< P3 Articles,BC Virtual Resource Centre,Public-Private Partnerships,Information,Victoria,BC,Canada,British Columbia

P3 Homewhat are p3'sP3 ResourcesP3 OpportunitiesP3 Events P3 LinksP3 Contact us

 

Province pursues P3s
By Laurene Clark

Multipurpose arena indicative of future P3s
by Dwayne Peverett

BC+X=P3
by Sid Tafler, Summit Magazine

Public, private partnerships: A highway runs through it
By Lyle Jenish, BE Editor

P3 Resources - Articles

Public, private partnerships: A highway runs through it
By Lyle Jenish, BE Editor

VICTORIA - On the cusp of a large-scale launch, provincial plans to partner with the private sector have a somewhat ignominious start with the Coquihalla
Highway.
   The Coquihalla Highway is considered the B.C. Liberal's first stab at a significant public-private partnership (P3) agreement.
   It has been a long time coming. In his Feb. 2002 budget speech, Finance Minister
Gary Collins framed P3s as being central to future provincial development plans.
   "We're changing the way we develop public infrastructure - opening up new opportunities for the private sector and opening up government to creative new ideas for providing public services at a cost we can afford,"  Collins said.
   P3s were also a pivotal tenet in premier Gordon Campbell's 2001-election platform. However, halfway through his government's mandate, save for some employment programs, little P3 substance has been introduced.
   The Coquihalla Highway though, appears to signal a quickening of the pace and could lead to Victoria and island-based P3 opportunities. However, the Coquihalla Highway venture (which includes a 55-year agreement and an initial 30 per cent toll increase) could also sour the public's perception of the P3 model.
The B.C. Liberals extolled P3 as a means of off loading capital costs, not
as a means for paying operating costs.
The Coquihalla Highway's operating costs - much like the Island Highway's - are supposedly covered by fuel taxes which, incidentally, the B.C. Liberals just recently increased by 3.5 cents-per litre.
The B.C. Liberals are banking on a smooth execution of the Coquihalla Highway transfer in order to realize other benefits an effective P3 program promises.
These benefits include: off-balance sheet financing costs for big projects; sharing of project risk between both private and public bodies; and, depending on the P3 and operational agreement, better defined cost and operational control than in a public sector agency.
Victoria lawyer Gerald Smeltzer says there are many other 'motivations' for government to get into long-term contracts with the private sector, including realizing efficiencies they may otherwise be unable attain in a purely public environment.
However, to realize these benefits both the private sector and taxpayer must be convinced P3s are the way to go.
Partnerships British Columbia - the year-old, arms length commercial agency created by the province to promote and implement P3s - will perform much of the heavily lifting.
Partnerships BC president and chief executive officer Larry Blain, the former managing director of RBC Capital Markets, will help government ministries and agencies identify and implement P3 opportunities. In the case of capital projects, Blain will also be responsible for reporting on their progress to government.
Blain will put his investment banking background to good use, advising on not only what the province should convert into a P3 or an alternative service delivery (ASD) model, but in determining what has to be offered to pique private interest while simultaneously looking out for the public interest.
Smeltzer, through his Victoria firm National Education Consulting Inc., performs process monitoring for Partnerships BC and is also a 'fairness advisor' on major procurements made through the B.C. Purchasing Commission and Ministry of Management Services. He also offers contract management training seminars for government and the private sector.
"There are contracting laws that apply to the RFP [request for proposal] process. When a public or private body runs a contracting competition they have to follow the rules," Smeltzer says. "There are instances in Canada where unsuccessful bodies have sued and claimed damages."
While the Coquihalla Highway P3 will not be in place until December, the offering has already generated a lot of interest - even the Teamsters have indicated interest in the 135-kilometre stretch of highway. According to Teamsters Local 213 president Don McGill, managers of the membership's $200 million pension fund see a solid, secure, long-term investment when they look at the Coquihalla Highway P3.
However, previous B.C. P3s have not been so enthusiastically received by the private sector. The province's 2002 stab at enticing private operators to take over management of numerous heritage properties under provincial tutelage did not generate as enthusiastic a reception as was first hoped.
In 2002 the province took receipt of RFPs from private businesses, groups and individuals interested in taking over operation of 12 provincial heritage sites. Included in this number were Victoria's Craigflower Manor, Craigflower Schoolhouse, Point Ellice House, Emily Carr House and Campbell River's Haig-Brown House.
While property management companies such as Victoria's Complete Asset
Management initially expressed interest in the commercial viability of the properties, most reconsidered once the opportunities were more closely examined.
"A lot of things government does is because the private sector can't or won't do it," said Kevin Pirie, an agent with Complete Asset Management.
"Maintaining a heritage value, which may be intrinsic and latent, is not something you can really milk in a commercial sense." Packaging current or future assets, infrastructure or services as being commercially viable for private operators is the challenge for Blain and the B.C. Liberals. Time is also of the essence as Campbell's self-imposed deadline for balancing the 2004-05 provincial budget is less than a year away.
At publication, Partnerships BC's on-line inventory of "business opportunities" totalled three: the Coquihalla Highway; the New Fraser River Crossing Project; and the province seeking a private partnership for development and operation of the Abbotsford Hospital and Cancer Centre.
Suromitra Sanatani, Partnerships BC's vice president corporate relations, says the number of P3 opportunities will increase by the end of May.
Sanatani laughed when asked whether the Coquihalla Highway was a poor selection to initiate a larger P3 program. She says other P3 projects.

