Public-private partnerships – also known as P3s – are a partnership between private sector companies and governments to construct public infrastructure such as roads, hospitals, schools. They may also be used to deliver public services. As their use is making headlines in Canada, we take a closer look at this popular contract form ahead of the Canadian Council for Public-Private Partnership’s (CCPPP) 26th Annual National Conference, taking place on the 5-6 November 2018 in Toronto, Canada.
Typically, P3s will use a Design-Build-Finance-Maintain-Operate (DBFMO) contract with performance targets. As this model combined the work of several companies into one contract, a consortium will normally be formed of many companies to complete the project.
However, P3s span a whole range of models that can include contracted out services, through to arrangements that are publicly administered while still drawing on the private company’s expertise, or even permitting temporary ownership of an asset. According to the CCPPP, P3s in Canada are usually one of the following arrangements:
- Operation & Maintenance Contract (O & M): A private operator, under contract, operates a publicly-owned asset (e.g. water/wastewater treatment plant) for a specified term. Ownership of the asset remains with the public entity.
- Build-Finance: The private sector constructs an asset and finances the capital cost only during the construction period.
- Design-Build-Finance-Maintain (DBFM): The private sector designs, builds and finances an asset and provides hard facility management or maintenance services under a long-term agreement.
- Design-Build-Finance-Maintain-Operate (DBFMO): The private sector designs, builds, finances and provides hard facilities management or maintenance services under a long-term agreement. Operation of the asset is also included in projects such as bridges, roads and water treatment plants.
- Concession: A private-sector concessionaire undertakes investments and operates the facility for a fixed period of time after which the ownership reverts back to the public sector.
The P3 contract is designed to transfer the majority of the risk from the client, or public sector, to the private companies. Each of the P3 models listed above does this to a varying degree. The public sector will always retain ownership of the asset, including some risk unless the asset or service is completely privatized. This risk transfer means that any cost and time overruns are paid for by the private sector, with penalties if the consortium goes over budget, delays the programme, or underperforms.
Why Are P3s Popular?
Traditional contracts mean that the government is responsible for any time and cost overruns. But using the P3 model, public infrastructure is being delivered sooner and more cost-effectively than conventional models because profitability is tied to performance.
In addition, the P3 model ensures that funds are set aside for regular repair and maintenance, a key factor in keeping infrastructure costs down. The P3 model considers an asset’s whole life, which can affect many decisions on the project and lead to better value in design, construction, maintenance and operation. Looking at life-cycle costs in advance ensures the private sector sets aside money for maintenance and repairs and protects it from being used for some other initiative.
Looking for Your Next Move?
Canada’s strong P3 track record makes P3s in this country a buoyant market, with a steady pipeline of projects. I will be attending the CCPPP’s National Conference in November and am looking for some high-quality CVs to discuss with potential employers. If you have P3 experience and are considering working in Canada, please get in touch for an informal discussion about your requirements.
About the Author
Construction Recruitment Director, UK & Canada
I am responsible for the Maxim Recruitment office in the UK where our team of recruitment consultants specialise in the recruitment of quantity surveyors, commercial managers, delay, dispute and claims consultants for civil engineering and building contractors and specialist construction consultancies. I am also responsible for growing our recruitment operation in Canada and the USA where we are increasingly busy. I have over 20 years’ experience in construction recruitment and enjoy working on both contingency and search/headhunting assignments for our repeat clients.
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