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OGGO Committee Report

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Mr. Pat Martin, M.P.
Chair,
Standing Committee on Government Operations and Estimates
House of Commons
Ottawa, Ontario
K1A 0A6


Dear Mr. Martin,

Pursuant to House of Commons’ Standing Order 109, I am pleased to respond on behalf of the Government of Canada to the recommendations of the tenth report of the Standing Committee on Government Operations and Estimates: “Public-Private Partnerships: A Tool in the Tool Box”.

I wish to thank the Committee for its work on public-private partnerships (P3s). P3s can improve the delivery of public infrastructure for Canadians and provide better value for money for taxpayers. Under P3 arrangements, governments continue to own the infrastructure assets while the private sector plays a more integrated role in their design, construction, operation and maintenance. In doing so, the private sector assumes a greater share of project risks, bringing innovation and efficiency benefits to bear. The risk transfer, anchored by having private financing at risk, gives incentives to the private sector partner to deliver projects on time and on budget, lowering costs over the full life cycle of assets and providing fiscal predictability to the public sector. Well executed P3s allow Canadians to benefit from quality, high-performing infrastructure.

The Government is committed to supporting the development of the Canadian P3 market, and encourages the use of P3s by all orders of government where value for taxpayers can be demonstrated.  In 2008, the Government established PPP Canada Inc., a federal Crown corporation, to act as a centre of expertise on P3s and encourage their use in cases where they can generate better value for money.  PPP Canada Inc. manages the $1.25-billion P3 Canada Fund, the first infrastructure program in Canada dedicated to supporting provincial, territorial, municipal and First Nation infrastructure projects delivered through a P3 approach. To date, over $715 million in federal contributions have been committed toward 15 projects, representing a combined $3.2 billion in capital invested. Through Economic Action Plan 2013, the Government has proposed to renew the P3 Canada Fund with additional funding of $1.25 billion over five years starting in 2014-15, and to implement a P3 screen for large projects ($100 million or more in total capital costs) that provinces, territories and municipalities submit for federal funding under the new Building Canada Fund.

Through other infrastructure programs managed by the Transport, Infrastructure and Communities portfolio, the Government has also committed more than $4.2 billion towards a number of P3s that are pursued by provinces and local governments.  These projects represent a total investment in infrastructure, by all project partners, of more than $12 billion.  They include projects such as the Canada Line in Metro Vancouver, the Southeast section of the Stoney Trail in Calgary, the Ottawa Light Rail Transit project, the completion of Autoroute 30 in Montreal and the Route 1 Gateway project in New Brunswick.

In addition, the Government has also pursued P3 procurement processes for its own infrastructure projects when such arrangements provide meaningful savings for Canadians.  Some examples include the Communication Security Establishment’s Long-Term Accommodation Project and the RCMP E Division Headquarters Relocation Project.  Following Budget 2011, the Government announced that all federal projects having capital costs of $100 million or more would be subject to a P3 screen to determine whether a P3 will deliver greater value for taxpayers.

The Government recognizes the importance of properly structured P3s, underpinned by sound Value for Money assessments, for the efficient and effective delivery of infrastructure projects through the P3 model.  A thorough understanding of both the risks being transferred, as well as the whole life-cycle cost of the project, inclusive of private financing considerations and long term maintenance, is crucial in determining the P3 value proposition.  The Government agrees with the Committee that transparency and evidence-based assessments play a key role in ensuring public confidence in P3s as a means to deliver value for taxpayers. These are P3 best practices that are consistently followed in leading jurisdictions, including many Canadian provinces.  Several tangible examples of such reporting in Alberta, British Columbia, Ontario and Quebec include the public release of the majority of P3 Project Agreements, and the publication of reports on Value for Money analyses at the time of the substantial completion of projects. 

At the same time, the Government is of the view that the protection of commercially sensitive information is an important factor in ensuring the integrity of the procurement process and promoting the development of a pipeline of successful P3 projects.  The release of commercially sensitive information has the potential to negatively affect both the public and private sector parties to a P3 project.  From the public sector partner’s perspective, information detailing the valuation of risk is highly sensitive, and its release could undermine government contracting strategies.  From the private sector partner’s perspective, publishing specific information on cost breakdowns, strategies and the contents of proprietary financial models could undermine the ability of individual firms to compete in the context of both current and future partnerships.  In recognition of the challenge this represents, P3 best practices include the involvement of independent fairness monitors throughout the procurement process, who seek to balance transparency with the need to protect commercially sensitive information.  These efforts contribute to the development of an efficient Canadian P3 market that can continue to deliver value for taxpayers.

The Government has established administrative policies governing asset management, project management, investment planning and contracting that are consistent with the recommendations of the Committee regarding the delivery of federal projects through a P3 approach.  In 2012, the Treasury Board Secretariat released the Guideline to Implementing Budget 2011 Direction on Public-Private Partnerships, which provides guidance for departments in carrying out P3 screening requirements, and seeks to contribute to the achievement of value for money, sound stewardship, fairness and transparency.  The guideline also provides an overview of value for money methodology, risk assessment and risk transfer, and financial considerations surrounding issues, such as transaction costs, when assessing an investment’s viability as a P3.  As the source of P3 expertise, PPP Canada Inc. is working with federal departments to identify potential P3 opportunities, develop quality P3 business cases, and advise on the execution of federal P3s.  PPP Canada Inc. has developed detailed guidance, based on best practices, for use by federal departments considering the P3 model.  These include a detailed guide and analytical tools to assist departments and agencies in determining the P3 feasibility of their capital infrastructure projects, as well as promote consistency and comparability across all federal procurements. The Government is committed to following P3 best practices as it actively considers the potential to deliver large federal capital investments through P3 arrangements, such as the new bridge over the St. Lawrence and the construction of a new international crossing in the Windsor-Detroit corridor.

PPP Canada Inc. will continue its efforts to raise awareness, create and disseminate knowledge, promote skills development and build public sector capacity in areas such as contracting and infrastructure project management in order to ensure the successful delivery of P3 projects across Canada.  These efforts will include the production of sectoral reports targeting specific infrastructure asset classes, which will provide less experienced partners at all levels of government with guidance on the suitability of pursuing a P3 approach for the procurement of these asset classes, as well as on potential models and risk allocation structures to be used when developing P3 procurement analyses and contracts.  PPP Canada Inc. will also continue to disseminate knowledge and expertise to provincial and municipal agencies through workshops and panels hosted by both public and private sector partners involved in P3s.  Through contributions from the P3 Canada Fund, PPP Canada Inc. will further support the improvement of capacity in provinces, territories and municipalities across Canada in the assessment, development and implementation of P3 projects.

Again, I would like to thank the Committee for its work on this important subject and for the opportunity to bring attention to initiatives benefitting all Canadians.

Sincerely,




James M. Flaherty