PPP Canada, which was created by the federal government in 2008 to help finance infrastructure deals, is exploring ways that private partners can help communities deliver much-needed infrastructure better, faster. Here vice president of investments Michael Mills talks to Advantage about the challenges, the projects, and the possibilities.
What are the challenges with the traditional procurement process for infrastructure projects?
Traditional procurement has been the status quo for governments seeking to build new infrastructure. The most common method of traditional procurement is the design-bid-build method. In this method, the government retains all the risks associated with the life cycle of the project, including design flaws, cost overruns, and construction delays.
How is the public-private partnership (P3) model different?
P3s are performance-based contracts where the public sector is able to transfer a major share of a project’s life-cycle risks—from design, construction, and financing to operations and maintenance—to the private sector under one, integrated contract. Under P3 arrangements, governments pay on performance and do not issue any payment to the private sector until it is built and operational. Taxpayers are therefore not on the hook for any unexpected costs.
Who pays for infrastructure projects under the P3 model?
Just like a traditional model, the public sector owns the asset and will ultimately pay for it.
How does the process work?
The P3 process begins with a definition of the needs or performance that the government hopes to achieve with an infrastructure asset. The government then runs a two-stage procurement, where it first qualifies teams—typically three consortia—that can meet its needs, then seeks proposals from each team, choosing that which meets its needs at the best value. They then enter into a long-term partnership, with the private partner providing integrated services such as designing, building, financing, and operation and maintenance.
What is PPP Canada’s role in this?
We work with our federal, provincial, territorial, municipal, and First Nations clients to assess projects for P3 suitability and advise on P3 procurement practices to assist them in delivering quality public-infrastructure assets.
What is your role at PPP Canada?
As vice president of investments, I assist our clients from all levels of government to develop sound P3 procurement and implementation strategies; to optimize the commercial and financial structures of transactions and risk allocation within the P3 project agreement; and to provide advice to enable procuring authorities to realize value for money through well-executed procurements. When projects have gotten to the point where a procuring authority has developed a robust business case and it has secured funding approvals for large infrastructure projects that it wants to pursue as a P3, it will come to my group for review, at which point I really start to focus on questions like, “How can we help our clients in the procurement of their P3 project?” My team works with these clients, and we will work on helping our colleagues develop an investment decision. We also provide advice and expertise on P3 project financing, contract structuring, and optimization of risk allocation, and perform extensive due diligence on the value for money analysis for the project.
What expertise do you bring to your role?
I’ve worked in various positions with Indian and Northern Affairs Canada, Industry Canada, and Finance Canada. I have experience in federal-provincial fiscal relations and several aspects of Aboriginal policy, including Aboriginal business and economic development, First Nations education policy, and self-government fiscal relations. I joined PPP Canada in 2009 as director of project development, where I gained hands-on project experience assessing applications under the P3 Canada Fund and working with screened-in applicants on P3 project planning, structuring, and delivery, including P3 business-case development, procurement, and implementation. These experiences have been invaluable to my current role.
How are P3s and PPP Canada helping the community?
P3s are helping governments deliver their long-term infrastructure commitments, on time and on budget, to meet the needs of Canadian communities and deliver better value for tax dollars. Whether the goal is to procure a wastewater-treatment plant or an airport for a growing territory, value for Canadians is PPP Canada’s first priority.
What about First Nations communities? How are you working with them, and what value do you bring to them?
PPP Canada engages with all levels of government to bring awareness of the P3 model. Along with provinces, territories, and municipalities, we continue to do outreach with First Nations communities across the country. We also work closely with the federal Department of Aboriginal Affairs and Northern Development (AANDC) that has a mandate to work with First Nations communities on quality and sustainable infrastructure. In working with AANDC, we explore ways that private partners can help communities deliver much-needed infrastructure better and in a more timely fashion.