Consulting engineers and public-private infrastructure

Canada ranks fourth in the world in terms of revenue generated by consulting engineers. Consulting engineers are very often the first Canadian businesses into new markets. Very often, yet not often enough, they are able to bring other Canadian interests to the table in emerging markets. The success of many of ACEC’s member firms has been highlighted through virtually every Team Canada trade mission.

The nature of our industry’s changing marketplace, however, may start to affect negatively this Canadian success story. No longer is it good enough to have the best technical competence. Increasingly, today’s clients are looking to work with providers of an integrated solution to their business needs. In our world, this means that engineering firms, if they are to play a meaningful role in project work, have to come to the table with some form of financing.

Consulting engineers typically have a limited capital base, and their ability to generate financing in traditional capital project markets is hamstrung by the nature of our knowledge-based industry. Our industry has a heavy concentration of entrepreneurial firms, often employee-owned and almost always with very narrow margins.

Today’s global market for capital projects is projected at roughly $3 trillion U.S. over the next 10 years according to the World Bank. Half of this market is expected to be developed through public-private partnerships (PPP). Canadian consulting engineers add value to the Canadian economy through their international work, yet they risk being closed out of future business opportunities because they lack the deep pockets required to play in current capital projects markets.

ACEC has helped to bring federal attention to these issues. A national conference of Industry Canada and other key federal departments and agencies has identified a number of fundamental issues affecting Canada’s ability to compete in the global infrastructure market, chiefly in public-private infrastructure (PPI) development.

First, the conference recognized that competence building — within both the public and private sectors in Canada — on PPIs is an important building block to successful international experience in that market. Given that Canadian infrastructure is largely either in public hands or highly regulated, there is a need for much education of both the public and private sectors in this area. ACEC applauds the federal government’s recognition of our long-standing argument that you can only compete successfully at the international level once you have first acquired the experience domestically. In this respect, the conference’s findings are in tune with ACEC’s call for focused government attention to Canada’s failing infrastructure.

Second, traditional lending agencies in Canada also lack experience with PPIs, making access to competitive project financing very difficult for consulting engineers. Finally, Industry Canada recognizes the need to investigate the scope of changes to tax and foreign investment rules to encourage investment. This can be a key success factor for Canadian consulting firms on the global scene.

Other federal departments and agencies are also paying attention to the new market realities of our industry. For instance, CIDA has announced a new mechanism to provide additional support for qualified companies to pursue international PPI business interests. Proposals within key sectors that create new infrastructure, or rehabilitate or expand existing infrastructure, will be eligible for added assistance to access needed financial expertise and legal advice during a PPI project development stage.

The Export Development Corporation has played an important role in supporting large international projects. In its submission to the current EDC Review, ACEC has recommended that EDC be prepared to take on more risk, both as a lender and as an insurer, on smaller projects and in riskier geographic markets, in order to maximize Canadian opportunities in the global PPI market.

To its credit, Industry Canada has also recognized that international capital market development also offers “soft infrastructure” opportunities for Canadian business. Specifically, the PPI market means changes to the legal and regulatory frameworks for newly privatized infrastructure sectors, establishing the required financial market environment for PPI investments, and building the necessary institutional capacity, education and training. Estimates from the World Bank and OECD peg the soft infrastructure market at $10 billion annually.

Industry Canada has helped to remind the government that the PPI market goes well beyond traditional engineering and offers significant opportunities to niche providers of soft engineering services.

Where consulting engineers fit into the PPP marketplace and how they can elevate their status on project teams is the subject of a workshop being held at ACEC’s 75th National Convention, June 9-12, 1999 in St. Andrews-by-the-Sea, NB.

ACEC member-organizations: Association des ingnieurs-conseils du Qubec, Consulting Engineers of Ontario, Nova Scotia Consulting Engineers Association, Consulting Engineers of British Columbia, Association of Consulting Engineers of Saskatchewan, Consulting Engineers of Alberta, Association of Consulting Engineers of Manitoba, Consulting Engineers of New Brunswick, Consulting Engineers of Yukon, Consulting Engineers of the Northwest Territories, Consulting Engineers of Newfoundland