PPP Canada Inc.
SUMMARY CORPORATE PLAN 2010-2015, OPERATING AND CAPITAL BUDGETS 2010/11
PPP Canada Inc.
Summary Corporate Plan 2010-2015, Operating and
Capital Budgets 2010/11
PPP Canada Inc.
SUMMARY CORPORATE PLAN 2010-2015, OPERATING AND CAPITAL BUDGETS 2010/11
PPP Canada Inc.
Summary Corporate Plan for the 2010-2015 planning
period
Operating Budget for the 2010/11 Budget Year
Capital Budget Summary for the 2010/11 Budget Year
PPP Canada Inc.
SUMMARY CORPORATE PLAN 2010-2015, OPERATING AND CAPITAL BUDGETS 2010/11
Table of Contents
Executive Summary
1
1.
Corporate Profile........................................................................................................ 4
1.1. Background and History of PPP Canada ..............................................................4
1.2.
Mandate.................................................................................................................4
1.3.
Legal Structure and Corporate Objects.................................................................4
1.4.
Corporate Governance ..........................................................................................5
1.5.
Resource Profile....................................................................................................8
2.
Context and Planning Environment ........................................................................... 9
3.
SWOT Analysis ....................................................................................................... 10
4.
Business Line Strategies .......................................................................................... 12
4.1.
P3 Canada Fund ..................................................................................................12
4.2.
P3 Screen ............................................................................................................22
4.3.
Federal Business Line .........................................................................................24
4.4.
Expertise and Advice ..........................................................................................30
5.
Building the Organization........................................................................................ 40
6.
Financial Authorities................................................................................................ 45
7.
Financial Statements & Analysis ............................................................................. 46
7.1. 2010/11 Operating and Capital Budgets .............................................................46
7.2.
2010/11 to 2014/15 Pro-Forma Financial Statements ........................................48
ANNEX 1 — Environmental Factors
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Executive Summary
PPP Canada’s mandate is to improve the delivery of public infrastructure by achieving
better value, timeliness and accountability to taxpayers, through P3s. To achieve this
mandate, the government has authorized PPP Canada to deliver four principal functions:




P3 Canada Fund: invest $1.2 billion to catalyze the use of P3s by other levels of
government - provincial, territorial, municipal and First Nations;
P3 Screen: review large infrastructure projects over $50 M from other levels of
government seeking funding from federal programs (administered by
Infrastructure Canada and Transport Canada) to encourage the use of P3s where
appropriate;
Federal Projects: Assess public-private partnerships opportunities at the federal
level in accordance with criteria established by the Treasury Board; and advise on
the execution of public-private partnership projects at the federal level;
Expertise and Advice: act as a source of expertise and advice on P3 matters.
In 2009-10, PPP Canada launched its operations, with a focus on the P3 Canada Fund. In
September 2009, after a market sounding to gauge interest in the program, streamline the
process for applications, and identify a pipeline of P3 projects, the P3 Canada Fund was
successfully launched.
PPP Canada completed Round One of the P3 Canada Fund in October 2009. This success
gave the Corporation immediate credibility, legitimacy and presence in the PPP market,
and with governments.
In its second year of operations, PPP Canada will continue to grow its P3 market
development program and service offerings. Round Two of the P3 Canada Fund will be
opened in mid-2010 and will build on the successes of Round One. The Corporation will
also launch its other business lines, including support for federal P3 procurements and the
provision of expertise and advice on public-private partnership matters.
All the while, PPP Canada is working diligently to implement the cost containment
measures contained in Budget 2010 through this growth phase. PPP Canada also believes
that the increased value and accountability generated by more and better P3
procurements, in addition to the budget certainty they provide, will leverage savings for
taxpayers, far beyond the operations of the organization.
This corporate plan sets out strategies for the Corporation’s business lines and
organizational development, identifies early priorities, and seeks a number of specific
authorities to enable further progress. Future corporate plans will elaborate, in more
detail, the performance targets for the Corporation.
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SUMMARY CORPORATE PLAN 2010-2015, OPERATING AND CAPITAL BUDGETS 2010/11
The provinces of British Columbia, Ontario, Alberta and Quebec have been early
adopters and have each made a clear policy commitment to P3 procurement as a means of
delivering better value to taxpayers. These four provinces have undertaken the vast
majority of P3 procurements in Canada, to date. As a result of provincial leadership in
P3s, Canada boasts a high number of P3 procurements in the social and transportation
infrastructure sectors, such as hospitals, courthouses, roads and bridges, which are key
areas of responsibility for provincial governments and occupy large portions of provincial
infrastructure budgets.
In addition to this advanced P3 market segment, there are several provinces and
large/medium municipalities which are currently emerging as P3 markets. Many of them
have taken steps to institutionalize P3s as a standard option in their infrastructure
procurement processes and build capacity to manage the procurements and ongoing
concession agreements. To date, the First Nations and Federal P3 markets remain largely
undeveloped, though there is an increasing interest in the P3 model.
From the lay of the land, it is clear that Canada represents many disparate P3 markets.
Standardizing P3 procurement practices/bid processes/documents across the country and
developing expert resources and capacity and will support the further development of the
Canadian marketplace.
Nevertheless, Canada is regarded by the private sector as a leading international market
for P3s. Both foreign and domestic players are active in Canadian deals, though ongoing
access to debt is an issue that PPP Canada is monitoring closely, especially as deal flow
increases across markets.
PPP Canada is supporting the development of Canada’s P3 market primarily by
increasing the visibility of P3 procurement among decision-makers and increasing
dialogue and knowledge sharing between the provinces and municipalities and Indian and
Northern Affairs Canada and First Nations. However, it remains to be seen how the
current period of fiscal restraint will impact on public infrastructure procurement as a
whole, and on P3 procurement in particular.
PPP Canada’s overall strategic approach to the development and deployment of its
business lines is to leverage more and better P3 projects to develop the market. To
accomplish this, PPP Canada will favour an incremental approach to the growth of the
business, which reflects the readiness of procuring public authorities to consider P3
procurement and commit the necessary resources to implement it as a procurement
solution.
The strategy for the P3 Canada Fund will be to build on the successes of Round One
through ongoing relationship building with partners and support good projects that
demonstrate the Value of P3s for the taxpayer. PPP Canada will also tailor the P3 Canada
Fund business strategy to the advanced, emerging and undeveloped market segments.
This Corporate Plan clarifies PPP Canada’s interpretation of the Terms and Conditions of
the P3 Canada Fund, based on the experience in implementing the Fund in Round One.
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The P3 Screen was suspended by the government in late 2008 for two years to facilitate
the rapid delivery of short-term, infrastructure stimulus funding to other levels of
government. This stimulus funding was time-limited to two years and would not have
targeted P3 projects which are long-term, major projects. The future of the P3 Screen
will be addressed in future corporate plans.
If 2009/10 was the year of launching the P3 Canada Fund, then 2010/11 is the year to
launch and resource the federal business line. There is high potential for a reasonable
flow of P3 projects at the federal level, as shown by the departments exploring P3s. PPP
Canada will focus on creating successful P3 projects with departments prepared to
explore P3s.
The first priority will be to support the success of federal P3 projects coming to the
marketplace in the near future. Over the longer term, PPP Canada will continue to grow
its targeted outreach to other federal departments.
PPP Canada will conclude an MOU with Public Works in 2010/11 and establish a work
plan with PWGSC and Treasury Board Secretariat in an effort to support the adoption of
P3 procurements by federal departments.
PPP Canada will also work with the Office of the Comptroller General to produce
guidance for federal departments with regard to the accounting treatment of federal P3s.
In 2010/11, PPP Canada will also place a significant amount of effort into developing the
expertise and advice business line. Key areas of focus will be to build internal capacity
with regard to the P3 model, leverage relationships with other P3 institutions, tap private
sector expertise and increasingly begin to leverage international and academic sources of
expertise on P3 procurement.
In order to effectively implement these business line strategies, and grow the advisory
business, PPP Canada’s recruitment has shifted to an increasing focus on depth of P3
skills and expertise and direct experience with the private sector.
PPP Canada’s focus remains to build a high-performing organization with effective
governance and sound stewardship of public resources, which leverages the best value for
the taxpayer in public infrastructure procurements.
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SUMMARY CORPORATE PLAN 2010-2015, OPERATING AND CAPITAL BUDGETS 2010/11
1. Corporate Profile
1.1.
Background and History of PPP Canada
As Canada’s existing public infrastructure continues to age and the requirements
for replacement and new infrastructure increase, governments must find ways of
stretching their infrastructure dollars further. Across Canada, governments have
begun to recognize the value of engaging private-sector innovation to build more
for less, where possible, and deliver savings that will help to fill the infrastructure
gap.
This infrastructure delivery model, known as P3 procurement, has been
successfully implemented through the creation of government agencies in the
United Kingdom, Australia and across Europe. The agency model is finding
increasing favour with governments in Canada as well, where public corporations
and agencies have been created in British Columbia, Ontario, Quebec and most
recently federally, to leverage greater value for money through P3 procurement.
In 2008, PPP Canada was established to build P3 procurement knowledge and
capacity federally, and leverage greater value for money from federal investments
in provincial, territorial, municipal and First Nations infrastructure with the P3
Canada Fund.
1.2.
Mandate
PPP Canada’s mandate is to improve the delivery of public infrastructure by
achieving better value, timeliness and accountability to taxpayers, through P3s.
1.3.
Legal Structure and Corporate Objects
On February 28, 2008, PPP Canada was incorporated pursuant to the Canada
Business Corporations Act. On May 8, 2008, the Governor-in-Council declared
PPP Canada as a Parent Crown corporation for the purposes of Part X, (except
section 90) of the Financial Administration Act and reports to Parliament through
the Minister of Finance. The objects for the Corporation were established by
Order-in-Council as follows:

Assess public-private partnerships opportunities at the federal level in
accordance with criteria established by the Treasury Board;

Assess the suitability of public-private partnership projects seeking funding
from federal infrastructure programs in accordance with criteria established by
or pursuant to Treasury Board authorities;
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
Advise on the execution of public-private partnership projects at the federal
level;

Manage the Public-Private Partnerships Funds (P3 Canada Fund) in
accordance with the policies and authorities established by the Treasury
Board;

Negotiate, sign and administer agreements to be funded through the P3
Canada Fund in accordance with the policies and authorities established by
the Treasury Board; and,

Act as a source of expertise and advice on public-private partnership matters.
The OIC also stipulates the foregoing objects shall in no way include the
initiation, development or elaboration of policy related to decision-making
concerning PPP project approval.
1.4.
Corporate Governance
1.4.1.
Minister of Finance
The Minister of Finance is the Minister responsible for PPP Canada. The Crown
Corporation reports to Parliament through the Minister of Finance.
1.4.2.
Authority for Project Approval
The Board of Directors will approve recommendations to the Minister(s).
The Minister of Finance and the Minister of Transport, Infrastructure and
Communities and the Treasury Board share responsibilities with respect to
approval and amendments of certain projects funded by the P3 Canada Fund.

For amounts of less than $25 million:
- Following the approval by the Board of Directors of PPP Canada of a
recommendation to the Minister, such projects will then be submitted
to the Minister of Finance for final approval.
- Once final approval from the Minister of Finance is obtained, PPP
Canada will finalize and the CEO will sign a funding agreement with
the recipient(s) (and other parties if needed).
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 For amounts of $25 million or more but less than $100 million:
- Following the approval by the Board of Directors of PPP Canada of a
recommendation to the Minister, such projects will then be submitted
to both the Minister of Finance and the Minister of Transport,
Infrastructure and Communities for final approval.
- Once final approval from the two Ministers is obtained, PPP Canada
will finalize and the CEO will sign a funding agreement with the
recipient(s) (and other parties if needed).

