Public–private partnership in Canada
Public–private partnership (PPP or P3) in Canada is a form of alternative service delivery that involves a formal, collaborative arrangement between the public and private sectors, typically of a long-term nature.
[1][2] Public–private partnerships are commonly used for infrastructure projects related to healthcare, transportation, the environment, justice and correction, recreation and culture, and education.
[3] The earliest and most commonly known examples of P3 projects are Highway 407 in Ontario, the Royal Ottawa Hospital, and the Confederation Bridge linking New Brunswick and Prince Edward Island.
[3] Advocates argue that P3s make use of the expertise and innovation of the private sector and the incentive of capital market to enhance public projects.
They argue that P3s provide better value for money than traditional procurement methods because they transfer a project's risk from the public to the private sector.
[4] PPP Canada was a Crown corporation with the duty of contracting out several services to the private sector, as well as providing funding at both the federal and provincial levels.
[3] Complaints revolved around the issues of accountability, higher costs, loss of democratic control over public services, and the user fee rates of some projects.
[3] Discrepancies between steering and rowing, level of public interest, labour relations, autonomy and accountability, and savings and performance are often topics of P3 debates.
[1] Some critics question how the conflicting values and operations of the public and private sectors affect the ability to achieve desired goals efficiently.
[5] The term can cover hundreds of different types of long-term contracts with a wide range of risk allocations, funding arrangements, and transparency requirements.
[3] Criticisms revolved around topics such as complex concessions, lack of transparency and accountability, and the high private cost of capital.
[3] The heavy scrutiny of the first wave of P3s led to a greater emphasis on meeting expectations and making P3s more politically acceptable to stakeholder groups (especially the public).
[9] In 2002, British Columbia created the Capital Asset Management policy, a framework that was adopted by other provincial governments across the country.
[4] While there are many types or models of PPPs, the following are some of the most common designs in Canada: P3s have increasingly been used to build roads, bridges, and public transit infrastructure.
When the Ontario government started planning the project, its normal process for highway construction was not possible given the financial constraints of the recession of the early 1990s.
It was leased to a conglomerate of private companies called 407 International Inc., initially owned by the Spanish multinational Cintra Infrastructure (43.23%) and various subsidiaries of the Canada Pension Plan Investment Board (40%) and the Montreal-based engineering firm SNC-Lavalin (16.77%).
[18] The highway is today described as a "value generating monster" and "cash cow" for SNC-Lavalin[20] and one of the "worst financial missteps" from any government in Ontario's history.
[24] Another criticism is that, a part of the contractual agreement with the government, the Ministry of Transportation is required to deny licence plate validation stickers to drivers who have an outstanding 407 ETR bill over 125 days past due.
[25] In 2002, just three years after the highway's sale for C$3.1 billion, Macquarie Infrastructure Group, an Australian investment firm, estimated that it was worth four times that price.
[29]: Chapter 2 The Harris government failed to put any restrictions on toll increases (as long as the road attracted a certain volume of cars).
[38] This practice has been criticized by auditors general as an accounting fallacy, as the costs of the projects must still be paid in full by the government through deferred payments.
According to its advocates, drivers of value for money in P3s include "stimulating innovation during the project planning process, encouraging lifecycle asset management, and transferring construction and operations risk to the private sector".
[1] If the profit motive is not balanced with the public interest, too much emphasis is put on user responsiveness, and efforts are targeting the bottom line.
[3] To respond to critics of the over political and lack of expertise in negation of the public sector between P3 agreements, six provinces have created P3 units: government agencies or Crown corporations responsible for promoting and facilitating P3s in their jurisdictions.
This crown corporation's arguments for recommending P3s were that its benefits are greater than its costs through calculations of risk, expectation, and value for money analysis.
[4] PPP units in Canada have been criticized for having a structural bias in favor of public-private partnerships, especially if promoting PPPs as part of their mandate.
However, its board of directors contains representation from companies who directly benefit from the implementation of P3s, such as PricewaterhouseCoopers, Macquarie Group, Fengate, OMERS and EllisDon.
[51] There is also supporting evidence that shows climate action plans are not constrained by P3 initiatives because of the capacity of public sector leadership to engage in contractual agreements outlining environmental policy priorities.
There has been pressure in the past put on governments by users to “buy out” the P3 operators, while at the same time, non-user taxpayers have paid no attention to P3 predicaments.
They published the report "Flushing money away: Why the Privatization of Wastewater Treatment Plant is a bad idea", which estimates that a P3 funding scheme would cost the city $61 million more than a DBB.