Partnerships BC is working on are more of the development, capital intensive variety the public has come to expect.
"When we are an adviser to the Ministry of Health or Transportation, the department makes the decision to build a road or hospital and then we advise them on whether it would be suitable to be a P3," Sanatani says. "On some projects, such as the Abottsford Hospital, we are the project manager. Others we will simply do the financial modeling." Lawyer Smeltzer suggests Victoria business not be distracted by "headline grabbing, big, capital intensive projects" and consider smaller, service delivery P3s and ASD opportunities, some of which have been around for years.
"In the last 10 years in Canada there have been quite a few changes in the delivery of government services involving the private sector," Smeltzer says. "There are projects that do not require multi-million dollar investments, but instead tap into the abilities of the private sector."
Smeltzer admits that while P3s are the current buzzword in B.C., they are neither particularly new nor unique.
"The Ministry of Human Resources" Job Placement Program [JobWave and Destinations] and BC Parks has completed some major processes and contracts involving the private sector," Smeltzer says. "For the last decade BC Parks have been working with private sector campground operators and quality has been high."
According to Sanatani, current and pending Vancouver Island P3s are primarily municipal-run projects. She says municipalities can consult Partnerships BC for help in assessing P3 potential but are under no obligation to do so.
BC's municipal governments and regional districts have had more P3 experience than the province. Over the last five years, along with the current P3 struck between the City of Victoria and RG Properties, there are a number of other notable partnerships:
- In January 2000, the provincial government, through the Ministry of Social Development and Economic Security, partnered with Victoria's West Coast Group and Grant Thornton, creating JobWaveBC and Destinations. The private partners are responsible for finding prospective employers, interviewing participants to determine program suitability, and providing employment counselling and follow-up. Originally a two-year pilot program, longer-term P3 agreements were struck with both companies in 2002.
- In May 1999, the province struck a 10-year P3 operating agreement with
MacDonald, Dettwiler and Associates Ltd. to operate BC OnLine. Services include information on property assessments, companies, gas/electrical permits, land titles, manufactured homes, personal property, taxes, wills and site environmental information. MDA receives a performance-based development fee and a per transaction fee. Meanwhile, the province receive fees and royalties.
- In 1999, Port Hardy signed a 20-year performance contract with EPCOR (then Aqualta) to design, build and operate a water treatment facility and related waterworks infrastructure. The first P3 for a water utility in B.C., EPCOR is responsible for all technological performance and has underwritten the risks related to water quality regulatory changes over the first five years of the contract. The company provided a cost guarantee for the life of the contract and receives incentives for operating cost savings. The District of Port Hardy is responsible for revenue collection. The cost of plant construction was $3.67 million, which is less than the estimated $6 million price tag had the project been delivered in-house. Victoria architect Bradley W. Shuya has public (Comox's St. Joseph's General Hospital, Vancouver Island Housing Association for the Physically Disabled, Greater Victoria School Districts #61 and #63) and private clients.
"We are all waiting with baited breath for the P3 opportunities to come out and for a formal process," Shuya says.
Shuya says he is aware of alliances beginning to form among Victoria construction companies, adjutant suppliers and specialists in anticipation of P3 opportunities.
"We are aligning with a couple of potential partners in the construction and development sector. But until something really comes up, we have not really solidified any relationships," Shuya says.
Asked whether a P3 project would present unique design challenges, Shuya says there are standards within the Ministries of Health and Education restricting 'deviation' from certain requirements. He suspects these standards will remain in-place. He believes however that private partners will approach the projects under pressure to economize and create higher efficiency ratios.
"Of course there will be cost cutting exercises, trying to come in with a lower bottom line-that will be the real competition measure," Shuya says.
Bill Wood, principal of Belleville Street's Matrix Planning Associates, says that while there is eager anticipation in the private sector to see how the provincial P3 process will play out, there is also some ambivalence.
A veteran of numerous public and private projects, Woods senses reluctance among different companies to come together and combine resources and expertise on a RFP. He says while sure of their abilities, many consider other individuals and firms unknown quantities, making the RFP cost-benefit analysis all the more difficult. "As a result, government may not get the level of competition they had hoped for," Wood says.
Echoing Shuya's assessment, Wood says that while incorporating efficiencies into a P3 construction project are essential, past experience indicates project design elements are so "tied down and tightly controlled" design flexibility is limited.
"There is still not a great deal of appetite for serious rethinking of operations of facilities. People are quite prepared to find a different way to deliver the building but are not prepared to rethink their requirements," Wood says.

HOME | WHAT ARE P3'S | RESOURCES | EVENTS | OPPORTUNITIES | LINKS | CONTACT US


Web design and maintenance by BEYOND Computer Services
Copyright © 2003 BEYOND Computer Services
All rights reserved. Copyright terms & conditions