1.4.3.
For amounts of $100 million or more:
- Following the approval by the Board of Directors of a
recommendation to the Minister, such projects will then be submitted
to the Minister of Finance and the Minister of Transport, Infrastructure
and Communities for their approval in principle.
- The Minister of Finance and the Minister of Transport, Infrastructure
and Communities will seek the final approval by the Governor in
Council (i.e., the Treasury Board). This could be done as part of the
approval process for PPP Canada’s annual corporate plan or through
stand-alone Treasury Board submissions.
- Following approval by the Governor-in-Council, PPP Canada will
finalize and the CEO will sign a funding agreement with the
recipient(s) (and other parties if needed).
Board of Directors & Committees
PPP Canada’s Board of Directors is comprised of a Chairperson, the CEO, and
seven Directors all of whom are appointed by the Minister of Finance with the
approval by the Governor-in-Council. The Board is responsible for the overall
governance of the Corporation. It approves the five-year Corporate Plan and the
Annual Report, both of which are tabled in Parliament, and meets quarterly to
review the Corporation’s overall operation, receive committee reports and discuss
PPP Canada’s performance against objectives. The Board reviews the
performance of the CEO on an ongoing basis and provides timely feedback.
Compensation recommendations of the CEO are made to the Minister of Finance
and must be approved by the Governor-in-Council.
On January 19, 2008 the Governor-in-Council confirmed the appointment of the
Chair of the Board of Directors, Mr. Greg Melchin and confirmed the appointed
of the CEO Mr. John McBride effective February 16, 2009. In May 2009, four
new board members were appointed and one additional appointment was made in
June 2009. There are currently two vacancies on the Board which will be filled in
2010. The Directors come with a remarkable depth and breadth of knowledge and
experience, whether from the public sector or as leaders in their respective
industries.
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To date, the new Board of Directors has focused on the immediate priority of
building the Corporation and launching the P3 Canada Fund. The Board provides
strategic insight and guidance and oversees the operational direction proposed by
management. Moreover, it is the Board’s duty to challenge itself and
management to develop an appropriate corporate governance system. This
system includes the policies, procedures, internal controls, and risk management
measures necessary to instill confidence in our stakeholders and will enable the
Corporation to deliver the greatest value to the public and taxpayers.
In keeping with modern governance arrangements for Crown corporations, the
Board of Directors has established Committees to support the Board and its work.
The Audit Committee’s primary responsibilities are to oversee the Corporation’s
standards of integrity and behaviour; to oversee the Corporation’s reporting of
financial information; to oversee the Corporation’s internal control systems,
including the Corporation’s compliance with all applicable legal and regulatory
requirements; to review the qualifications, independence and performance of the
Corporation’s external auditor(s); and to oversee the Corporation’s enterprise risk
management plan.
The Governance and Human Resources Committee primary responsibilities are to
recommend candidates for the Board, for the Chair of the Board and the CEO of
the Corporation to the Minister, as the need arises; analyze and make
recommendations to the Board on candidates for Board appointed officers and the
compensation of such officers; oversee the development and approval of human
resources strategies and policies, as may be referred to it by the Board, the Board
Chair or the CEO from time to time; and oversee and assess the implementation
and assessment of effective corporate governance principles; implement practices
and procedures to ensure that the Board operates effectively and in accordance
with high standards of corporate governance. In 2010-11 the committee will
undertake an assessment of the Board and Board Committee effectiveness and the
contributions of each Director by means of a peer-review exercise designed to
improve individual and collective performance.
The Investment Committee’s primary responsibility is to oversee the
Corporation’s market development strategies for increasing the effective use of
public-private partnerships. In fulfilling this responsibility, the Committee shall
undertake the following: review and approve any of the Corporation’s proposed
new business products and/or business lines to confirm that these initiatives are
within the Corporation’s mandate; periodically review and recommend to the
Board any amendments to the Terms and Conditions of the P3 Canada Fund, and
confirm that the decisions made to amend the Terms and Conditions are
undertaken in an effective, professional and complete manner, with the attendant
risks being identified and managed properly; work with the Audit Committee and
other Board committees, as required, in addressing P3 Canada Fund allocation
and investment issues as well as procurement and contracting concerns; review
and determine whether potential public-private partnership projects should be
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moved to the full Board for review and recommendation; and receive
presentations and reports from management on a periodic basis and determine
significant issues requiring full Board review.
The Board has established quarterly meetings up until June 2011 and will have
additional meetings as required to approve recommendations to the Minister,
review the Corporation’s overall operations, receive committee reports, and
discuss the objectives.
1.4.4.
Report on Compliance with Legislative Requirements
PPP Canada adheres to the Privacy Act, the Access to Information Act, the
Federal Accountability Act, the Public Servants Disclosure Protection Act, and
the Official Languages Act.
A public meeting is currently targeted for Fall 2010, in accordance with Treasury
Board Guidance on the Accountability of Crown Corporations. PPP Canada will
comply with the new quarterly reporting requirements commencing in 2011.
1.5.
Resource Profile
During fiscal year 2010/11, PPP Canada forecasts $12.7 million of operating and
capital disbursements and will draw down and invest $242.5 million under the P3
Canada Fund. The current staff complement of 29 is expected to grow to 44 in
2010/11 in order to fulfill its mandate. The Corporation has developed a human
resources plan and recruitment strategy, which is to ensure retention of core P3
competencies & knowledge within the corporation that are aligned with its
Business lines. Additionally, the Corporation is conscious of maximizing the
value and efficiency of a wide variety of out-sourced and shared services
arrangements to supplement its in-house staff.
PPP Canada is working diligently to implement the cost containment measures
contained in Budget 2010 through this growth phase. PPP Canada also believes
that the increased value and accountability generated by more and better P3
procurements, in addition to the budget certainty they provide, will leverage
savings for taxpayers, far beyond the operations of the organization.
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2. Context and Planning Environment
In 2009-10, PPP Canada launched its operations, with a focus on the P3 Canada
Fund. In September 2009, after a market sounding to gauge interest in the
program, streamline the process for applications, and identify a pipeline of P3
projects, the P3 Canada Fund was successfully launched.
PPP Canada completed Round One of the P3 Canada Fund in October 2009. This
success gave the Corporation immediate credibility, legitimacy and presence in
the PPP market, and with governments.
In its second year of operations, PPP Canada will continue to grow its P3 market
development program and service offerings. Round Two of the P3 Canada Fund
will be opened in mid-2010 and will build on the successes of Round One. The
Corporation will also launch its other business lines, including support for federal
P3 procurements and the provision of expertise and advice on public-private
partnership matters.
In planning for this growth, and in order to effectively deploy program/service
offerings that will impact the adoption of P3 procurements in Canada, Annex 1
takes a strategic look at the environmental factors that influence the development
of a market for P3s in Canada, and PPP Canada’s ability to contribute to the
development of the P3 market.
The following environmental factors were researched and analyzed:
1.
2.
3.
4.
5.
6.
7.
8.
9.
How is the P3 Market Developing in Canada?
Overview of P3 markets
Impact of institutional, policy and program funding approaches
Clear need for expert resources and capacity
How is the private sector responding to P3s?
How are capital markets reacting to P3 deals?
What are the systemic barriers to P3s?
How is PPP Canada influencing the development of Canada’s P3 market?
How will a period of fiscal restraint impact public infrastructure
procurement and P3s?
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3. SWOT Analysis
Based on the environmental scan, the following section outlines PPP Canada’s
strengths and weaknesses in achieving its business objectives, as well as the
opportunities which present themselves and threats which must be overcome.
STRENGTHS






P3 Canada Fund has attracted projects in the early stages of development and
provides an opportunity to influence the shaping of the P3 to maximize value for
the taxpayer
Learnings from P3 Canada Fund Round One have informed a more targeted
marketing approach for Round Two
PPP Canada is the only P3 “agency” mandated to support P3s across all Canadian
jurisdictions – as a result, it is the only one which has a global view of the state of
development of the Canadian P3 market
PPP Canada has forged strong relationships with key provincial and territorial
infrastructure departments and P3 agencies
PPP Canada is well positioned to support federal departments which require
expertise and advice to support their P3 procurements, and assess environmental
barriers to P3 procurement
Federal departments and central agencies have shown an increasing willingness to
work with PPP Canada to identify opportunities to deliver greater value to the
taxpayer through P3 procurement
WEAKNESSES



Need to develop depth of expertise in P3 procurement to support the growth of the
advice & expertise line of business
Federal infrastructure funds competing for clients -- P3 Canada Fund not being
approached by jurisdictions for support with regard to their high-priority projects
because Building Canada Fund and Stimulus Fund offer larger investments
As there is no budgeting for capital expenditures across all departments at the
federal level, PPP Canada must approach individual departments to discuss their
capital project pipeline in order to identify potential P3 projects
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OPPORTUNITIES









Increasing interest in and experience with P3 procurement across several
Canadian markets
PPP Canada increasingly viewed as a source of information and support in
scoping infrastructure projects for P3 potential
Opportunity to support the standardization of bid processes and bid documents
across Canadian jurisdictions through dialogue and review of best practices
Private-sector views Canada as a premier market for P3s
Canadian market shows potential and some readiness for growth beyond
traditional core provincial infrastructure sectors (i.e. bridges, roads, hospitals) into
sectors such as water and waste water
Both federal departments and other levels of government are approaching PPP
Canada for support in growing knowledge and capacity to do P3s
Opportunity to adapt the P3 model to deliver value in First Nations infrastructure
Several large municipalities are adopting procurement policies for P3
procurement
An increasing number of P3 Canada fund applicants are looking for support in
developing their P3 business case which provides an opportunity to ensure that
best practices are being followed and maximum value for money is being
achieved
THREATS








Unclear what effect this new era of fiscal restraint will have on capital spending
and the increased use of P3 procurement
There is a learning curve for procuring public authorities in adopting P3
procurement
Lack of consistent/best P3 procurement practices across jurisdictions puts off
private-sector partners
Budgeting and accounting policies make P3 procurement difficult to implement
Not all jurisdictions have dedicated P3 procurement capacity
Only approximately 20% of procurements (by $ value) can deliver better value
with current P3 procurement models
Failure to conclude P3 deals once they are in procurement hinders the growth of
the market
An increasing number of P3 deals in the market may stress the availability of
financing
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4. Business Line Strategies
PPP Canada’s overall strategic approach to the development and deployment of the
following business lines is to leverage more and better P3 projects to develop the
market. To accomplish this, PPP Canada will favour an incremental approach to the
growth of the business, which reflects the readiness of procuring public authorities to
consider P3 procurement and commit the necessary resources to implement it as a
procurement solution.
4.1.
P3 Canada Fund
4.1.1.
Status Update
In 2009/10, PPP Canada’s priority was the launch of the P3 Canada Fund. In the
first half of the year, the organization and Board of Directors researched the
market extensively in order to prepare for Round One. Specifically, this
preparatory work included:





Engaging all provinces and territories and INAC
Designing and completing a market sounding
Developing a strategy and issuing call for projects for Round One
Developing preliminary assessment criteria; and
Developing comprehensive assessment criteria.
PPP Canada successfully closed its first Round of applications for investments of
the P3 Canada Fund in October 2009.
During Round One, PPP Canada engaged a broad cross-section of applicants: 20
in total, including:




9 different provincial and territorial governments as well as Indian and
Northern Affairs Canada
Six of the applications were for municipal projects.
Projects ranged in size from $45 to $500 million in capital costs
8 different infrastructure sectors.
PPP Canada anticipates that the first project approvals and investments of the P3
Canada Fund from Round One will continue to build momentum & visibility for
P3 procurement among undeveloped markets.
The Round Two call for projects will be launched in early May and close June 30,
2010.
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In advance of the Round Two launch, market development strategies have been
prepared for each province and territory, as well as for the First Nations market.
During the last quarter of 2009/10 and quarter one of 2010/11, a key occupation
of the organization has been outreach to provinces, territories and Indian and
Northern Affairs Canada to identify a pipeline of projects and encourage
stakeholders to submit promising projects in Round Two.
Over the summer, preliminary project assessments will be prepared for projects
submitted in Round Two, with preliminary project recommendations made to the
Board of Directors in the Fall. Comprehensive project assessments will follow
throughout the Fall, with the first project approvals from Round Two expected
before the end of fiscal 2010/11.
4.1.2.
4.1.2.1.
Strategy
Build on Round One
In order to allow PPP Canada to gather further information and data points about
the P3 market in various jurisdictions, the Round Two process will closely
resemble Round One in terms of format.
However, Round One has highlighted the need to further support some applicants
in the assessment process. As a result, PPP Canada has undertaken to revise its
Submission Guide: Round Two, and include additional guidance for applicants,
specifically with regard to best practice for the P3 Business Case, which forms the
basis of PPP Canada’s Comprehensive Assessment.
It is anticipated that, following Round Two, the Corporation will be in a position
to draw more accurate conclusions on the state of the various P3 markets across
the country and adapt market development strategies more comprehensively. The
additional data points gathered in Round Two will also help PPP Canada assess
the need and demand for products and services to support the adoption of P3
procurement, and adapt business line strategies accordingly.
At that stage, PPP Canada will also be in a position to set more specific
performance measurement targets for the P3 Canada Fund and its development of
the P3 market.
4.1.2.2.
Support good projects that demonstrate the Value of P3s
Strategically, PPP Canada will continue to seek opportunities to leverage the P3
Canada Fund to deliver more and better P3s across Canada. It is PPP Canada’s
view that demonstrating the value of P3s through successful procurements and
projects will generate more proof points on the value of P3 procurement, more
political and public support, and ultimately a stronger case for
regular/institutionalized consideration of P3s as a procurement solution.
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PPP Canada’s Comprehensive Assessment reflects this goal of investing in good
P3s which provide value to taxpayers. The Comprehensive Assessment
scrutinizes the business case for the P3 procurement and pays particular attention
to two critical indicators of a good P3:

Value For Money is an internationally recognized best practice for assessing
the suitability of the P3 procurement option. It is a quantitative analysis which
compares the cost of the P3 procurement, including the costs associated with
risk transfer and the financing costs, versus a public sector comparator, which
is essentially the cost of traditional procurement of the infrastructure. This
comparison allows the procuring government to make a cost-based decision
on the best procurement methodology for the project and, incidentally, is
being employed by some jurisdictions as a standard practice to provide better
budget certainty even when traditional procurement if the preferred
procurement option.

