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Congress Looks to Learn Lessons from Canada’s P3 Experience

April 10, 2014

This week the House Transportation and Infrastructure Committee looked to our northern neighbor Canada for advice on the federal role for public-private partnerships (P3) holding a panel hearing on the International Experience with Public-Private Partnerships, chaired by U.S. Rep. John Duncan (R-TN). Experts from the Canadian financing market were brought in to share their perspective on how their 200+ P3 projects have gone and what they consider to be the best practices of their federal and state framework.

Kicking off the discussion, however, was Rep. John Delaney (MD-06) who is sponsoring a bipartisan bill that is gaining support - The Partnership to Build America Act (H.R. 2084) relating directly to P3s. The Partnership to Build America Act would create an infrastructure fund using repatriated corporate earnings and then utilize financing tools like public-private partnerships. The bill has gained the support of 60 House co-sponsors (30 Republicans and 30 Democrats) in the House and a companion, bipartisan Senate bill by Senators Michael Bennet (D-CO) and Roy Blunt (R-MO). If this were passed, it’s estimated that at least 25% of the projects financed with the new fund would use a P3 model.

The panel of expert witnesses had many suggestions for what made the Canadian model successful for structuring P3s.  However, it was Dr. Larry Blain, Chairman of the Board of Directors, Partnerships British Columbia, who suggested the following four benefits of performance-based infrastructure that should inform the U.S. structure:

  1. Planning discipline and preparation. Performance-based infrastructure projects require comprehensive and long-term definition, costing and risk assessment. Many pitfalls are avoided before a shovel hits the ground.
  2. Certainty. Projects are on or under budget, and on or ahead of schedule, and key risks are assumed by the private partners. This is a key benefit of performance-based, financially-motivated contracting.
  3. Life-cycle asset management. In a performance-based approach the private partners have to maintain and rehabilitate the asset over 15-30 years, and they have to leave the asset in the required condition or face financial penalties.
  4. Efficiencies and innovation. Competition and the profit motive can lead to startling results, where the winning proposal provides solutions that the public owner never contemplated.

 

Mr. David Morley, Vice President, Business and Government Strategy, Infrastructure Ontario, also described how their organization’s procedural transparency would also benefit the P3 structure and could be a 5th element to add to this list.  Finally, Mr. Cherian George, Managing Director, Global Infrastructure and Project Finance, Fitch Ratings, and Dr. Matti Siemiatycki, Associate Professor, Geography and Program in Planning, University of Toronto, argued for prioritizing risk allocation that balances the needs of both the public interest and the private investors. Perhaps with these six ideas, the Committee may be more able to find the same balance that has made Canada a leader in the P3 arena.

Watch the full hearing and find the full written testimony of the panel here.

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