Public infrastructure impacts the lives of every Canadian – from the water they drink to the roads they drive – and the quality and reliability of our public assets play a substantial role in determining our overall quality of life.
With this in mind, governments are continuously challenged to develop public assets that meet taxpayers’ expectations of quality, and also promise to stand the test of time.
Public–private partnerships (P3s) are a long-term, performance-based approach to procuring public infrastructure that can enhance governments’ ability to hold the private sector accountable for public assets over their expected lifespan.
P3s work because they engage the expertise and innovation of the private sector and the discipline and incentives of capital markets to deliver public infrastructure projects.
P3s transfer a major share of the risk associated with infrastructure development (such as the costs associated with overruns, schedule delays, unexpected maintenance, and/or latent defects in the assets) to the private sector. This is accomplished by engaging the private sector in a bundled contract for the life of the asset. This contract connects ongoing operations and/or maintenance payments to the quality of the original construction.
In practical terms, this means that:
- Governments do not pay for the asset until it is built and operational;
- A substantial portion of the contract is paid out over the long term, and only if the asset is properly maintained and performs well; and
- The lifetime cost of the asset is known upfront, meaning that taxpayers are not on the hook for costs that arise unexpectedly during the contract period.
While they are not the right solution in every case, P3s can provide many benefits when applied to the right projects. Visit our Project Map to find out more about the P3 projects PPP Canada has facilitated across the country.
For more information about P3s, visit our FAQ.