The integrity of the procurement process is critical to extracting the best value
for taxpayers and building private-sector confidence in the market. Evidence
clearly shows that the existence of competitive market tensions between
bidders is the best way to ensure that taxpayers get maximum value for every
dollar that is spent. However, the importance of a business-like approach to
procurement is further amplified in P3 procurement because it requires the
private-sector bidders to invest heavily in bid costs associated with design and
professional services. As a result, they demand a fair, transparent and
predictable procurement process in order to participate in the P3 market.
With these two factors as key criteria for investing the P3 Canada Fund, PPP
Canada believes that its investment decisions will promote the development of the
market by providing concrete examples of the value and benefits that P3s can
deliver.
4.1.2.3.
Tailor strategies to market segments
As outlined in earlier sections, the Canadian P3 market is not a homogeneous one.
As a result, it is necessary to adapt and tailor the deployment of the P3 Canada
Fund to impact the development of the P3 market.
In preparation for Round Two of the P3 Canada Fund, three market segments
have been identified: advanced P3 markets, emerging P3 markets and
undeveloped P3 markets.
PPP Canada’s strategy for deploying the P3 Canada Fund in each of these markets
is presented below:
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Advanced P3 Markets
Strategy:
Diversify P3 infrastructure classes
The experience with these jurisdictions in Round One has typically been that they
are procuring infrastructure that is either:
a) outside the scope of Fund’s eligible sectors (e.g. hospitals, schools); or
b) large highway projects which would disproportionately draw down Fund and
limit the number projects across Canada that the program could support.
As a result, PPP Canada will work with these provinces to seek opportunities to
identify and support provincial projects in different infrastructure classes which
diversify the use of P3 procurements beyond the current applications.
Provincial governments, in many instances, are responsible for providing
infrastructure such as drinking water and wastewater facilities, in communities
that are unincorporated or do not have sufficient capacity to procure them on their
own.
PPP Canada will look for opportunities to invest in these projects which, while
smaller in scale, present good prospects for market development and deal flow.
Emerging P3 Markets
Strategy:
Identify projects that will help support capacity-building
This market segment, unlike the previous one, includes both provincial and some
municipal jurisdictions which have put in place policies and processes for a P3
procurement, but have limited or no P3 experience.
PPP Canada will strategically deploy the Fund to identify projects in their capital
plans that have the potential for P3 procurement, and leverage those projects to
build institutional capacity and knowledge which will underpin and support these
new P3 markets. Through the collaboratory relationships that are being
developed, PPP Canada will help build capacity in these jurisdictions by
providing advice and guidance on the development and procurement of these
projects.
In building working relationships with every Canadian P3 market, PPP Canada
benefits from a unique vantage point and view of the P3 market as a whole. The
Corporation will continue to provide advice, upon request of provinces and
municipalities, on P3 best practices with regard to the implementation of policies
and processes.
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Undeveloped P3 Markets
Strategies:
Leverage the Fund to open a line of communication and incent
consideration of P3s as a procurement option
Generally, the jurisdictions in these markets have a limited understanding of P3
methodologies and have nascent or no institutional capacity to undertake the
development of a P3 procurement. However, there is market potential that is
untapped. There are large jurisdictions in this category, which have the potential
to generate significant capacity and deal flow, though the effort required to bring
projects to fruition in these markets will be significantly greater than in advanced
or emerging P3 markets.
PPP Canada will leverage the P3 Canada Fund to open a dialogue with these
jurisdictions and communicate the merits of P3 procurement, the availability of
funding through the P3 Canada Fund, and advice to help plan and manage P3
projects.
As part of the priorities for accessing undeveloped markets, PPP Canada is
currently working with INAC to consider a jointly-managed development queue
for First Nations projects.
4.1.3.
Updating Terms & Conditions
The Terms and Conditions (T&Cs) for the Public-Private Partnerships Fund (P3
Fund) Program were originally developed on the model of a traditional federal
contribution program. Through the application of the T&Cs to Round 1 call for
project proposals it is evident that certain clarifications are necessary to reflect the
specific construct of P3 projects, versus traditional infrastructure projects.
PPP Canada plans to request more substantive changes to the T&Cs at a later
date, in order to reflect the realities of P3 procurements and ensure that the P3
Canada Fund is adequately equipped to incent the effective use of P3
procurement. Rounds 1 and 2 will serve as the fact bases for any required changes
to the T&Cs.
PPP Canada is providing three clarifications of the T&Cs:
1. PPP Canada should share in incremental financial gains accrued from disposal
of the asset, only until the end of the P3 contract;
2. In a P3 procurement, the cost data contained in the financial model supporting
the P3 agreement are the “capital costs” of the project; and
3. The procuring jurisdiction’s “financing charges and interest payments on
loans” are ineligible costs (Section 9 e) of the T&Cs), consistent with the
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T&Cs of the Building Canada Fund, but the private financing costs tied to the
risk transfer in a P3 procurement are eligible costs.
Each is discussed in detail below.
1. PPP Canada should share in incremental financial gains accrued from
disposal of the asset, only until the end of the P3 contract
The following is the current text under Section 7 Funding Instruments of the
Terms and Conditions:
Special Provisions
Repayable and non-repayable contributions will need to comply with the
following:

Each agreement will require the recipient to notify PPP Canada in advance if,
at any time during a period of 25 years from the date of the substantial
completion of the construction phase of the project, the recipient proposes to
sell, lease, encumber, use in a manner other than as described in their request
for funding under the P3 Fund, or otherwise dispose of, directly or indirectly,
any assets constructed, rehabilitated or improved, in whole or in part, with
contributions from PPP Canada, other than to Canada, the recipient or a
Crown corporation of the recipient that is the latter’s agent for the purpose of
implementing the agreement.
The intention of this clause in the T&Cs is to provide for a fair and equitable
sharing of gains between the P3 Fund recipient and the federal government,
should the procuring jurisdiction realize an incremental cash flow from the public
infrastructure asset.
At the term of the P3 contract, responsibility for the asset is relegated to the
recipient, who must take on the full costs associated with the ongoing use or
decommissioning of the asset. As PPP Canada does not share in the costs beyond
the P3 contract period, there is no rationale for imposing an ongoing requirement
to share in the gains.
The T&Cs specify a 25 year period, from the date of substantial completion,
during which PPP Canada may share in these gains, however, the reality is that
many P3 contracts will have a shorter lifespan, which should be reflected in the
contribution agreement. For example, technology-dependent projects typically
have a life of less than 25 years because of the rapid pace of technological
innovation and obsolescence. Therefore, PPP Canada has interpreted the 25 year
period to mean the life of the P3 project.
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It is reasonable to have such a clause within the T&Cs of the Fund but such a
clause should reflect the life of a P3 project and not be tied to an arbitrary time
frame of 25 years.
The underlined is a clarification of PPP Canada’s interpretation.
Each agreement will require the recipient to notify PPP Canada in advance if, at
any time during the period of the concessionary agreement, the recipient proposes
to sell, lease, encumber, use in a manner other than as described in their request
for funding under the P3 Fund, or otherwise dispose of, directly or indirectly, any
assets constructed, rehabilitated or improved, in whole or in part, with
contributions from PPP Canada, other than to Canada, the recipient or a Crown
corporation of the recipient that is the latter’s agent for the purpose of
implementing the agreement.
2. In a P3 procurement, the cost data contained in the financial model
supporting the P3 agreement are the “capital costs” of the project
The following is the current text under Section 9 Eligible and Ineligible Costs of
the Terms and Conditions:
Eligible costs will include only the following:
a) The capital costs of acquiring, constructing or renovating a tangible capital
asset, as defined and determined according to accounting principles generally
accepted in Canada;
This wording reflects clauses found in traditional federal contribution programs
like the Building Canada Fund, upon which the P3 Fund was modeled. The
intention of this clause is to limit the federal investment to the acquisition or
construction or renovation of the infrastructure, as opposed to the costs associated
with ongoing maintenance and operation.
However, the P3 model relies on savings from a bundled price (net-present-value
for design, construction, financing, maintenance and operation), as opposed to
reimbursing the construction costs of the private sector partner. As a result, in a
P3 procurement, the only way to separate out the “capital costs” from the
operation and maintenance costs is to use the cost data contained in the financial
model supporting the P3 agreement.
While it requires PPP Canada to use a proxy for “capital costs”, this divestiture of
risk and reliance on a contracted price otherwise has the benefit of protecting the
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taxpayer against cost overruns. In a P3, the private sector will incur and be
responsible for all construction costs, as they are actually incurred.
Nonetheless, there are checks and balances built into the choice of the cost data
contained in the financial model supporting the P3 agreement as a proxy for
“capital costs”. It is essential to note that the same cost data is always used in the
value for money analysis (which compares the cost of P3 to the cost of a
traditional procurement), and that it forms the basis for determining the savings
for the taxpayer and the decision to proceed with the P3 model. If the value for
money analysis shows no savings for the taxpayer, the project will not proceed as
a P3.
Consequently, it is this same cost data contained in the financial model supporting
the P3 agreement that should form the basis for PPP Canada to determine the
eligible costs, cost sharing percentages and compliance with federal stacking
limits.
As an added tool to ensure that the taxpayer benefits from the P3 deal, PPP
Canada also reserves the right to independently verify the reasonableness of the
cost data if there is doubt or if there are questions on the value for money
analysis.
PPP Canada has therefore interpreted the following clarification to reflect the
realities of a P3 procurement and form the basis of P3 Canada Fund investments.
The costs of acquiring, constructing or renovating a tangible capital asset will be
determined based on the cost data contained in the financial model supporting the
P3 agreement.
3. The procuring jurisdiction’s “financing charges and interest payments on
loans” are ineligible costs, consistent with the T&Cs of the Building
Canada Fund, but the private financing costs tied to the risk transfer in a
P3 procurement are eligible costs
Under Section 9 e) of the P3 Fund’s T&Cs, “financing charges and interest
payments on loans” are ineligible costs.
PPP has consulted with central agencies and other infrastructure programs in
order to confirm our understanding of this clause. Consistent with its application
in the context of the Building Canada Fund, PPP Canada interprets this clause to
apply strictly to financing costs which are incurred by a procuring jurisdiction in
raising the funds for the acquisition of public infrastructure. Regardless of the
procurement methodology, this limitation is relevant to federal infrastructure
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funds, and it is not suggested that it be changed or removed from the list of
ineligible costs.
However, in the context of P3 procurement the absence of clarification with
regard to the eligibility of private financing costs (tied to the risk transfer) can be
misleading.
In the case of a P3, in order to divest the risk of cost overruns during the
construction phase of a project, the procuring jurisdiction (and the taxpayer) only
begins to pay for the infrastructure once construction is complete (with few
exceptions for milestone payments in large projects to reduce the costs of private
financing). This is a distinguishing characteristic of P3 procurement. The result is
two-fold: 1) the taxpayer doesn’t pay for the infrastructure until it is built and/or
in use, and thus assumes no risk; and 2) at a minimum, the private sector partner
must finance the costs that it incurs during the construction phase (i.e. materials,
labour, etc).
The follow-on effect of this risk transfer is that the price paid by the procuring
jurisdiction on completion of construction includes the cost of private
construction financing, which is incrementally higher than the cost of government
borrowing. This is the cost/benefit equation of divesting the taxpayer of
construction risk.
On the other hand, the private financing costs must be more than offset by other
savings in order for the project to proceed as a P3. [Note: in order to make this
determination, the cost of private financing is explicit in the bids (unlike
traditional procurement bids)].Ultimately, there are safeguards to ensure that the
taxpayer does reap a net financial benefit from the P3 approach, even despite the
private financing costs.
In practice, disallowing such costs would ignore the true costs of P3 procurement
and send a signal to procuring jurisdictions that traditional procurements qualify
them for a greater federal investment. This would inevitably create a systemic
obstacle and undesired bias against P3 procurement, which was most certainly not
be the intent of the clause.
Supporting the cost of construction financing is consistent with PPP Canada’s
mandate of supporting the foundations and best-practices of the P3 approach.
To eliminate any potential disincentive PPP Canada has interpreted eligible costs
to include finance costs of the private sector during construction of the public
infrastructure. This clarification not only respects the uniqueness of the P3 model
but it also clarifies the distinction from the wording provided under ineligible
costs.
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4.1.4.
Performance Indicators
4.1.4.1.
Funding Commitments in 2010/11
PPP Canada Inc. will commit over $100 million in 2010 to projects that
demonstrate leadership in P3 procurement.
4.1.4.2.
Number of Approved Projects
Recognizing that project approvals will depend, to large degree on the
procurement schedules or provinces, territories, municipalities, First Nations or
other procuring public authorities, PPP Canada has set the following performance
indicators for increasing the number of P3 projects in the market:



