P3 process needs streamlining, say panelists at Toronto conference

The future of public-private partnerships in Canada is at a “very delicate point” said Brian Bentz, of AMEC at the 11th annual conference on Public-Private Partnerships in Canada. Bentz is director of Americas, project investments with AMEC, Vancouver. The conference “P3 2003: Building Momentum in Canada” was held at the Toronto Hilton Hotel November 24-25.<br>
Bentz was one of the panel charged to look at whether things are going well in the way Canadian governments involve private companies in building and operating public infrastructure. The title of the session Bentz was speaking at was “Rethinking P3 Competitive Processes — Is it Time to Make some Serious Improvements?”<br>
The public-private partnership model, known as “P3,” involves a private company or consortium not just designing and building new infrastructure projects, but also financing and operating the facility on an ongoing basis.<br>
Bentz explained that compared to other countries, Canada is just above average in terms of how many infrastructure projects are being done as P3s. If we start to see some P3 projects get under way now, he suggested, then the momentum will build as it has in the United Kingdom. On the other hand, if more P3 projects don’t go ahead here, then it’s likely the demand for them will shrink.<br>
Evidently, several large P3 projects have fallen by the wayside in the past few years. The panel heard that the Halifax Harbour Solutions project to build wastewater collection and treatment systems folded as a P3 project in January, for example. This was after years of negotiation, effort and millions of dollars of expense by the municipality and the proponents. The first phase of constructing the distribution system finally began in November, but it is proceeding as a standard design-build project. Someone called the failure of the P3 procurement process “atrocious” during the question and answer period.<br>
Bentz outlined what AMEC looks for before plunging into the highly expensive quest for P3 work. He says they prefer, for example, to see performance drive specifications. If they are going to compete for a transportation project, he said, then they would like the owners just to give them the headways, travel times, etc. rather than detailed engineering requirements. That way they have an opportunity to be more creative, he suggested.<br>
He also said they look for a clear playing field against other competitors, with the rules laid out from the beginning as to how the winner will be chosen.<br>
Jim Mitchell, vice president of capital projects at PCL Constructors in Edmonton, agreed that they are looking for fairness and transparency when they decide to compete for a P3 project. If there is no “fairness auditor” assigned, he said, then it’s likely his company won’t go for the project.<br>
One of Mitchell’s concerns with the current procurement process is the amount of wasted time and effort that can be spent to compete for P3s. He asked whether it’s possible to come up with a more economical and speedier procurement process. “We have been following the U.K. model,” he said, “but I’m not sure it’s right for Canada.”<br>
He said that on one project his firm spent four months and $3 million on a design but when they presented it to the government, the government didn’t like it. If the contractor had been able to meet with the government body earlier in the process, he said, they could have discussed the design and come up with a more amenable solution. Later, during the question and answer portion, Mitchell gave another example of how expensive the P3 procurement process can be. He talked about the Calgary Courthouse and estimated that the three consortia competing probably spent $10 million in total on pursuing the project, and the government probably spent $5 million on preparing and managing the process. “Is $15 million efficient just to get a bid?” he asked.
It is the Request for Proposal (RFP) stage that requires a big commitment in time and staff, said Mitchell. Entering a P3 competition means tying up senior staff, obtaining letters of credit, ensuring bonding capacity. “Do you have an appetite to take it on?” is the question. He also said it’s important to choose your team members carefully (“the weakest link will let you down”) and sometimes it’s good to use a firm that doesn’t have lots of experience in a certain sector as they may be more likely to come up with innovative ideas. He mentioned the Vancouver Winter Olympics in 2010 and wondered how many companies would participate in P3 projects, when there is likely to be lots of standard contract work later on in any case.<br>
With this kind of heavy investment by P3 proponents, it’s no wonder he warned that the first thing to do, suggested Mitchell, is find out if the government is “for real or just on a fishing expedition.” <br>
Certainly cash-strapped Canadian governments are still showing a lot of interest in public-private partnerships to help rebuild the country’s aging infrastructure. However, with a change of government in Ontario the outlook is not very clear as to whether this will continue. Gordon Campbell’s B.C. government, however, is going full steam ahead, setting up a special entity called Partnerships BC to implement P3 projects such as the Abbotsford hospital, the new Fraser River Crossing and the Richmond-Airport-Vancouver rapid transit line, all currently in the works.<br>
While the success or failure of the P3 movement has a big impact on the larger consulting engineering firms who have the financial and manpower means to be part of a P3 consortium, the impact is less dramatic on the small and medium-sized firms. As one engineer who works for a medium-sized consulting engineering firm said on his way out of the panel session, for them<br>
all a P3 project basically means is that they will be working for a different type of client: the P3 design-builder, as opposed to the owner or its prime consultant.<br>
During the question and answer session, an attendee suggested that given the obvious problems with the current procurement methods, the Canadian Council of Public-Private Partnerships that sponsors the conference, should collect from the speakers and others ideas on how to improve the P3 procurement process. Rita Burak, president of the council, who was moderating the session, responded that finding the right formula was one of their priorities.<br>