While Public Private Partnerships (P3s) have become a widespread method of providing publically owned facilities and other infrastructure projects, there is still a lot of misinformation about how these agreements work.
Here we debunk three of the common myths about P3s.
Myth
P3 hospital projects mean the hospital becomes “private” and patients will have to pay for services.
Facts
A P3 agreement does not mean that there will be a change in ownership, or a change in responsibility to provide hospital services. Health care, including hospital care, is publically funded in Canada through provincial/territorial medical services insurance plans.
Public Private Partnerships have no impact on access to or payment for hospital services.
In regard to the Stanton Territorial Hospital Renewal Project, under a P3 agreement, the land, the hospital and everything in it is still owned by the GNWT, as is the responsibility for the provision of health care.
Myth
P3s are the only way the GNWT can fund major projects.
Facts
As in most jurisdictions across Canada, the GNWT has an established a Public Private Partnership Policy (“P3 Policy”) and a Public Private Partnership (“P3”) Management Framework, both of which guide the GNWT when identifying, assessing, and acquiring capital infrastructure and considering a P3 approach.
The GNWT’s P3 Policy allows the GNWT to enter into partnership agreements with the private sector to procure services and public infrastructure when:
1.The total projected threshold for procuring those services, including capital, operating, and service costs over the life of the agreement exceeds $50 million;
2.There is appropriate risk sharing between the GNWT and the private sector partners;
3.The agreement extends beyond the initial capital construction of the project;
4. The arrangement results in a clear net benefit, as opposed to being merely neutral in comparison with standard procurement processes.
P3 transactions are strictly governed by the following five principles set out in the government’s framework for planning, financing, and procuring public infrastructure:
- Public interest is paramount;
- Value for money must be demonstrable;
- Appropriate public control and ownership must be preserved;
- Accountability must be maintained; and
- All processes must be fair, transparent and efficient.
The P3 approach is generally suitable for large, complex projects. However, not all projects lend themselves to this model.
Consistent with the P3 Management Framework, a Business Case conducted by third-party experts is commissioned to compare project delivery models and to analyse the feasibility of the project as a P3.
If the findings of the analysis demonstrate that the project should provide value-for-money and has an appropriate risk sharing profile when compared to traditional procurement processes, the project warrants proceeding to market as a P3.
The P3 approach brings private-sector expertise, ingenuity, and rigour to the process of managing and renewing the GNWT’s public infrastructure, but preserves public ownership of core public assets. It works towards:
- Minimizing cost and schedule overruns;
- Better integration of design, construction, and long-term maintenance and building services;
- More accountability throughout the planning, construction, and maintenance phases of each project;
- Building infrastructure that will last for years to come, be maintained to high standards, and support the delivery of quality health care; and
- Providing value through innovation, which manages costs, enhances program delivery, and generates economic benefits.
P3 projects in Canada and around the world have yielded many benefits. The most consistent of these include cost savings, faster construction, and improvements to plans. Evidence shows that Canada’s P3 model brings more transparency, rigorous analysis, and accountability to procurement, construction, financing, and maintenance than traditionally procured projects. The results are roads, hospitals, recreation centres, etc. that are delivered faster, on budget, and maintained to high standards over several decades. With almost everything being measured in a P3 project, there are more mechanisms to identify lapses in service quality and impose penalties according to the contract.
So, while P3s are not the only option, they are very often the best option.
Myth
Public-Private Partnership is the same as “privatization.”
Facts
“Privatization” is the transfer of ownership and control of a business or service from a government to a privately owned entity. “Outsourcing” or “contracting-out” is the use of a third-party to deliver a service or product under a contractual agreement. While the terms are often used as if interchangeable, there is a distinct difference.
For example, in 1993, the Government of Alberta privatized liquor retailing. From 1924 until 1993, with few exceptions, liquor could only be legally purchased from an Alberta Liquor Control Board (ALCB) Liquor Store. The province owned all of the ALCB stores, and store personnel were government employees. The decision was then made to get the government out of the liquor sales business and turn the industry over to private businesses. The government maintains regulatory oversight, as it does for most industries, but is no longer the “owner” of any liquor stores.
In contrast, while some P3 agreements include the provision of services there is no transfer of ownership.
In regard to the Stanton Project for example, the GNWT will enter into a contractual agreement with a private sector proponent for the design, construction, financing, and hard facilities management services for the newly developed hospital over a 30 year life span. There is no allowance under the P3 procurement model for Stanton to be privatized. Stanton will continue to be government owned, government controlled and accountable. Medical services in the hospital will continue to be government funded and government administered.