2 new projects in 2010/11
8 new projects by 2011/12
20 new projects by 2012/13
4.1.4.3.
Number of Projects in New Sector, New Jurisdictions, or using New
P3 Models
PPP Canada has set the following performance indicators for diversifying the P3
projects in the market, through new sectors, new jurisdictions or new P3 models:



4.1.5.
1 diverse project in 2010/11
4 diverse projects by 2011/12
10 diverse projects by 2012/13
Priorities
The following priority actions have been identified, by relevant time periods:
2010/11
 Assess Round 1 projects against preliminary and comprehensive criteria (Sep
2009 – June 2010)
 Recommend Round 1 project approvals (Dec 2009 – June 2010)
 Engage all provinces and territories and INAC for Round 2 (underway)
 Develop strategy for and issue call for projects for Round 2 (Feb – May 2010)
 Preliminary and Comprehensive Assessments on Round 2 submissions (Q2Q4 2010)
2011-12
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




Develop performance measurement tools and targets
Conduct periodic calls for projects, building on experience of early funding
rounds
Execute and monitor projects
Extract and share learning from projects
Develop strategies aimed at meeting the needs of municipalities
2012-14
 Commit all funding
 Evaluate future of P3 Canada Fund
4.1.6.
Resource Allocation
PPP Canada will allocate $5,172,000 in operating funds and $242,500,000 in
program funding to the P3 Canada Fund business line in 2010/11. A total of 19
staff will also be allocated to this business line.
4.2.
P3 Screen
4.2.1.
Status Update
The Corporate Objects include the mandate to “assess the suitability of publicprivate partnership projects seeking funding from federal infrastructure programs
in accordance with criteria established by or pursuant to Treasury Board
authorities”. This mandate has often been referred to as the “P3 Screen”. The
purpose of the P3 Screen was to ensure that the potential value of a P3 for
infrastructure projects seeking funding from grants and contributions programs of
the federal government would have been considered. This would increase the
federal government’s ability to leverage the use of P3s.
Through the 2008-09 Corporate Plan, the Treasury Board approved the
application of this element of the mandate with respect to the Building Canada
Fund and the Gateways Fund administered by Transport, Infrastructure and
Communities, for projects in excess of $50 million. The application of the P3
Screen to other federal infrastructure programs was not addressed at that time.
However, before the application of the P3 Screen to the Building Canada Fund
and the Gateways Fund had commenced, it was suspended by the government in
late 2008 for two years to facilitate the rapid delivery of short-term, infrastructure
stimulus funding to other orders of government.
Consequently this has not been an early focus for the Corporation. An
interdepartmental coordinating committee engaging key federal organizations
with an interest in P3s has been struck. The future of the P3 Screen is part of the
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future agenda for this group. A strategy regarding whether and how the P3
Screen should be reinstituted will be the subject of future Corporate Plans and
will be guided by direction from the government.
4.2.2.
Strategy
The purpose of the P3 Screen is to ensure that the potential value of a P3 has been
considered and realized. The vast majority of federal infrastructure funding
programs are managed by other federal departments and agencies. Integrating a
P3 screen into the assessment process for these programs would increase the
leverage of the federal government regarding P3s. A screen that was streamlined
and sensitive to the policy objectives and accountabilities of other departments
will be critical.
The scope of application of the P3 Screen will need to be considered. The focus,
of past work, has been on infrastructure programs under the responsibility of the
Minister of Transport, Infrastructure and Communities. In considering the
reinstitution of the P3 Screen, the application of the P3 Screen beyond TIC
programs will need to be assessed.
The governance of the P3 Screen will also be subject of further consideration. As
previously conceived, it was mandatory for TIC to seek PPP Canada’s opinion but
it was at the sole discretion of the Minister whether to consider the opinion. This
is appropriate given the independence of PPP Canada as a Crown Corporation.
However, it raises questions about the importance of the P3 Screen and whether it
should be part of TB consideration when specific project approvals are sought.
The future of a mandatory P3 Screen will be determined at a later date. In the
meantime, PPP Canada will work with interested departments on the development
of an internal departmental screen for P3s for their programs. Such work is
underway with INAC.
4.2.3.
Performance Indicators
Performance under this business line will be measured in terms of the number of
departments/programs screening projects and the number of P3s funded through
other programs.
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4.2.4.
Priorities
The following priority actions have been identified, by relevant time periods:
2010/11
 Continue to work with interested departments on the application of a P3
Screen for their infrastructure programs
2011-12
 Engage affected departments and central agencies regarding the future of the
mandatory P3 Screen
2012-14
 On-going application of the screen
4.2.5.
Resource Allocation
PPP Canada will continue to assess the resource requirements of the P3 Screen
based on discussions with the Treasury Board.
4.3.
Federal Business Line
4.3.1.
Status Update
If 2009/10 was the year of launching the P3 Canada Fund, then 2010/11 is the
year to launch and resource the federal business line.
P3s fit into the Treasury Board's Framework policy for the Management of Assets
and Acquired Services. PPP Canada will work with Treasury Board and others to
determine how best to deliver P3s against this backdrop.
Early in 2010, PPP Canada has had the opportunity to work with federal
departments which are considering or undertaking P3 procurements. There is high
potential for a reasonable flow of P3 projects at the federal level, as shown by the
departments exploring P3s.
In the near term, we believe that up to 2-3 new P3 projects per year, with 5-8
active at any time, may be achievable. Over time, the number of P3 projects
could increase, even in the absence of a mandatory policy. Ultimately, the P3
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procurement of services, and other non-traditional P3 arrangements, may present
the largest opportunity in the federal market.
Dialogue with Treasury Board Secretariat (TBS), Public Work Government
Services Canada and line departments is underway regarding potential projects
and collaborative efforts to build a federal P3 market, establish a knowledge-base
of best practices and generate a deal flow to attract private sector partners to the
market.
Prospective clients for PPP Canada services among the federal market segments
will largely come from Departments and agencies that are only periodic or
intermittent procurers of major capital assets – with the latter group requiring
greater efforts and support from PPP Canada.
Many obstacles to pursuing P3s within the federal system can be overcome
through PPP Canada’s leadership in establishing best practices and incentives at
the federal level. These include:



Standardizing approaches and documentation to reduce transaction costs,
accelerate processes, and improve private-sector uptake;
Supporting the development and application of clear and consistent P3
analytical tools which will facilitate decision-making; and,
Reducing the risks of pursuing P3s by providing institutional support and P3
expertise.
4.3.2.
Strategy
4.3.2.1.
Develop the Federal P3 Market Incrementally
Unlike jurisdiction where a mandatory P3 mandate has been established (e.g.
British Columbia and Ontario), PPP Canada’s strategy for developing the federal
P3 market will be opportunistic in nature, and rely heavily on relationship
building.
PPP Canada will focus on creating successful P3 projects with departments
prepared to explore P3s, and thereby:



create momentum and awareness for a federal project pipeline;
establish PPP Canada capacity and credibility; and
reduce the risks, costs and barriers to successful P3 implementation.
The first priority will be to support the success of federal P3 projects coming to
the marketplace in the near future.
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As PPP Canada builds capacity, the focus on the federal business line will grow to
departments that have a willingness to undertake P3 procurements and capital
infrastructure requirements which can yield positive Value for Money with a P3
procurement solution. PPP Canada will prioritize relationships the following
federal market segments which hold the highest potential for synergies:

Periodic Procurers: federal departments with some project management
capacity but which, for economic reasons, do not maintain in-house
procurement capabilities;

Intermittent Procurers: federal departments and agencies that have limited
project management capabilities and rely heavily on PWGSC and external
consultants for project management and procurement.
Over the longer term, PPP Canada will continue to grow its targeted outreach to
federal departments to:



provide information and assessment tools to ensure departments capitalize on
P3 opportunities and pursue projects that can deliver value for taxpayers;
support the adoption of P3 procurements; and
build a pipeline of federal P3 projects in the marketplace.
4.3.2.2.
Support Institutional Drivers of P3s
In addition to supporting procuring departments, PPP Canada’s federal business
line strategy focuses on creating strategic partnerships with key federal policy
leaders (TBS and PWGSC) to create clarity and consistency in decision-making
and P3 procurement practices.
These federal institutional drivers can address and overcome systemic barriers to
P3 procurement. PPP Canada is currently working with both TBS and PWGSC to
support the following measures which will facilitate P3 procurement at the federal
level:

A Memorandum of Understanding is being established with Public Works to
strike a joint P3 working group which will:
a) Identify a pipeline of federal P3 projects;
b) Streamline P3 project development, approval and implementation
processes;
c) Reduce transaction effort (time and costs) required to evaluate and
implement a federal P3 project;
d) Increase knowledge of P3 best practice, models and challenges;
e) Communicate the uses and benefits of the P3 model to federal departments
and agencies.
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
Work is also beginning with Treasury Board Secretariat to:
a) Identify major capital projects at an early stage;
b) Develop common messaging for federal departments and agencies on P3s,
the role of PPP Canada, etc;
c) Provide advice to departments interested in exploring P3s in the form of
Business Case Guidelines;
d) Establish a Process Map for project approvals.

As well, PPP Canada has reviewed the accounting challenges presented by P3
procurements to support future evolutions that will facilitate this form of
procurement at all levels of government. PPP Canada will continue to work
with Office of the Comptroller General and others on the specific issue of the
Accounting Treatment of P3s.
In addition, PPP Canada will work with departments, agencies and Crown
Corporations such as Public Works and Defense Construction Canada, which
already have sophisticated in-house project management and procurement
capacities, to coordinate approaches, processes and tools. PPP Canada will
encourage such groups to create internal centres of expertise on P3s.
4.3.2.3.
Deliver Advisory Services
Fundamental to the federal business line strategy will be to build PPP Canada’s
advisory services to support federal departments in undertaking P3 procurements.
As expertise grows through experience with the P3 Canada Fund, and as needed
capacities are developed, PPP Canada’s learning will be applied to federal P3
procurements.
The following table shows the value PPP Canada can provide to departments at
the various steps of the capital asset procurement process.
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4.3.3.
Performance Indicators
4.3.3.1.
New Federal Projects
PPP Canada has set the following performance indicators for supporting new
federal P3 projects to successful financial close, and developing a pipeline of
future federal P3 projects:


two P3 projects brought to successful financial close in 2010/11
three to five more new P3 projects under development
4.3.3.2.
Strengthening Relationships within the Federal Family
PPP Canada will conclude an MOU with Public Works in 2010/11 and establish a
work program with PWGSC and Treasury Board Secretariat in an effort to
support the adoption of P3 procurements by federal departments.
PPP Canada will also work with the Office of the Comptroller General to produce
guidance for federal departments with regard to the accounting treatment of
federal P3s.
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4.3.4.
Priorities
The following priority actions have been identified, by relevant time periods:
2010/11



Support federal P3 projects which are currently in the market
Recruit staff to support federal departments in P3 procurements
Support interested government departments in identifying opportunities for
federal P3 procurements and help develop the projects as successful P3s
2011-12

On-going marketing of P3 procurements with federal departments
2012-14

4.3.5.
On-going marketing of P3 procurements with federal departments
Resource Allocation
PPP Canada will allocate $2,516,000 in operating funds and 9 staff to the Federal
business line in 2010/11.
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4.4.
Expertise and Advice
4.4.1.
Status Update
4.4.1.1.
Purpose of Expertise and Advice
The mandate of PPP Canada is more and better P3s.


