In this month's Industry Leaders Blog,
we'll be introducing a new feature entitled Bloggin' with the
Board. This month we'll be speaking with Graeme Silvera, a
NAIOP Vancouver member since 1999 and a long serving member of our
Board of Directors, presently serving as Vice President of the
Chapter for 2012. Graeme's employer, Plenary Group
Canada, is Canada's largest development firm with a sole focus
on Public Private Partnerships or P3's.
This month we'll be discussing the form of project delivery
known as Public Private Partnership, or P3. I'll be asking Graeme a
series of questions that focus on the key principles behind this
unique method of project delivery, as well as some of the more
common myths about P3's. We hope you'll find it interesting
and learn something about this growing method of project
delivery.
What constitutes a P3 or Public Private
Partnership?
The term "P3" is used quite loosely throughout the
marketplace, and there are many projects that involve financing
using private capital and involve the private sector which fall
under the wide "P3" banner. However, to those involved
directly in the Industry and who focus exclusively on this type of
procurement, a "true" P3 has to involve the following 4 elements,
all of which have to be present to leverage the maximum benefits
from this unique structure:
- Private capital to provide a significant portion of the
funding for the project; this would include both equity and
debt;
- A Design-Build Contract where the private sector designs
the project to meet well defined performance and operational
requirements;
- A long term (15-30 years) Operate and Maintain Contract
where the private sector operates and maintains the asset inclusive
of life cycle replacement requirements over the term of the
Contract;
- The transfer of risk from the Public Sector to the Private
Sector across various elements of the Contracts including Design,
Construction, Financing, Maintenance and Operational
Risk.
But aren't public-private partnerships all about the
privatization of public assets?
No, it's a misconception. P3s in
Canada are not about the privatization of public assets. Ownership
of new infrastructure facilities always remains with the public
sector. Moreover, the public sector retains full control of
the infrastructure and the outcomes of the project. The public
sector owner also retains the right to make changes to the project
requirements (i.e., change orders), including termination of the P3
agreement, and retains full accountability to taxpayers for the
project.
So if P3's aren't about privatizing our hospitals and
roads, what are opponents to this type of project delivery
objecting to?
Here are a few of the more
common refrains we often hear from opponents to P3
projects:
- "Due to the higher cost of private capital, P3's cost
far more than traditional methods of tendering to the lowest
bidder"
- "All services will be 'contracted out' to the private
sector, replacing high-paying public sector jobs with low-wage
entry level jobs"
- "P3's are not a 'sustainable' method of delivering
projects; only governments care about the environment"
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What are your thoughts on P3's? Is this the new wave of project
delivery in BC, or a system that needs to be reconsidered? Share
all of your thoughts in the comments below, as well as any
additional questions you might have for Graeme.
Make sure to join our discussion next week, as we dig deeper
into the issues of cost for P3 projects in Bloggin' with the
Board.