What does the Canadian P3 market look like?

P3s are currently operating across the country – from bridges and roads to hospitals to fire stations and prisons – and users and taxpayers are reaping the benefits with better service, lower costs and faster delivery times.

The provinces of British Columbia, Ontario, Alberta and Quebec have been early adopters and have each made a clear policy commitment to P3 procurement as a means of delivering better value to taxpayers. These four provinces have undertaken the vast majority of P3 procurements in Canada, to date.

As a result of provincial leadership in P3s, Canada boasts a high number of P3 procurements in the social and transportation infrastructure sectors, such as hospitals, courthouses and roads, which are key areas of responsibility for provincial governments and occupy large portions of provincial infrastructure budgets.

As jurisdictions have developed P3 expertise and procurement capacity, and more noticeably where they have created dedicated P3 units or agencies, the application of P3 procurements has subsequently grown to other infrastructure sectors, and even to municipal markets. Clearly, these institutional drivers have played significant role in the development of P3 markets in Canada.

However, because the value of P3s is best leveraged in large, complex projects where innovation can reduce lifetime costs and deliver better infrastructure, the P3 market is not boundless. It is estimated that P3s are the better procurement option in only up to 20 per cent of public infrastructure procurements. However, in the instances where they are the better procurement option, they have delivered cost-savings range between a few million dollars and more than $750 million in the case of the Autoroute 30 project south of Montreal. As a result, P3s are only one tool of many that governments can employ to optimize the value that is being delivered in public infrastructure procurements.

Recommended reading

The Conference Board of Canada issued a report on Canadian P3s in 2010: Dispelling the Myths: A Pan-Canadian Assessment of Public-Private Partnerships for Infrastructure Investments 

Canadian Provincial and territorial P3 Markets

Provinces and Territories have largely driven the early adoption of P3 procurement in Canada. However, even amongst them, advanced, emerging and undeveloped P3 markets can be distinguished, as displayed in the map below.

Advanced P3 markets share several key characteristics.  They are the larger provinces with attendant larger capital infrastructure budgets, and they have institutionalized their P3 procurement capacity – both in terms of analysis of P3 opportunities and in the execution of P3 projects.  These markets include: British Colombia, Alberta, Ontario and Quebec.

Emerging P3 markets typically have a P3 policy framework (established or under development) and a focal point for general P3 advice.  However, there is seldom dedicated institutional capacity to support P3 procurements, and often less experience in executing P3 arrangements.   These markets include: Saskatchewan, Manitoba, New Brunswick, Nova Scotia, PEI, and the NWT.

Undeveloped P3 markets are those that have only a limited understanding of the uses and benefits of a P3 approach, or have weak institutional and financial capacity that prevents the development of projects.
 

Canadian Municipal P3 Markets

Canadian municipalities represent a significant potential market for P3s, with construction capital expenditures in 2008 estimated at $15 billion.  However, by and large, the capacity and knowledge to implement P3s in Canadian municipalities is limited and implementation of the model has been lacking.

A few major cities (e.g., Toronto, Montreal, Vancouver, Calgary, Edmonton and Ottawa) have some experience in alternative forms of infrastructure procurement, including P3s, and some smaller cities (e.g., Moncton and Saint John) have also procured infrastructure as P3s.  To date, municipal P3 activity has been concentrated in the following key sectors: transportation (roads and bridges), public transit, water and wastewater treatment, and civic buildings (administration, courthouses, etc).

Expanding P3 Opportunities in Aboriginal Communities

The Government of Canada is advancing a new framework for promoting economic and social development for Aboriginals based on partnerships between communities and the private sector.  The Minister of Indian and Northern Affairs (INAC) has indicated that a part of this framework could be a change to how infrastructure is financed to facilitate P3s and other alternative financing arrangements.

There is a severe deficit in infrastructure quality and availability in Aboriginal communities, creating an ever-growing demand that INAC capital investment budgets are insufficient to meet.

Aboriginal communities present some unique challenges and opportunities in terms of developing P3s, stemming from circumstances which include remote locations, comparatively small scale projects and limitations posed by the Indian Act.

PPP Canada has been in discussions with INAC to identify, develop and support a select number of P3 projects under the P3 Canada Fund. 

Aboriginals have already identified a number of sectors where P3 arrangements can succeed: green energy generation and transmission, water and wastewater facilities, tourism and cultural facilities. Some of the projects identified by Aboriginals serve the local community, while others also serve adjacent non-Aboriginal communities and create economic development opportunities.