More P3s that create value for taxpayers
Better P3s that maximize the value produced for taxpayers.
PPP Canada’s role to act as a source of expertise and advice needs to be focused
on this outcome. This means a more systematic assessment of the areas of
expertise and advice that are key to more and better (what type of expertise and
advice) and of the people and institutions that need this expertise and advice (who
are target clients). This assessment would be the basis for a strategy in this regard
and would enable a determination of the best manner to deliver (how).
4.4.1.2.
Developments over the First Year
The focus of PPP Canada for 2009-10 has been on the establishment of the
Corporation and the launch of the P3 Canada Fund. The work on expertise and
advice has been driven by this focus. In the context of the P3 Canada Fund, the
launch has required work on how best to identify and assess projects. Work on
this continues but has involved:




Understanding the state of P3s in all Provinces, Territories, some
municipalities and First Nations;
The development of basic tools to identify and screen potential projects;
The development and application of assessment criteria, including P3
procurement processes and value for money analysis; and
The application of federal funding support to the distinct nature of P3
procurements.
In the context of the establishment of the Corporation, PPP Canada has engaged a
wide-range of stakeholders and has sought out views on areas where PPP Canada
could provide value-added expertise and advice. In some areas, PPP Canada has
undertaken initial work to understand and scope the issues. These include:

Access to capital for P3 – particularly in the context of developments related
to the financial crisis but also on options to increase the participation of new
debt providers to P3 projects (e.g., small pension funds)
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


Participation of Canadian industry in P3s – the balance of participation of
Canadian versus foreign firms in the sponsoring, financing, construction and
operation of P3s
Taxation – assessment of whether there are impediments to P3s in the tax
system with particular regard to tax shelter rules and CCA provisions
Accounting treatment – assessment of the accounting treatment of P3s in
accrual accounting and the implications for government balance sheets and
deficits
This work has been necessary and useful. It enables the development of a more
systematic strategy for the expertise and advice role of PPP Canada.
4.4.2.
Strategy
PPP Canada is and will follow a multi-pronged strategy for expertise and advice:




Build PPP Canada capacity: Expertise and advice is a core role for PPP
Canada and a key enabler of all business lines. Constant effort to build and
maintain capacity within the organization will need to be an on-going priority.
Work with Existing P3 Institutions: PPP Canada will leverage and employ the
skills of other P3 Agencies, especially Partnerships BC and Infrastructure
Ontario. This strategy is already shown success with PBC in business case
development and is promising in the area of procurement execution with IO.
This approach has the ancillary benefit of supporting the other Agencies
which are key institutions in the success of P3s in Canada.
Recognize Private Sector Expertise: Significant expertise exists within the
advisory community. Establishing rosters could help facilitate access to this
expertise.
Tap international and academic sources: Expertise exists in both academic and
international institutions. PPP Canada will need to invest in assessing and
establishing linkages with these institutions.
4.4.2.1.
What Types of Expertise and Advice?
The expertise and advice areas for P3s can be broadly grouped into the five
following areas consistent with the development and execution process for a P3.
General Environment: This is expertise and advice that would result in a more
receptive environment for P3s. Specific examples would include building
awareness of what P3s are and how they produce benefits. It could also include
expertise and advice to aid procuring entities regarding enabling policies and
processes (capital budgeting and decision-making, taxation, access to capital etc).
Project Identification and Reconceptualization: This is expertise and advice that
would assist potential procuring entities to identify and/or reconceputalize
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projects that have a high potential to be a successful P3. The result would be
agreement to pursue a P3 for a particular project. Specific examples would
include developing and applying a P3 screening tool. It could also involve
providing advice to a private sector or public sector client in how to reframe a
traditional procurement as a quality P3.
Business Case Development and Project Approval: This is expertise and advice
that would result in the development of a business case that effectively analyses
the potential value of a P3 and secures approval from relevant decision-makers to
proceed. Specific examples include value for money analysis, including risk
assessment and valuation.
Procurement Execution: This is expertise and advice that would result in the
closure of an effective P3. This includes the writing of RFQ/RFPs, bid
preparations, bid evaluations, contract negotiations.
Project Implementation: This is expertise and advice related to all elements of a
P3 project post financial close. It could include all elements that result in an
effective project throughout the concession period.
4.4.2.2.
Expertise and Advice for Whom
The potential clients for PPP Canada’s advice can be broadly grouped as follows
consistent with the market segmentation set out in the Corporate Plan:





Provinces and Territories
i. Developed (B.C., Alberta, Ontario, Quebec)
ii. Emerging (New Brunswick, Nova Scotia, PEI)
iii. Undeveloped (balance)
Municipalities
First Nations
Federal
Private Sector
PPP Canada’s understanding of the state of knowledge and the needs in these
various market segments is growing but remains incomplete. The role that PPP
Canada’s expertise and advice business line can and should play is part of the
market development strategies that continue to evolve.
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4.4.2.3.
P3 Knowledge Map
In order to scope needs and opportunities for PPP Canada’s expertise and advice,
a starting point is to assess the current state and sources of knowledge in each of
the potential markets and subject area elements. The assessment of the current
state of knowledge is based on experience and work over the last year. It is
somewhat impressionistic and anecdotal but begins to provide a sense of the
overall state of knowledge.
The existing sources attempt to reflect both what exists within the jurisdiction but
also highlights what expertise can be purchased from either other jurisdictions or
the private sector. It should be noted that it does not include what is available
from publically available information that can be found from a number of
sources. While much is available, it is often piecemeal and not readily available
in a digestible form. Finally, it does not include an assessment of the quality and
availability of knowledge from academic institutions, although this needs to be
addressed.
The sub-components of the knowledge map are shaded in three colours. These
colours represent a proposed set of priorities for PPP Canada – (Green—high
priority, yellow—medium priority and blue—low priority). These proposed
priorities have been established based on the following factors:



Linkage to other business and market priorities: the degree to which they are
critical to the successful implementation of the P3 Canada Fund or the
development of the federal market.
Ability to make an impact: what is PPP Canada’s ability to succeed given its
position and capacity.
Need: how acute is the need and to what extent can other sources be used.
There are a number of broad conclusions that emerge:



General environment issues should be a relatively higher priority for PPP
Canada – this is a reflection of PPP Canada’s role as a national institution with
a broad mandate with respect to P3s;
Project identification and business cases should be a relatively higher priority
– this is a reflection of both PPP Canada’s unique role with respect to the P3
Canada Fund and its emphasis on building the market;
Federal Market should be a priority – this reflects the relative capacity to
influence areas within its own jurisdiction.
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P3 Knowledge Map
Area of
Focus
General
Environment
Project Identification
&
Reconceptualization
Business Case
Development
& Project
Approval
Procurement
Execution
Project
Implementation
Current State: Sound
awareness of the P3s
and their benefits
among key decisionmakers, supportive
government policy
and capital budgeting
framework and
processes.
Existing Sources:
Established
institutions dedicated
to PPP. Central
agencies and line
departments engaged
in P3 activities.
Significant
participation of firms
and advisory
communities.
Current State: Assessment of
P3 integrated into capital
budget decision-making
process; P3 generally default
option for larger projects;
procurement option analysis
generally systematic.
Existing Sources: Established
institutions, although variable
involvement in early stages of
project identification process.
Current State:
Established practice
and experience with
business cases.
Established VFM
methodologies and
application.
Decision-makers
experienced with
assessing P3
proposals.
Existing Sources:
Established
institutions and
policies. Advisory
community involved
and familiar with
approach and
methodologies.
Current State:
Significant
experience,
established
documentation and
processes, often in
multiple sectors.
Existing Sources:
PPP agencies and
institutions; many
private sector firms
experienced with
bidding on P3s.
Current State:
Experience with
projects through to
substantial completion,
with early experience
post substantial
completion.
Existing Sources: Mix
of agencies and line
departments. Limited
sources in advisory
community.
Market
Developed
Provincial
Markets
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Area of
Focus
General
Environment
Project Identification
&
Reconceptualization
Business Case
Development
& Project
Approval
Procurement
Execution
Project
Implementation
Current State:
Pockets of
awareness;
approaches and
policies driven by
projects; private
sector still unsure of
commitment and
long-term deal flow.
Existing Sources:
Limited
Current State: Driven by
opportunities and often single
line departments, generally
Transport and/or Infrastructure
Departments.
Existing Sources: A few
individuals within a single
department supplemented by
contracted expertise like PBC
Current State: Some
experience based on
a few projects.
Approach generally
project-specific and
driven by advisors.
Existing Sources: A
few individuals
within a single
department
sometimes providing
advice to other
departments. Work
generally outsourced
to big accounting
firms
Current State:
Some experience
but generally
limited in terms of
number and sectors.
Existing Sources:
In-house
supplemented with
contracted services
from private sector
procurement,
financial and legal
advisers
Current State: Limited
Existing Sources:
Responsible line
department.
Market
Emerging
Provinces
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Area of
Focus
General
Environment
Market
Current State: Little
or no awareness of
Undeveloped P3s; supporting
Provinces & decision-making
processes largely
Territories
absent; exposure
generally related to
exchanges with other
jurisdictions.
Existing Sources:
Informal linkage to
other jurisdictions
through FPT forums
and networks
Current State: Very
limited knowledge
Municipalities about application of
P3s, with a few
exceptions and
growing interest
recognition.
Existing sources: Ad
hoc
Project Identification
&
Reconceptualization
Business Case
Development
& Project
Approval
Procurement
Execution
Current State: Limited to
discussions with PPP Canada
in relation to P3 Canada Fund.
Existing Sources: Some work
with PPP Canada
Current State: None
Existing sources: No
internal capacity –
PPP Canada in
context ofPPP
Canada projects.
Private sector
advisory firms.
Current State: None
Existing sources:
Private sector
advisory firms
Current State: None
Existing Sources:
Private sector advisory
firms
Current State: Little or no
knowledge, with handful of
exceptions
Existing Sources: none
Current State: Little
or no knowledge,
with handful of
exceptions
Existing Sources:
PBC or private sector
accounting firms
Current State: No
knowledge, with
handful of
exceptions
Existing Sources:
PBC, Infrastructure
Ontario or private
sector advisory
firms
Current State: No
knowledge with handful
of exceptions
Existing Sources:
Private sector advisory
firms
Project
Implementation
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Area of
Focus
General
Environment
Project Identification
&
Reconceptualization
Business Case
Development
& Project
Approval
Procurement
Execution
Current State: Little
or none at First
Nations level – some
within INAC
Existing Sources:
Limited from INAC
Current State: Little or none at
First Nations level – some
within INAC
Existing Sources: INAC and
potentially PBC for BC
Current State: No
knowledge
Existing Sources:
PBC and private
sector advisory firms
Current State:
Pockets of awareness
in select departments
Existing Sources:
Some in TBS and
PWGSC, but limited
Current State: Pockets of
awareness in select
departments
Existing Sources: Some n TBS
and PWGSC, but limited
Current State: Some
in PWGSC and
select departments
(e.g., CSE)
Exiting Sources:
PBC as well as
private sector
advisory firms; very
limited availability
from PWGSC
Current State: No
knowledge
Existing Sources:
PBC, Infrastructure
Ontario and private
sector advisory
firms
Current State:
Limited experience
in PWGSC and
some select line
departments
Existing Sources:
PBC, IO and private
sector advisory
firms
Market
First Nations
Federal
Government
Project
Implementation
Current State: No
knowledge
Existing Sources:
Private sector advisory
firms
Current State:
Extremely limited, some
related experience in
PWGSC
Existing Sources:
Private sector advisory
firms
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Area of
Focus
General
Environment
Project Identification
&
Reconceptualization
Business Case
Development
& Project
Approval
Procurement
Execution
Current State:
Solid understanding
of the issues affecting
the market for P3s
but less
understanding of the
drivers for public
sector and how to
collectively influence
change
Existing Sources:
Individual private
sector firms, CCPPP,
lobby firms
Current State:
Good ideas regarding
individual projects but less
understanding of how to secure
public sector interest.
Existing Sources:
Individual private sector firms,
lobby firms
Current State:
Good understanding
of basics but often
misunderstand
intricacies of process
and critical elements
of public sector
decision-making.
Existing Sources:
Private sector firms,
private sector
advisory, lobby firms
Current State:
Well experienced
and knowledgeable
Existing Sources:
Many individual
private sector firms,
private sector
advisors
Market
Private Sector
Project
Implementation
Current State:
Core competency
Exisiting Sources:
Private sector firms
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4.4.3.
Performance Indicators
2010/11 will be a year to establish baselines for performance in this new business
line, through consultations on the needs and expectations of PPP Canada’s
provincial, territorial, municipal, First Nations and federal clients.
PPP Canada will measure increases in internal expertise through capacity and
knowledge building, again using 2010/11 data points as the baseline for future
performance indicators.
4.4.4.
Priorities
For the purpose of the 2010-11 Corporate Plan, it is proposed that the following
priorities be established. These priorities would be updated based on experience
and progress in subsequent Corporate Plans.
2010-11




