, multi-unit housing,
infrastructure, hospitals, schools, airports
• Interaction between development goals of public entities and private
sector financing, expertise, and assumption of risk created cost
effective ways to provide services
• P3s enable governments to find unique ways to deal with the
challenges of the global economy and frees up public funds for
essential programs