Definitions & Background P3 Markets – Global & Canadian Canada’s Infrastructure Deficit P3 Policy Debate and Drivers Why the debate matters P3 Policy Framework P3 Case Study Design &
Methodology Conclusion & Discussion
Transportation Infrastructure
Roads Bridges Rail systems Airports Seaports
Research Focus – Edmonton Ring Roads
Early history of Public-Private Collaborations
British Trusts – 1830s British Roads & Turn Pikes American Turn Pikes French Concessions Others
Research Focus – Edmonton Ring Roads
What are P3s (UK: PFIs, Europe/Australia: PPP)
“A co-operative venture between the public and
private sectors, built on the expertise of each
partner that best meets clearly defined needs
through the appropriate allocation of resources,
risks, and rewards.”
Source: Canadian Council for PPP – http://www.pppcouncil.ca April 24, 2012.
Background to P3 Policy
Originated in the early 1990s in Europe UK’s Conservative Government - first to adopt
P3s P3s now popular in the UK, EU, Australia, & Asia Canadian and US P3s are growing – number &
value
Global Market Share – Major P3 Countries by Value
Source: Infrastructure Journal, 2008 & 2009
Source: European PPP Expertise Center
P3 Market Update (2010)
UK continues to lead the P3 market Globally there are 3,300 P3 projects valued at $1.54T* Transportation P3s make up 1,867 or $712B (57%:46%) P3s are now 10-20% of Canada’s infrastructure
expense** AB has 6 P3s – 3 completed, 1 On-going, 2 Approved***
[6 Transportation - Edmonton & Calgary Ring roads; 2 Education - ASAP 1 & 2. ]
Investors are attracted by the return on investment
Source: * Public Works Financing, October 2010, Vol. 253.**Conference Board of Canada, December, 2010 Report***Government of Alberta, Budget 2011
Canada’s Infrastructure Deficit
Evidence suggests an ageing infrastructure Life expectancy of 80% of Canadian infrastructure is
exhausted* TD Bank Economics estimates C$50-125B needed (2004) Canadian Council for PPP estimates C$350-400B needed
(2009) Proposed infrastructure deficit bridging models:
Devolution of tax authority Adoption of a “User pay” model Partnership with the private sector
* Project Finance Journal, September, 2010
Source: Vancouver Board of Trade
The P3 Policy Debate: Pro – P3
P3s frees up government to focus on what it does best Better performance – on-budget and on-time Leads to improved care of public assets – whole life
cycle approach (construction/maintenance/retirement) Maintain service quality through innovation Risk is transferred to private sector partners as
applicable Non-financial benefits from time savings and other
efficiencies
The P3 Policy Debate: Pro – Conventional Procurement
P3s represent another name for privatization P3s are more expensive than traditional procurement P3s are a way for governments to avoid reporting debt P3s are weak in accountability and transparency
(Governance) P3s lead to public sector job losses and lower benefits Private partners sacrifice quality to maximize profits
P3s Emphasize partnership in asset
acquisition & maintenance More private capital engaged Risk is shared with the private
sector Adopts a whole-of-life cycle Mainly delivers on-time & on-
budget Taxpayers purchase a bundle of
services
Traditional (Conventional) Fragmented arrangements Less innovation & competition Prone to cost and time over-
runs Public borrowing for new
assets Taxpayers purchase assets Inefficient procurement
process Has several players
sometimes with conflicting interests
P3 vs. Conventional Procurement - Features
P3 Policy Drivers
Demand by citizens for improved public services Need to sustain economic growth and
productivity Limited growth in public sector revenues Private sector demonstration of superior
performance Attractive budget and financial statement impact
Why P3 Policy Debate Matters
P3s are risky & uncertain – life span of 20-30 years P3s could increase debt, taxes & limit competitiveness
(lower economic growth/standard of living) P3s could spark economic growth and higher standard
of living Bandwagon effect is taking hold among governments Alberta’s P3 cash commitments is substantial ($6B -
2011)*
*Source: Government of Alberta, 2010-11 Annual Report
Current P3 Policy Framework
Government’s commitment is critical P3 financing strategies – Equity vs. Debt Comprehensive project risk identification and
allocation Concession selection and transparency
My Proposed P3 Policy Framework/Model
Government’s commitment is critical P3 financing strategy – Equity vs. Debt Comprehensive risk identification and allocation Concession selection and transparency **Governance and Community
Engagement
Case Study : Design Approach
Focus on the Edmonton Ring Roads 3-4 cases – a mix of both policies
South West Edmonton – Conventional Procurement ($600m) South East Edmonton – P3 Procurement ($495m) North West Edmonton – P3 Procurement ($1.42b) North East Edmonton – P3 Procurement ($650m) est.
Theoretical Approaches
Investment theory
Agency theory
Transaction cost theory
Conclusion & Discussion
P3s are growing at a rapid rate in almost every region, and Canada is now a major player
Governments are attracted by the promise of P3s (deliver a project today @ minimal cost to current taxpayers)
P3s are not suitable for every asset/service category
P3s need careful policy analysis given their long term implications for all citizens