Build capacity in PPP Canada: PPP Canada must invest in building the
capacity to provide expertise and advice. This means continued focus on
recruitment of qualified staff; establishing a roster of private sector advisory
firms; and developing and implementing a P3 training program for staff.
Increase our understanding: PPP Canada must develop a more robust
understanding of the state of and sources of knowledge. This means a more
explicit identification of the role that expertise and advice will play in our
market development strategies.
Position PPP Canada in the Federal Market: As a key target, particular focus
will be given to assessing needs and developing an expertise and advice
strategy. This will be done in the context of growing relations with PWGSC
and TBS and in relation to a small number of federal projects.
Capital Market Issues: A particular focus will also be given to capital market
issues as they relate to P3s. One element of this focus will be on the
implication of the end of the Extraordinary Financing Framework and the
effective role that EDC has played in the domestic P3 market. A second focus
will be issues related to access to long-term debt financing and opportunities
to increase market participants.
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2011-12



Strengthen international networks: As the national institution, PPP Canada has
the opportunity to network with other countries and exchange best practice.
Establish expertise and advice strategies for each market segment: The role
and effort PPP Canada will invest in each of its market segment will need to
be more precisely defined and resourced, with defined measures of success.
Materials and modules: this would involve the development and provision of
key materials and modules for P3 practitioners with an early focus on business
cases, procurement processes and contract documentation.
2012-13



4.4.5.
Established as go to place in federal government for P3s.
Networked both domestically and internationally with leading P3
practitioners, industry participant and academics.
Continually updated set of P3 modules and documentation.
Resource Allocation
PPP Canada will allocate $2,349,000 in operating funds and 6 staff to the
Expertise and Advice business line in 2010/11.
5. Building the Organization
5.1.
Status Update
2009/10 was PPP Canada’s first year of operation and it was, in large part, a year
of building the organization and managing immediate needs to launch the P3
Canada Fund.
Among the key milestones in building the organization were:
5.1.1.
People
PPP Canada recruited a senior executive team and staff contingent of thirty, with
public- and private-sector backgrounds in the areas of:


P3 deal experience and financial/accounting expertise to support PPP
Canada’s business lines;
governance and administration of Crown corporations to build PPP Canada;
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


5.1.2.
corporate services and human resource management;
creation and operation of federal grants and contributions programs to support
the deployment of the P3 Canada Fund; and,
Sector experience and expertise across a wide range of infrastructure sectors.
Financial and Treasury Management
PPP Canada has developed and implemented an Enterprise Resource
Management solution (Freebalance) for the Corporation and the P3 Canada Fund.
PPP Canada’s Board has adopted a Treasury Risk Management Policy and
reviews Treasury investments on a regular basis to ensure compliance with
corporate Policy.
5.1.3.
Human Resource Policy
PPP Canada has:


