| Advocacy
P3 Myth Busters

MYTH 6: P3s create big private-sector profits using public money

FACT: The private sector designs and builds both traditional and P3 infrastructure projects.

Profit is being made in both models, but P3s are structured so that profitability (and loss) is tied to performance.

Canada has a highly competitive P3 market, which ensures that the government gets the best bids and ultimately, the best value for money.
MYTH 7: The public sector can borrow at lower interest rates than the private sector

FACT: Canada’s strong P3 track record (259 projects to date, valued at more than $122 billion) makes it clear that P3s deliver better value for the public dollar and save money during construction and over the life of the asset for several reasons:

  • Project risks are allocated to the party best able to manage them, which outweighs the difference between public and private sector borrowing rates.
  • The private sector has “skin in the game” (i.e. significant investments and responsibilities) that creates the necessary incentives to provide on-time, on-budget, and high-quality infrastructure.
  • Infrastructure projects are seen as strong, stable investments by lenders and investors.
  • Lenders and investors, who partner with contractors to deliver a P3 project, continually monitor the project milestones because of their investments, providing additional oversight to keep the project on track.
  • Canada’s capital markets are competitive and considered to be very cost-effective.

MYTH 8: Small and local contractors get left out of P3s

FACT: The Province of Saskatchewan is among the most active P3 markets in Canada. Premier Brad Wall recently noted that more than 200 local and regional contractors have contributed to P3s across that province.

The size and complexity of most P3 projects demands strong consortia with the experience, qualifications and financial capabilities to get the job done.

Smaller local and regional Canadian companies continue to play a key role in the P3 sector across the country, just as they do in traditional projects.

Regardless of who leads the consortium, P3 projects employ many Canadian firms, particularly at the subcontracting level.

Jurisdictions such as Ontario have developed policies that require “local content” in large infrastructure projects, further incentivizing the participation of smaller and local contractors.

A recent study by the Canadian Centre for Economic Analysis (CANCEA) found that Canadian P3s supports 115,000 jobs per year, $5 billion in additional wages and have saved governments up to $27 billion.


MYTH 9: P3s send profits out of Canada to foreign companies

FACT: The Canadian P3 model has become so successful that it is considered as globally best in class.

Canadian firms have benefited from that success at home and abroad. Their P3 experience has made them highly marketable around the world. Canadian companies are becoming increasingly successful at winning foreign bids, which is a major benefit to Canadian employees and Canadian governments that collect taxes from these companies.

International companies also bring welcome expertise and capital funds that contribute to the Canadian economy through the development of critical infrastructure projects, and cements relationships between Canadian businesses and foreign markets.

Canadian pension funds and insurance companies also invest in infrastructure, both at home and abroad. Canadians benefit from reliable income streams in their retirement years due to the success of the private-sector consortia in P3s everywhere.

Between 2003 and 2012, P3s generated $25.1 billion in direct GDP and $92.1 billion in total economic output in Canada.


MYTH 10: Unions do not support P3s

FACT: LIUNA and the Carpenters Union are among various labour groups that are regularly involved in P3 projects and support them. Labour unions routinely partner with the private sector to deliver Canadian infrastructure projects that generate highly desirable jobs.

Collective agreements are usually maintained for public sector employees in P3s and provide equivalent wages and benefits. For example, City of Regina employees transferred to the private sector company contracted to operate the new wastewater treatment plant with their collective bargaining agreements remaining intact. The private sector firm established a CUPE local to represent the transferred workers.

A significant investment in new and refurbished public infrastructure in Canada in recent years has resulted in hundreds of new jobs, many of them unionized.

A recent study by the Canadian Centre for Economic Analysis (CANCEA) found that Canadian P3s supports 115,000 jobs per year, $5 billion in additional wages and have saved governments up to $27 billion.


MYTH 11: P3s take longer than traditional procurement

FACT: On time delivery is a prime objective in all P3 projects. There are significant incentives (and penalties) embedded in the process which you don’t typically see in traditional procurement.

Under a P3 model, the private sector does not receive payment from the public sector until construction of an entire project is complete or it completes agreed-to construction milestones.

Recently released research from CANCEA has found that P3 projects are delivered 13% faster than traditionally procured projects. By comparison, a traditional project that took 8 years to complete would be completed in 7 years using a P3 model.

The Canadian P3 procurement process has become very well refined over the past 25 year and is viewed globally as one of the shortest and most efficient.

The P3 model allots more time for a rigorous due diligence process. More time is taken in the planning and analysis of the project to ensure it will deliver value for tax payers, to engage stakeholders and to insure risks are appropriately assessed and transferred.

The on-time construction record of P3s compared to traditional procurement more than makes up for the longer procurement time.

CANCEA’s study of the Canadian P3 market determines a one year delay in delivering a complex infrastructure project reduces its value by nearly 10%.

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