Expanding Ontario’s public infrastructure by delivering innovation, transparency, accountability and results – building a better tomorrow
Derrick Toigo Senior Vice President, Civil Infrastructure
June 12 2014

• Ontario’s hospitals were, on average, 40 years old, equalling the industry-standard
“useful life” of a hospital.
• Annual infrastructure investment levels were 75% lower than today’s.
• The estimated the cost of modernizing
Ontario’s hospitals was $8 billion.
November 18, 2004
A report on the “poorly planned” new
Thunder Bay hospital contains valuable lessons about how not to build or redevelop
Ontario health-care centres, Health Minister
George Smitherman said Tuesday.
• Large, traditionally delivered projects were plagued by poor budgets, inadequate project management and unsophisticated commercial negotiating expertise.
Governments did not have the confidence to properly address the large infrastructure deficit.
Sault Ste. Marie Star
September 2, 2006
“The new Sudbury hospital was originally approved at $143 million but was suspended when the cost reached $316 million.”
“The new Thunder Bay hospital was approved at $126 million and came in at $283 million.”

• In 2004, the Ontario Government sought an alternative to traditional methods of infrastructure project delivery.
̶ examined the delivery methods that had been used by other jurisdictions to address infrastructure deficit.
Building a Better Tomorrow Framework
(2004)
1
Guided by five principles meant to address lessons learned in Ontario and in other jurisdictions when it comes to P3:
• The public interest is paramount
• Value for money is demonstrable
• Appropriate public control/ownership must be preserved
ONTARIO’S
LONG-TERM
• Accountability must be maintained
2
INFRASTRUCTURE
PLAN
• Publically committed to the first ever long-term infrastructure plan
̶ Signaled to the market provision of a steady pipeline of infrastructure projects.
• All processes must be fair, transparent, efficient
3
ReNew Ontario (2005-2010)
• Formulated a made-in-
Ontario approach to financing and managing large, complex
Ontario’s five-year infrastructure plan invested $30 billion in health care, justice, infrastructure projects.
̶ In 2005, established
INFRASTRUCTURE post-secondary education and transportation projects.
ONTARIO
Infrastructure Ontario 3

• Ontario’s P3 model was adapted using the model from the UK and Australia where both labour and conservative governments have used P3s.
• IO carefully reviewed issues and problems realized in other jurisdictions and intentionally designed non-ideological procurement practices and contractual provisions; hence the name Alternative Financing and Procurement (AFP).
• What makes Infrastructure Ontario’s AFP model different?
• Infrastructure Ontario:
̶ Protects the rights of unionized workers;
̶ Puts in no more private finance that is necessary to transfer risk;
̶ Does not include core public services; services relate to assets (e.g., HVAC and elevator repair and cleaning);
̶ Does not outsource any service to the private sector that is new – only difference is we have combined them and the private sector has integrated them; and
̶ Always reserves the right to terminate contract.
• Why does Infrastructure Ontario continue to be successful?
• IO continues to carefully monitor local and international issues so as to proactively modify the model as appropriate.
• IO maintains an active dialogue with stakeholders in other jurisdictions in an effort to share and benefit from best practices, and analyzes and modifies current practices so as to increase overall value for money on projects.

Using taxpayers’ money responsibly
• Value for money (VFM) analysis is a process of comparing project costs using two delivery models
− the traditional project delivery model (the public sector comparator) and the Alternative
Financing and Procurement (AFP) model
− to determine which is the better value proposition .
• VFM reviews are conducted by thirdparty accounting firms based on real project data.
• Only where a VFM review demonstrates that the value of the AFP model outweighs the traditional model and provides value for money will the province proceed with an AFP project.
Value for money savings on Alternative
Financing and Procurement projects average over 11% per project.
Value For
Money
Risk Retained
Risk Premium
Ancillary Cost
Financing Cost
Base Cost
Primary Risks Transferred to
Private Sector in AFP Model:
• Design Risks
• Financing Risks
• Maintenance Risks
• Construction Risks
• Scheduling Risks
Infrastructure Ontario 5

Internal Mechanisms External Mechanisms
• Client Ministries define project scope.
• Annual Report prepared in accordance with
Management Board of Cabinet directives
• Projects are assigned to IO by way of Ministerial letter of direction.
• Freedom of Information and Protection of
Privacy Act (FIPPA) prevails with allowance for commercially sensitive information
• Project budgets must be approved by Treasury
Board
• Auditor General can review directives from the
Minister
• Investment and Risk Committee of IO Senior
Management reviews all major transactions at critical milestones
• IO’s private-sector Board of Directors appointed by the Lieutenant Governor-in-Council approves all major transactions.
Infrastructure Ontario 6

Clear disclosure guidelines to the public with information posted on www.infrastructureontario.ca
Key commitments include:
• Competitive tendering
• Use of electronic systems for all bids (MERX)
• Proactively releasing relevant information in press releases and on website
• Disclosing key project documents on website, including RFPs, final project agreements, and value for money reports.
Information deemed commercially sensitive (determined with reference to principles under FIPPA) may be redacted
• All major procurement processes are supervised by a Fairness
Monitor
All projects are open to examination by the independent office of the Auditor General
Infrastructure Ontario 7

• 93 AFP projects have been assigned to IO
• 36 AFP projects have reached substantial completion of construction
• Total construction cost value: $6.5 billion
Infrastructure Ontario 8

• 37 Projects have reached Substantial Completion
– 27 health care
– 5 courthouses
– 3 detention centres
– 1 forensics complex
– OPP Modernization (16 sites)
Total Construction Value: $6.5 billion
• 18 Projects currently under construction
– 8 health care
– 5 transit/transportation
– 4 Pan Am Games Venues
– 1 college
Total Construction Value: $6.9 billion
• 18 Projects in procurement
11 health care
6 transit/transportation
1 college
Total Construction Value: $8.3 billion
Infrastructure Ontario 9

PARTICIPANT FINANCIAL INSTITUTIONS
CONTRACTORS, EQUITY PROVIDERS & OTHER NON-FINANCIAL MEMBERS

On-budget Schedule Analysis
• 29 of 30 projects analyzed were completed below the established contract and contingency budgets.
• On average across the 30 projects, 51% of contingency budgets are not utilized by the time projects are complete
On-Time Schedule Analysis
22 projects (73%) were completed on or ahead of schedule, with two projects delayed by more than five months.
Infrastructure Ontario 11

Senior Vice President, Civil Infrastructure derrick.toigo@infrastructureontario.ca
www.infrastructureontario.ca
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