5.1.4.
Developed and implemented a benefits plan for all employees of the
Corporation;
Initiated work on a classification system and compensation framework for all
employees of the Corporation.
Administration and Corporate Services
In addition to building internal administration capacity, new office facilities and
IT systems, PPP Canada has entered into a cost effective Shared Services
Agreement with the Canadian Commercial Corporation to provide corporate
services support.
5.2.
Strategy
5.2.1.
Implement Effective Management Accountability Framework
The strategy for priority-setting in 2009/10 was driven almost exclusively by the
necessity of managing the immediate needs of the new Corporation.
With the launch of the fund successfully completed, 2010/11 will see a greater
focus on creating an effective management accountability framework which can
govern PPP Canada as its growth stabilizes, and provide solid internal governance
for the ongoing operation of a mature Corporation and the effective deployment
of the remaining business lines.
One of the overarching strategic objectives of PPP Canada through this growth,
and in the creation of its management accountability framework, will be the
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ability to remain nimble in order to effectively serve the needs of PPP Canada’s
clients in deploying P3s as an effective procurement solution.
Beyond 2010/11, it is anticipated that the strategy for building the organization
will be one of continuous improvement and evolution, to reflect the growth of the
P3 markets across Canada.
5.2.2.
Prudence
PPP Canada Management has been very prudent in its spending during the
building of the organization preferring to take a long term view to operational
needs and growth and then utilizing the tools within the governance structure of
government to align the required resources. The result has been reprofiles of the
operating Vote in the 2009-10 Annual Reference Level Update and the current
reprofile planned for the Annual Reference Level Update in the fall of 2010.
PPP Canada will continue to work with Treasury Board Secretariat, Finance and
PCO officials at looking for options to support the ongoing management
requirements of the P3 Fund investments beyond the current 5 five year planning
period of this Corporate Plan.
5.3.
Performance Indicators
By the end of fiscal 2010/11 PPP Canada will have a full compliment of staff in
each of the business lines.
The inclusion of an Integrated Enterprise Risk Management Framework in the
2011/12 Corporate Plan.
The development of internal policies and procedures that build a learning and
innovative organization that respects Public Service Values and is driven to
excellence in results of its mandate.
5.4.
Priorities for 2010/11
5.4.1.
Stewardship
Sunsetting of Operating Funding in 2013/14 and Life Cycle of Investments
The 2010/11 operating budget for PPP Canada is comprised of a $5 million base
and a variable component that was calculated as a percentage of the P3 Canada
Fund appropriation. The $5 million base budget was a five year commitment of
the government which ends in 2012/13. The variable component related to the P3
Canada Fund ends in 2013/14 and both are reflected in the 2010/11 to 2014/15.
(See Pro-forma Financial Statements in section 9.3)
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Historically the variable component has been linked to the P3 Canada Fund
profile but such a link does not reflect the effort and resources needed to manage
the P3 Canada Fund investments. The time required to procure public
infrastructure using a P3 procurement strategy usually takes 3 to 4 or even more
years before reaching substantial completion of the infrastructure for public use.
While the business strategy for PPP Canada is to fully commit the P3 Canada
Fund appropriation in the year in which it is appropriated, the reality of P3
procurement is that cash will not be expended until 3 to 4 years after the
commitment. As a result, PPP Canada’s investments will be made well into fiscal
2016/17, and even 2017/18, and there will be a requirement for ongoing project
monitoring thereafter.
To address the funding shortfall in 2013/14 PPP Canada will be requesting a
reprofile of $1.7M from fiscal 2011/12 and $1.7M from 2012/13 into year
2013/14 in the Annual Reference Level Update process in the fall of 2010. The
issue of possible funding solutions for 2014-15 and thereafter will be discussed
with Finance, Treasury Board and included in a future Corporate Plan.
Commitment to Performance and Risk Management
Preparing for the P3 Canada Fund Formative Evaluation
In fiscal 2010/11 PPP Canada will develop a Performance Management
Framework in advance of the formative evaluation of the P3 Canada Fund. At the
present time PPP Canada has base line market information. PPP Canada will
update and expand this information to include performance metrics that could
include items such as the jurisdiction’s development of a policy framework, the
number of P3 projects, the variety of sectors of the jurisdiction’s projects, or the
percentage of infrastructure budget invested in P3s. The P3 Canada Fund
evaluation framework is planned for completion in 2010/11.
The current Terms and Conditions provide for a formative evaluation to be
completed during fiscal 2011/12. However, because of the time frames required
for completion of a P3 investment there will not be any completed project files for
review until at least 2012/13. Because project files will be one of the primary
sources of evidence for such an evaluation it is recommended that the formative
evaluation is deferred until 2012/13.
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Finalizing an Enterprise Risk Management Framework
Corporate risk is an inherent part of PPP Canada’s business from an operational
and financial standpoint. As the Corporation continues to build a strong
foundation of management, policies, and governance practices in 2010/11, the
organization’s management team will continue to refine, in consultation with the
Board of Directors, a comprehensive enterprise risk management program.
Consultants have already been contracted to aid in this process which is scheduled
for completion in 2010/11.
Risk management within PPP Canada is a shared process between the
Corporation’s management team and the Board of Directors. The Board will
ensure that a formal risk management program is developed, maintained,
effective, and reviewed on a regular basis. The management team will ensure that
effective structures, policies, and procedures are incorporated into the risk
management program and implemented.
Policies and Procedures Development
PPP Canada will develop a suite of human resource policies and procedures as
well as other administrative policies, procedures and practices that support a high
performing organization of excellence in management and that reflect the best
practices of the Government as represented by Treasury Board’s Management
Accountability Framework.
5.5.
Resource Allocation
PPP Canada will allocate $2,563,000 in operating funds and 10 staff to Building
the Organization in 2010/11.
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6. Financial Authorities
Issue: Drawdown the P3 Canada Fund:
The private sector and business partners will demand that PPP Canada provide
financial commitments to a P3 project in a form and of strength that reflects the
full backing of the Government of Canada. Project proponents and consortia will
require “bankable” commitments, when seeking project financing from the credit
markets. It is in the interest of the Government that in order to build the P3
market in Canada PPP Canada is able to appropriately respond to this issue.
Consultations:
PPP Canada requested and received an exemption to Treasury Board’s Directive
on the Use of the Consolidated Revenue Fund for Crown Corporations for fiscal
year 2009/10. PPP Canada has previously consulted Treasury Board Secretariat,
Finance, Office of the Comptroller General and Privy Council to ensure their
support for an exemption to the Directive.
Authority Request:
That Treasury Board approve an exemption to Treasury Board’s Directive on the
Use of the Consolidated Revenue Fund for Crown Corporations and allow PPP
Canada to invest such funds in accordance with PPP Canada Board’s approved
investment policy.
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7. Financial Statements & Analysis
7.1.
2010/11 Operating and Capital Budgets
PPP Canada Inc.
Budget Statement of Operations and Accumulated Surplus
Year Ending March 31, 2011
($000)
EXPENSES
Salaries and Benefits
Travel
Information & Communication
Legal
Professional Services
Shared Administrative Services
Project Specific Advice
Project Development
P3 Tools and Pratices
Rent
Purchased Repair & Maintenance
Directors Fees & Expenses
Special Fees and Services
Temporary Help Services
Interpretation & Translation Services
P3 Canada Fund Non-Repayable Contributions
Amoritization
Start Up Costs
2008/09
Actual
2009/10
Estimated
2010/11
Budget
2,279
137
48
170
1,555
750
80
30
210
260
55
120
100
100
20
7
2,234
2,241
131
5,936
690
65
150
885
1,000
570
1,340
915
462
40
148
315
30
100
3,308
255
6,045
16,209
REVENUES
Earned P3 Canada Fund Revenue
Interest Income
Net results of operations before Parliamentary appropriations
and amortization
Parliamentary appropriations
Amoritzation of deferred capital funding
Net results of operations
Opening Balance
Accumulated Surplus
3,308
18
35
35
(2,223)
(6,010)
(12,866)
3,386
7
1,170
1,170
5,649
131
(230)
1,170
940
12,650
255
39
940
979
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PPP Canada Inc.
Budget Statement of Capital
Year Ending March 31, 2011
($000)
Capital Expenditures
Equipment
Furniture and Fixtures
Leasehold improvements
Total Capital Expenditures
2008/09
2009/10
2010/11
Actual
Estimated
Budget
44
313
378
260
50
-
44
951
50
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7.2.
2010/11 to 2014/15 Pro-Forma Financial Statements
PPP Canada Inc.
ProForma Statement of Operations and Accumulated Surplus
For the Years Ending March 31, 2010 to 2015
Actual
Estimated
($000)
2008/09
2009/10
2010/11
EXPENSES
Salaries and Benefits
2,279
5,936
Travel
137
690
Information & Communication
48
65
Legal
170
150
Professional Services
1,555
885
Shared Administrative Services
750
1,000
Project Specific Advice
80
570
Project Development
30
1,340
P3 Tools and Pratices
210
915
Rent
260
462
Purchased Repair & Maintenance
55
40
Directors Fees & Expenses
120
148
Special Fees and Services
100
315
Temporary Help Services
100
30
Interpretation & Translation
Services
20
100
P3 Canada Fund Non-Repayable
Contributions
3,308
Amoritization
7
131
255
Start Up Costs
2,234
2,241
6,045
16,209
REVENUES
Earned P3 Canada Fund
Revenue
3,308
2011/12
2012/13
2013/14
6,233
450
70
100
780
1,000
520
1,440
960
468
40
155
215
50
6,544
450
70
100
780
1,000
520
1,245
830
471
40
163
215
50
6,872
450
70
100
660
1,000
440
1,200
800
481
40
171
215
50
7,215
450
70
100
600
1,000
400
900
600
481
40
180
215
50
50
50
50
50
21,390
264
153,800
221
236,377
178
270,333
114
34,185
166,550
249,154
282,798
21,390
153,800
236,377
270,333
Interest Income
18
35
35
35
35
Net results of operations before
Parliamentary appropriations and
amortization
(2,223)
(6,010)
(12,866)
(12,760)
(12,715)
Parliamentary appropriations
3,386
5,649
12,650
14,350
14,350
Amoritzation of deferred capital
funding
7
131
255
264
221
Net results of operations
1,170
(230)
39
1,854
1,856
Opening Balance
1,170
940
979
2,833
Accumulated Surplus
1,170
940
979
2,833
4,689
Assumptions
(1) Salary increase of 5% that reflects movement through PPP Canada's classification system based
on performance.
35
35
(12,742)
9,350
(12,430)
178
(3,214)
4,689
1,475
114
(12,316)
1,475
(10,841)
48
2014/15
PPP Canada Inc.
SUMMARY CORPORATE PLAN 2010-2015, OPERATING AND CAPITAL BUDGETS 2010/11
PPP Canada Inc.
Proforma Balance Sheet
As at March 31, 2010 to
2015
($000)
Actual
Estimated
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
Assets
Current Assets
Cash and cash equivalents
1,516
1,298
1,378
3,484
165,441
407,444
679,747
1,516
166,738
408,821
683,232
37
357
378
260
407
378
260
457
378
260
507
378
260
557
378
260
607
378
260
(138)
(393)
(657)
(879)
(1,056)
(1,170)
37
857
652
438
266
139
75
1,553
167,595
409,473
683,670
829,617
867,237
610,214
298
298
311
517
1,499
2,439
298
298
311
517
1,499
2,439
165,441
407,444
679,747
823,596
863,876
618,274
48
37
60
857
88
652
135
438
188
266
248
139
316
25
85
166,358
408,184
680,320
824,050
864,263
618,615
383
166,655
408,494
680,837
824,928
865,762
621,055
1,170
940
979
2,833
4,689
1,475
(10,841)
1,553
167,595
409,473
683,670
829,617
867,237
610,214
Short term investments
Long-term Assets
Equipment
Furniture and Fixtures
Leasehold improvements
Less: Accumulated
Depreciation
Total Assets
5,756
823,596
829,351
3,222
863,876
867,098
(8,135)
618,274
610,139
Liabilities
Current Liabilities
Accounts payable and
accrued liabilities
Long-term Liabilities
Deferred P3 Canada Fund
Revenue
Employee future benefits
Deferred capital funding
Total Liabilities
Accumulated Surplus
Total Liabilities and
Accumulated Surplus
879
879
49
PPP Canada Inc.
SUMMARY CORPORATE PLAN 2010-2015, OPERATING AND CAPITAL BUDGETS 2010/11
PPP Canada Inc.
Proforma Statement of P3 Canada Fund Cash Flows
For the Years Ending March 31, 2011 to 2015
($000)
Actual
2008/09
Appropriation
-
Estimated
2009/10
165,400
Fund Interest Earned
-
41
Disbursement
Opening Fund Balance
2010/11
242,500
2011/12
275,000
2012/13
275,000
2013/14
252,900
2014/15
2,852
18,693
22,649
23,757
24,731
(3,308)
(21,390)
(153,800)
(236,377)
(270,333)
165,400
407,444
679,747
823,596
863,876
Closing Fund Balance
-
165,441
407,444
679,747
823,596
863,876
618,274
Interest Earned on Excess Funds
-
41
2,852
18,693
22,649
23,757
24,731
Cumulative Earned Interest
-
41
2,893
21,587
44,235
67,992
92,723
0.30%
0.70%
2.75%
2.75%
2.75%
4.00%
Interest rate assumption
Assumptions
Disbursements made on the following basis:
2% 1st year after drawdown
10% 2nd year after drawdown
75% 3rd year after drawdown
13% 4th year after drawdown
Investments of cash reserves shall follow the guidelines set out in the Board approved Investment Policy.
50
PPP Canada Inc.
Proforma Statement of Operating Cash Flows
For the Years Ending March 31, 2010 to 2015
($000)
Actual
Estimated
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
Cash flows provided by (used in)
operating activities
Net income from operations
Amortization expense
Amortization of deferred capital
funding
Employee future benefits
Changes in non-cash items:
Increase (decrease) in accounts
payable and accrued liabilities
1,170
(230)
39
1,854
1,856
(3,214)
(12,316)
7
131
255
264
221
178
114
(7)
(131)
(255)
(264)
(221)
(178)
(114)
48
12
28
47
53
60
68
298
-
13
205
363
620
940
1,516
(218)
80
2,106
2,272
(2,534)
(11,308)
(44)
(313)
(50)
(50)
(50)
(50)
(50)
Cash flows provided by (used in)
investing activities
Acquisition of equipment
Acquisition of Furniture and Fixtures
(378)
Acquisition of leasehold
improvements
(260)
Cash flows provided by financing
activities
Parliamentary appropriations for
capital funding
44
951
50
50
50
50
Increase (decrease) in cash and
cash equivalents
1,516
(218)
80
2,106
2,272
(2,534)
(11,358)
1,516
1,298
1,378
3,484
5,756
3,222
1,298
1,378
3,484
5,756
3,222
(8,135)
Cash and Cash equivalents,
beginning of year
Cash and Cash equivalents, end of
year
1,516
51
PPP Canada Inc.
Proforma Statement of Capital
For the Years Ending March 31, 2010 to 2015
($000)
Actual Estimated
2008/09
2009/10
2010/11
2011/12
50
50
2012/13
2013/14
2014/15
50
50
50
Capital Expenditures
Equipment
44
313
Furniture and Fixtures
378
Leasehold improvements
Total Capital
Expenditures
260
44
951
50
50
50
50
50
Amortization Equipment
7
67
127
137
94
50
50
64
128
128
128
128
64
131
255
264
221
178
114
Amortization Furniture and
Leasehold
Total Amortization
7
Equipment amortized straight line over 3 years
Furniture and Fixtures and Leasehold improvements amortized straight line over 5 years
52
ANNEX 1 — Environmental Factors
1. How is the P3 Market Developing in Canada?
P3s are currently operating across the country – from bridges and roads to
hospitals to fire stations and prisons – and users and taxpayers are reaping the
benefits with better service, lower costs and faster delivery times.
Nonetheless, at this early stage of P3 procurement adoption, Canada cannot be
seen as a single market for P3s. In fact, there is a large degree of variability
amongst the P3 markets in Canada.
The provinces of British Columbia, Ontario, Alberta and Quebec have been early
adopters and have each made a clear policy commitment to P3 procurement as a
means of delivering better value to taxpayers. These four provinces have
undertaken the vast majority of P3 procurements in Canada, to date.
As a result of provincial leadership in P3s, Canada boasts a high number of P3
procurements in the social and transportation infrastructure sectors, such as
hospitals, courthouses and roads, which are key areas of responsibility for
provincial governments and occupy large portions of provincial infrastructure
budgets.
As jurisdictions have developed P3 expertise and procurement capacity, and more
noticeably where they have created dedicated P3 units or agencies, the application
of P3 procurements has subsequently grown to other infrastructure sectors, and
even to municipal markets. Clearly, these institutional drivers have played
significant role in the development of P3 markets in Canada.
However, because the value of P3s is best leveraged in large, complex projects
where innovation can reduce lifetime costs and deliver better infrastructure, the
P3 market is not boundless. It is estimated that P3s are the better procurement
option in only up to 20 per cent of public infrastructure procurements. However,
in the instances where they are the better procurement option, they have delivered
cost-savings range between a few million dollars and more than $750 million in
the case of the Autoroute 30 project south of Montreal1. As a result, P3s are only
one tool of many that governments can employ to optimize the value that is being
delivered in public infrastructure procurements.
1
Mario Iacobacci, Dispelling the Myths: A Pan-Canadian Assessment of Public-Private Partnerships for
Infrastructure Investments (The Conference Board of Canada, January 2010), p. iii, 13, 16, 23.
53
2. Impact of institutional, policy and program funding approaches
In Canada, jurisdictions have opted for a variety of different approaches to
implementing P3 procurement. Generally, these include institutional capacitybuilding and policies for considering P3s in infrastructure procurement. The
federal government has also implemented a financial incentive program, unique in
Canada.
Institutional capacity-building has had a large impact on jurisdictions’ adoption of
P3 procurement and the development of the Canadian P3 market, beginning in the
early 2000s with the creation of dedicated P3 procurement entities in major
provinces.
By and large, the adoption of P3 procurement has been greater in those
jurisdictions which have a general policy framework for reviewing all
infrastructure projects over a certain dollar value for P3 suitability, than in those
without.
Though it has not yet been implemented, the federal government did, however,
create the P3 Screen to assess projects applying to federal infrastructure programs
for P3 suitability. The P3 Screen would institute a process to systematically
review non-federal projects over a certain dollar value, seeking federal grants and
contributions.
Finally, the federal government has implemented a funding program to incent the
consideration of P3 procurements in non-federal projects which are seeking
matching federal infrastructure dollars. While it is still early to draw conclusions
on the impact of this program, there are a couple of early signals that the program
funding approach is influencing the development of Canadian P3 markets:

The projects which have been submitted to the P3 Canada Fund in Round One
have, generally, reflected a very early stage of development.

Federal program funding to incent P3s is unlocking new markets. Projects
have been submitted to the P3 Canada Fund by jurisdictions which have never
before done P3s, including several First Nations and municipalities.
To conclude, while the existence of policies, institutional capacity and program
funding are all drivers for the development of the Canadian P3 market, there are
two core characteristics which clearly distinguish mature and successful P3
markets, both domestically and internationally:
1. They have implemented whole of government capital planning; and,
2. They have implemented a systematic consideration of the P3 procurement
option, which drives deal flow.
54
The following chart, prepared for PPP Canada by Deloitte & Touch, LLP,2
illustrates the “Market Development Curve” for international P3 markets. It plots
sophistication against the level of P3 activity within a number of international
jurisdictions. Jurisdictions in the upper-right quadrant (“Stage Three”) are
considered to be the most mature P3 markets.
3. Clear need for expert resources and capacity
Based on the experience with Round One, there appears to be no “standard” P3
project - each has its unique circumstances, and there is also considerable
diversity in approach (methodology, Value For Money analysis, active sectors,
and institutional arrangements) across jurisdictions. The availability of expertise
and capacity is an issue across much of the country and it may be necessary to
adapt PPP Canada’s service offering with more extensive outreach, education, and
support, since the experience in Round One has been that projects in jurisdictions
with less capacity and experience require more support, and a longer gestation
period.
In particular, aboriginal and northern projects tend to present different P3
structures from southern models, mainly with respect to the generation of wealth
for the community. As these projects make their way through PPP Canada’s
2
Deloitte & Touch LLP, Environmental Scan of the Accounting Practices of P3 Projects (January 29,
2010), 39.
55
assessments, they may, in fact, challenge conventional thinking on P3 best
practices and require innovation that will enable P3 procurement to be used in the
procurement of public infrastructure for First Nations.
4. How is the private sector responding to P3s?
Canada is considered to be a leading market for doing P3s by private-sector
partners. In fact, Canada has ranked 6th in the world in terms of market share of
P3s by value, for the past two consecutive years (see following chart)3.
Amongst other factors, this has been attributed to:







