The 2014 federal budget announced a $1.25 billion renewal of the federal Public-Private Partnership Fund even as critics call for more scrutiny of this type of procurement model.
Last year, the federal government committed to six different multi-million dollar P3 infrastructure projects, including the first leg of a new light rail transit line in Edmonton, several waste-water treatment plants and a biosolids management project.
Follow the money
A series on 2013 federal spending announcements by students from the Carleton School of Journalism.
It has become increasingly common practice to deliver large projects through P3 arrangements, which account for 10 to 20 per cent of all infrastructure procurements, according to PPP Canada, a federal crown corporation.
The P3 model has been touted as a better way to deliver large infrastructure projects because a large portion of the risk is supposed to be shouldered by the private sector, which designs, builds, operates and maintains the project while the city maintains ownership.
But critics of the federal government’s current P3 process say these projects lack openness and accountability.
NDP MP Linda Duncan was a member of the Commons' committee on Government Operations and Estimates, which delivered a report on federal P3 spending in March 2013. Duncan said she’s concerned that the P3 funding model actually takes away the chance for municipalities to autonomously determine the best way to fund their projects.
Duncan uses Edmonton’s LRT project as an example. Construction of the new Valley Line LRT is contingent on funding commitments from both the provincial and federal governments.
Last March, the city received $250 million from the federal government to help fund the first leg of the LRT, according to an announcement from PPP Canada. But that funding was only available if the project was a public-private partnership, said Duncan, who represents the riding of Edmonton-Strathcona.
“Essentially, they had no choice because it’s a costly project,” she said.
John McBride, chief executive officer of PPP Canada, says there’s a misconception that P3 projects are less transparent than traditional procurement models. He says P3s are actually more accountable, because detailed “value for money” reports are released after a P3 project is completed.
Still, McBride said it’s important to keep much of the information surrounding any procurement private in order to keep it competitive.
“P3 contracts are longer and more complex than traditional procurements because they bundle the design, construction, operation and/or maintenance of an asset over a long period of time,” he said. “Anything which could give bidders a sense of the government’s evaluation criteria or project costing must be kept confidential.”
McBride said the government will only spend money on the “most affordable option” for an infrastructure project.
But Duncan said municipalities and citizens should have more access to information surrounding a P3 before the project is completed – not after. That would allow them to compare, for themselves, whether the P3 is the appropriate way to fund the project.
“First and foremost, it should be done on a basis of good governance and the delivery of accessible, affordable public service,” she said.
Edmonton still needs a commitment of another $515 million before the end of April for the southeast leg of the Valley Line to be operational by 2020.
It’s an onerous process for the municipality, which can’t move ahead with the project until all the money is committed.
“We cannot go to market without all funding in place, without risking reducing the competitiveness of bids on the project or additional financial risk transfer driving the project cost up,” said city transit spokesperson Quinn Nicholson.
The entire Valley Line LRT is estimated to cost $1.8 billion, said Nicholson. The city is seeking a total of $400 million from the federal government and $600 from the province, while the remaining $800 million will be funded by the city itself.
Erika Stark is a 4th-year journalism student at Carleton University in Ottawa. This story is part of a project by the Carleton School of Journalism on federal spending announcements in 2013.