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P3 projects can save money, minimize risk, councillors told

With city council getting ready to decide whether to proceed with a number of big projects, they will also have to decide how they will build any project.
Sudbury's $63 million biosolids plant is an example of a P3 project. With city council getting ready to decide whether to proceed with a number of big projects, they will also have to decide how they will build any project. File photo.
With city council getting ready to decide whether to proceed with a number of big projects, they will also have to decide how they will build any project.

On Tuesday, Mark Romoff, president and CEO of the Canadian Council for Public-Private Partnerships, gave councillors an overview of P3s – public/private partnerships the federal government has been especially vocal in supporting in recent years.

Contrary to what many people think, Romoff said P3s are not primarily a way to finance big projects.

Rather, they offer municipalities a way to accomplish a big project that minimizes risk and costs.

A local example is the $63 million biosolids plant that opened on Kelly Lake Road in 2013, on time and on budget.

“P3s are not a panacea,” Romoff said Tuesday. “But when done for the right reasons, they have produced wonderful results.”

In the case of the biosolids plant, it was built and is being run by a private sector company for the next 20 years. In return, the city provides a guaranteed payment to the company, as long as the company does the necessary work to maintain the facility.

The city assumes full ownership of the plant at the end of the contact. Romoff said the Sudbury example is fairly typical of how such agreements work.

“The private sector accepts responsibility for design, construction, financing, maintenance and, in some cases, operations,” he said. “Payment from government only begins upon completion of construction (and) ongoing payments remain subject to deduction for failures in service delivery.”

In the 22-year history of P3s in Canada, he said 236 projects worth $93.9 billion have been completed.

That translates into 290,000 direct jobs over the last 10 years alone, worth $25 billion to the economy, savings of $9 billion to governent and generated tax revenue of $7 billion.

“This has been a very strong outcome,” Romoff said. “We are receiving delegations from around the world to look at the Canadian model.”

Federal and provincial agencies have been set up to oversee P3 projects, groups that have had a major impact on their success. Minimizing risk and ensuring there are no surprises in the process has been key, he said.

“(Governments want) guarantees you'll get your project delivered on time and on budget,” he said.

Because of their size and the fact the process is so transparent, he said companies around the world bid on P3s, helping to ensure governments get the best possible price.

While public sector unions don't like P3s, Romoff said they all respect collective bargaining agreements. And they are popular with private-sector unions.

“We have enough of them in Canada to do some quality analysis,” he said. “The results were very strong.”

Not all on council were convinced, however. Ward 1 Coun. Mark Signoretti said he's worried that P3s allow the private sector to make money with public assest, and then just walk away from them at the end of the contract.

“I'm not a big fan of P3s,” Signoretti said.

But Romoff said the private sector must adhere to the terms of the contract, which includes doing proper maintenance of the facility.

Usually about five years before a contract ends, government will do an assessment of the facility to ensure the work has been done, and can withold payments as compensation if it hasn't.

“When you factor in the long-term maintenance, P3 projects come out to be cheaper,” he said. “I don't know anyone in the business community who does not want to make a profit … So if it doesn't work for both parties, it's a mistake.”

That's why it's so important to do the work up front in the contract language to ensure everyone knows what to expect, Romoff said.

Ward 6 Coun. René Lapierre wanted to know what would happen if, for example, the city built an arena and events centre under the P3 model. Would exisiting workers lose their jobs?

“We already have all our arena people,” Lapierre said.

Romoff said employees are given the option to either stay with public sector, or to work for the private-sector operator under the same pay and working conditions.

In response to another question, he said it's possible for government to share revenue in a P3 agreement. For example, a new toll highway is being built and government and the private are sharing the revenue.

“What kind of dollar range have these projects been?” asked Mayor Brian Bigger.

Romoff said the smallest he's seen is around $35 million, while most come in around $50 million-$75 million range or larger.

“The key is to get good, sound advice before you move ahead,” Romoff added.

City council is expected to get a report on big projects proposed for the city in April.

Darren MacDonald

About the Author: Darren MacDonald

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