3
relatively steady deal flow (e.g. Infrastructure Ontario is currently bringing a
new transaction to market approximately every six weeks);
reliable local constructors;
relatively low political risk;
stable currency;
credit quality of governments;
ethical and transparent administration; and
a strong legal system and contract/procurement laws.
Infrastructure Journal, Back to Schools – PPP/PFI Outlook 2010 (March 10, 2010), online publication
56
As a result, Canada has been able to successfully attract foreign equity and debt
investment to domestic P3 deals, very early on in the development of its P3
market. The early involvement of foreign sponsors and lenders has enabled
Canadian constructors to climb the P3 learning curve with less financial risk, by
acting as junior partners and sub-contractors in consortia.
More recently, the Canadian P3 market is maturing to reflect a mix of Canadian
and foreign participants. Canadian companies are steadily increasing their
involvement as senior construction partners or project sponsors in Canadian P3s.
Many of the early foreign project sponsors and constructors have set up or
acquired Canadian subsidiaries to service the Canadian market (e.g. Bilfinger
Berger, Plenary Group, Macquarie, Flatiron Constructors, etc). In addition, as the
P3 market developed a regular and predictable deal flow, several Canadian
headquartered firms have invested the necessary resources to build P3 businesses
(e.g. PCL Constructors, SNC-Lavalin, Atcon Construction, Aecon, Fengate
Capital Management, Ellis Don, Forum Equity Partners, etc). In some cases,
Canadian companies are also active in foreign P3 markets.
While the number of industry players, both foreign and domestic, in the Canadian
P3 market is growing, they do not view all public-sector partners equally. The
private-sector has a strong bias toward markets with stronger deal flow; reliable
capacity to support long-term partnership; a predictable track record; and, ideally,
standardized processes to minimize bid-costs.
This focus on the quality of the public-sector partner is driven, to a large extent,
by the financial risks that private partners must undertake to participate in P3
procurement. Governments that have been successful in developing P3 markets
have recognized the importance of continuously building the confidence of
private partners adopting a more business-like approach to the procurement
process. Conversely, markets which fail to convert projects get from RFQ/RFP to
financial close, or which signal a lack of commitment to the procurement have
had difficulty attracting qualified bidders.
5. How are capital markets reacting to P3 deals?
Financial market conditions have improved recently in terms of both liquidity and
spreads but the impact of the financial crisis on P3s has been noticeable as it has
reduced the number of players financing P3 projects, affected liquidity and
increased spreads.
For large debt deals (over $250 million), the evolution of trends has been
relatively easy to follow through placements and the leveraging of other capital
market solutions. The profile of lenders in the Canadian P3 market has changed as
a number of European financial institutions that had been active have exited, and
others have reduced the lending caps to individual projects (some now estimate
57
the cap around $50 million). In response, concessionaires have had to multiply
the number of participants in large debt deals. There has been some recent interest
in creating P3 investment vehicles, such as debt funds, to bring new debt players
to the market. Though the availability of debt does not seem to be an impediment
to deal, at the time being, the multiplication and close timing of new P3 projects
in the market has the potential to challenge the availability of financing. PPP
Canada continues to monitor these developments through dialogue with the
financial sector.
Interestingly, the exit of European financiers has created an opportunity for
Canadian banks, with their strong financial performance through the crisis, to
begin investing in the Canadian P3 market as debt partners. Nevertheless, this
participation is primarily through short-term construction debt and some mediumterm loans.
On the other end of the spectrum, small debt deals (under $50 million) are much
harder to track in terms of the availability and cost of capital. Primarily, debt for
small deals is sourced through bank debt, on the balance sheet of the
concessionaire, or provided by life insurance companies, which are also very
active in the P3 market.
At the federal level, the January 2009 Budget established the Extraordinary
Financing Framework (EFF) and broadened Export Development Canada’s
authorities for two years to include domestic projects, as part of the stimulus
package. These powers enable both surety and co-lending support to P3
transactions. The need for sureties remains important – especially for P3 deals
with medium-sized construction firms who need balance sheet support to
participate in the domestic market. PPP Canada anticipates that there will
continue to be a need for sureties in the Canadian P3 market beyond 2011, when
EDC’s special powers expire. PPP Canada will continue to monitor the privatesector’s ongoing interest in/ability to cope with the lending and surety needs of
the P3 market.
At the same time, some provinces have pursued different solutions, such as
alternative financing models, including British Columbia’s “wide-equity”
approach. The British Columbia model involves increased equity requirements
but with the province providing the debt for projects in order to manage costs of
financing and safeguard affordability caps on the projects. Partnerships British
Columbia has been clear that this solution is a temporary one and, in some cases,
continues to consider a commercial debt solution as an option for the
procurement, where the affordability caps can accommodate it.
58
6. What are the systemic barriers to P3s?
As the use of P3s in public procurement increases in Canada, systemic barriers are
being uncovered. Early adopters of P3s have begun to address these issues as a
means of encouraging private investment in public infrastructure.
6.a Cost, Complexity/Length and Uncertainty of Bid Processes
The cost, complexity/length and uncertainty of bid processes have been raised by
many private sector players as the first barrier to P3s. Bid costs for P3
transactions can be significant and can, in some cases, undermine the interest of
bidders in a P3 procurement. There are, however, opportunities to simplify and
standardize legal agreements and documentation and streamline RFP processes to
reduce cost. This is true across all jurisdictions in Canada and could be an area of
future focus for PPP Canada. The practice of standardizing documents has been
successful in the United Kingdom, where it is widely implemented. In Canada,
advanced P3 markets with dedicated agencies have made standardization of
documents and RFP processes a priority. In order to offset the high bid costs of
P3 procurements and maintain private-sector interest in the markets, a growing
trend is to use honoraria for unsuccessful bidders. The challenge will be to
standardize further across Canadian P3 markets, in order to satisfy the needs of
the bidder community and solidify the attractiveness of the Canadian market.
6.b Need for Alignment of P3 and General Procurement Practices
The second barrier is that procurement processes in many Canadian jurisdictions
are not designed to accommodate P3 procurement.
In Canada, the private sector has particularly flagged issues at the federal level,
noting that federal practices and processes do not facilitate P3s. The private sector
has highlighted the need for PPP Canada to play an enabling role with respect to
federal projects.
Some departments and agencies have seen the benefits that a P3 would provide in
meeting their infrastructure requirements, but they faced challenges in developing
and realizing their projects. For instance, within the federal government, there is a
dearth of expertise to negotiate, execute and support P3 arrangements requires. In
addition, current procurement, budgeting and accounting policies of the federal
government (e.g., annual appropriations, separate capital and operating votes,
cash rather than accrual accounting, etc.) are sometimes inconsistent with the
longer-term financial arrangements required for P3s.
Furthermore, while past P3 successes (such as the Confederation Bridge)
demonstrated the P3 model’s ability to complement traditional government
59
infrastructure procurement, unlike other jurisdictions with P3 agencies, there is no
explicit practice or process that requires that a federal department or agency
consider P3 arrangements when analyzing options in connection with capital
procurement. The absence of practices and processes for considering P3 projects
leads to inconsistent and uncertain evaluation of the costs and benefits of the
proposal, delays in project decision-making that increases overall costs, and does
not incent departments to assess whether P3 approaches would provide better
value for the users of the infrastructure and the taxpayer.
Likewise, there is no federal central Capital Planning process across departments
and agencies: each has its separate long-term capital plan. Approval of these
capital plans and larger capital projects is given by the Treasury Board, but the
capital projects are usually well advanced and there is little incentive to re-start to
examine P3 options.
PPP Canada notes that within the existing federal framework of distributed
authorities and accountabilities, there are elements of capital planning, approval
and management policies which speak to many P3 attributes:







Ensuring value for money
Demonstrating sound stewardship
Encouraging innovation by exploring a full range of options
Risk-based and complexity-based approaches
Use of life-cycle management approach
Generation of fees and revenues
Unlocking additional value of assets
However, as mentioned earlier, the existence of a both whole of government
capital planning approach and a process to systematically identify P3
opportunities are the core characteristics of mature and successful P3 markets. As
a result, it is PPP Canada’s view that federal departments would benefit from
support in developing the tools to incorporate P3s into their decision-making and
planning processes and Central Agencies could also benefit from support in
assessing the value-for-money and risk transfer elements of P3 proposals.
60
7. How is PPP Canada Influencing the Development of Canada’s P3 market?
7.a Increasing the Visibility of P3 Procurement Among Decision-Makers
The increased visibility of P3s as a procurement solution for governments is one
of the major accomplishments of the P3 Canada Fund and will remain a factor in
PPP Canada’s ability to develop the P3 market. Many of the applicants in Round
One represented undeveloped P3 markets which approached PPP Canada very
early on in their procurement planning process to obtain information about P3s as
a procurement solution and access support and expertise. They included
municipalities, First Nations, smaller provinces and territories.
PPP Canada’s experience in Round One is quite different than the experiences of
provincial P3 agencies, who are typically engaged once projects have been
funded, and/or once the decision to procure as a P3 has been made. It is a positive
indicator of the P3 Canada Fund’s ability to grow the Canadian market for P3s
beyond the advanced and emerging P3 markets that already exist.
PPP Canada anticipates that the first project approvals and investments of the P3
Canada Fund from Round One will continue to build momentum & visibility for
P3 procurement among undeveloped markets.
7.b Increasing P3 Dialogue Between Provincial Governments / P3 Agencies and
Municipalities; INAC and First Nations
In Round One, PPP Canada leveraged provincial and territorial governments, as
well as INAC as primary interlocutors to disseminate information about the P3
Canada Fund to other levels of government, and submit applications on their
behalf. This process was primarily borne out of capacity constraints, within PPP
Canada, to handle large volumes of municipal inquiries and applications. In
general this process worked well, though it did present some additional benefits
and challenges in its implementation.
In terms of benefits, the Round One approach enabled PPP Canada to build
relationships with the provincial and territorial departments responsible for
delivering on capital infrastructure needs and, ultimately, driving the adoption of
P3 procurement at the provincial and municipal levels. This approach also
positioned PPP Canada as an enabler of P3 projects, and a supporter of provincial
P3 agencies, rather than a competitor.
However, finding the appropriate interlocutor at the provincial/territorial level has
been a challenge. The PPP agencies in the four advanced P3 markets are the best
positioned interlocutors during the execution phase of the provincial P3 project,
but are neither mandated nor resourced to develop a new pipeline of P3 projects.
It was clear in Round One that PPP Canada must work in these jurisdictions (in
61
particular) to be effective with the municipal market. Additional outreach will
likely be needed in future rounds to effectively grow both the provincial and the
municipal markets for P3s in these provinces.
Another lesson learned in Round One was that the informal advance processes,
prior to the formal launch, were essential. The “Market Sounding” started in the
spring identified potential projects, minimized surprises (on both sides), and
informed our processes and Round One decisions. Moving forward, an advance
process will again be critical to success and project identification, development,
and outreach will be needed to identify projects prior to launching Round Two.
8. How Will a Period of Fiscal Restraint Impact Public Infrastructure
Procurement and P3s?
Following the spike in stimulus funding to stabilize the economy in 2009, all
levels of government are currently implementing or envisioning fiscal restraint
measures to manage their deficits over the next several years.
As a result, the context for capital budgets is evolving across the country and
there is visible downward pressure on the number of larger infrastructure
procurements that will be brought to market.
Just as Canadians are being more prudent with their household spending, the
refrain across most 2010 budgets has been one of fiscal restraint, stretching every
dollar and looking for opportunities to deliver better value for money.
In many provinces, territories and municipalities, the pressure to fill infrastructure
gaps remains high, and explains the priority that is being placed on core public
infrastructure such as hospitals, schools, roads, bridges and other transportation
infrastructure. Likewise, the federal Budget 2010 places a focus on the need “…to
rebuild Canada’s aging infrastructure by making priority investments in projects
designed to ensure that Canadians have access to safe and effective
transportation”.
The increased restraint and targeting of infrastructure dollars may have an impact
on the recourse governments have to P3 procurement. On one hand, the ability of
P3s to provide greatly increased budget certainty in capital spending makes them
a very attractive solution for cash-strapped governments. On the other hand, the
restraint being exercised with regard to non-core public infrastructure may stunt
the diversification of the P3 market beyond social and transportation
infrastructure.
2010/11 will be a learning year for all levels of government and for PPP Canada,
as we wait to see the impact that fiscal restraint will have on P3 procurements.
62