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The Latest in Delivery Methods in Canada: Design Build, Public Private Partnerships and More...

June-9-2003

Lawyer Ira Berg
Area Commercial Real Estate, Procurement, Public/Private Partnerships and Alternative Finance

Summary

The New Wave of P3s in Canada ~ The Experience to Date

Traditionally, the public-private partnership (P3) contractual model has been considered and used by the government public sector in seeking to provide basic services essential to the functioning of the economy.  Through contract models in which the private sector invests in the design, construction, financing and operation of infrastructure facilities,  the private partner consortium takes on many of the project risks and roles historically assumed by governments.  Combining the strengths of the private sector with contributions from the public sector is meant to produce cost-effective facilities that lack funding from traditional sources, such as taxation.  Private sector financial investment is usually needed to obtain the benefits of the project, given that the government will not likely be able to pay a return on the investment until the project succeeds in providing anticipated benefits.  
     
The purpose behind P3s is to achieve better “value for money” for taxpayers.   Proponents must demonstrate the most efficient use of resources to meet or exceed service delivery goals, while protecting the public interest.  Value arises from the reality that the private sector is often more efficient in performing all aspects of the design, building, operation and maintenance of an asset.  As such, while fiscal and debt management concerns are important reasons for partnering with the private sector, the biggest benefits of P3s in the long-term will likely arise from increased efficiencies (value for money), accelerated development of new infrastructure, and the acquisition of expertise that can be exported to other jurisdictions.   Also, if the private sector has any involvement in a related industry, there is potential for economies of scale. 
    
Further, the public-private relationship is mutually beneficial: since the private partner shoulders a large proportion of the project risk in exchange for a return, the government is guaranteed a commitment to economic efficiency, while fulfilling it’s mandate to serve the public interest.   

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