Public–private partnership (PPP or P3) in Canada is a form of alternative service delivery that involves a formal, collaborative arrangement between the public and private sectors, typically of a long-term nature. Public–private partnerships are commonly used for infrastructure projects related to healthcare, transportation, the environment, justice and correction, recreation and culture, and education.

The history of P3 projects in Canada can be divided into two waves: 1990–2000 and 2000–present. Over 220 P3 projects have been undertaken in Canada. The earliest and most commonly known examples of P3 projects are Highway 407 in Ontario, the Royal Ottawa Hospital, and the Confederation Bridge linking New Brunswick and Prince Edward Island.

The original rationale for P3s was to provide cities with top-quality infrastructure without creating more direct public-sector debt; they allowed governments to make off-balance-sheet investments in infrastructure. Advocates argue that P3s make use of the expertise and innovation of the private sector and the incentive of capital market to enhance public projects. They argue that P3s provide better value for money than traditional procurement methods because they transfer a project's risk from the public to the private sector. Indeed, under P3s, financial responsibility for a project can either be shared or transferred to the private sector. PPP Canada was a Crown corporation with the duty of contracting out several services to the private sector, as well as providing funding at both the federal and provincial levels.

P3s in Canada have received notable criticism from scholars, stakeholders, and the media. Complaints revolved around the issues of accountability, higher costs, loss of democratic control over public services, and the user fee rates of some projects. Discrepancies between steering and rowing, level of public interest, labour relations, autonomy and accountability, and savings and performance are often topics of P3 debates. Some critics question how the conflicting values and operations of the public and private sectors affect the ability to achieve desired goals efficiently. A common area of debate concerns how the goal of economic gain in private-sector values interacts with the public-sector value of public good. There is evidence both in favour of and against P3s.

Definition There is no consensus about how to define a PPP.Marta Marsilio, M., Cappellaro, G and Cuccurullo, C. (2011), The Intellectual Structure Of Research Into PPPs, Public Management Review, Vol 13 (6), pp.763–782 The term can cover hundreds of different types of long-term contracts with a wide range of risk allocations, funding arrangements, and transparency requirements.

The Canadian Council for Public-Private Partnerships, a longstanding promoter of P3s in Canada, defines a P3 as "a cooperative venture between the public and private sectors, built on the expertise of each partner, that best meets clearly defined public needs through the appropriate allocation of resources, risks, and rewards".

According to Simon Fraser University professor Aidan R. Vining, "a P3 typically involves a private entity financing, constructing, or managing a project in return for a promised stream of payments directly from government or indirectly from users over the projected life of the project or some other specified period of time". York University scholar Daniel Cohn defines P3s as "instruments for meeting the obligations of the state that are transformed so as to involve private property ownership as a key element in the operation of that instrument."

The Ontario Hospital Association describes P3s as "a relationship structured between a government entity and a private entity whereby the private entity assumes a defined level of responsibility for the provision and/or operation of a facility or service which has previously been the sole responsibility of government".

Privatization?

There is a debate on whether P3s constitute privatization or not. Some argue that P3s are not privatization because the government retains ownership of the asset and remains responsible for public service delivery. Others argue that P3s exist on a continuum of privatization, P3s being a more limited form of privatization than the outright sale of public assets, but more extensive than simply contracting out government services.

Supporters of P3s, such as former finance minister Jim Flaherty, generally take the position that P3s do not constitute privatization. Meanwhile, P3 opponents argue that they are a form of privatization. The Canadian Union of Public Employees, a major institutional opponent of P3s, describes them as "privatization by stealth".

History

Since the 1990s, over 220 P3 projects have been initiated in Canada. The provinces that started and have most used P3s are Ontario, British Columbia, Alberta, and Quebec.

First wave P3 projects in Canada can be categorized into two waves or phases. The first wave of P3s in Canada were initiated and launched between the 1990s and early 2000s. Notable projects from this time include Highway 407 in the Greater Toronto Area, Yonge–Dundas Square (now Sankofa Square) in downtown Toronto, the Royal Ottawa Hospital in Ontario, the Brampton Civic Hospital in Ontario, and the Confederation Bridge linking Prince Edward Island and New Brunswick. The development of a number of schools in Nova Scotia and New Brunswick also followed a P3 BOOT model. Near the end of the first wave, many new P3 projects included water treatment plants and municipal sports complexes.

The outcomes of the first wave of P3s failed to meet the public's expectations, and the projects were scrutinized by scholars, stakeholders, the media, and auditors. Criticisms revolved around topics such as complex concessions, lack of transparency and accountability, and the high private cost of capital.

Second wave The second wave of P3s has occurred between early 2000s and the present. The heavy scrutiny of the first wave of P3s led to a greater emphasis on meeting expectations and making P3s more politically acceptable to stakeholder groups (especially the public). The main argument used in the second phase to promote P3s in Canada is that they provide better value for money than traditional government procurement.

In 2002, British Columbia created the Capital Asset Management policy, a framework that was adopted by other provincial governments across the country. Under the framework, the government must always consider using P3s for infrastructure projects costing above a given threshold. The policy also states that special P3 agencies should be created to advocate for and deliver P3 projects in Canada. The provincial governments lead the P3 initiative in the second wave, using the model for projects such as healthcare facilities, justice facilities, roads, and bridges.

In 2009, Stephen Harper initiated the federal government's commitment to P3 infrastructure by creating a Crown corporation, PPP Canada Inc. PPP Canada aimed to invest in public infrastructure though P3s to contribute to long-term economic benefits and maximize value to appeal to public interest. The corporation also had a P3 Canada fund, under which provinces, territories, and municipalities could apply for funding from the federal government. Since its creation, P3 projects have been more commonly used for infrastructure such as local roads, public transit, and wastewater systems. P3s have also been used in projects such as brownfield redevelopment, national highways, green energy, regional and local airports, water systems, and solid waste management systems.

In 2014, the Government of Alberta cancelled plans to construct 19 P3 schools after discovering that they would cost $14 million more than regular schools.

Trudeau era Justin Trudeau is in favor of public-private partnerships. However, during his premiership, the federal government removed the P3 screen as a condition for federal funding for infrastructure projects in order speed up funding approvals for "strategic and trade-enabling" projects. This does not mean that infrastructure projects cannot be funded by P3s, simply that they do not have to consider the P3 model.

In 2017, the Government of Canada created the Canada Infrastructure Bank, a federal Crown Corporation tasked with financially supporting revenue-generating infrastructure projects that are in the public interest through public-private partnerships.

In 2018, the Government of Canada dissolved PPP Canada. The minister of Infrastructure and Communities, Amarjeet Sohi, justified the decision by claiming that PPP Canada had achieved its mandate of making P3s common practice across Canada and was no longer needed.

Types There are several subcategories of P3s. The forms of P3s in Canada include build–operate–transfer (BOOT), company-owned-government-operated (COGO), and government-owned-company-operated (GOCO).

Common public-private partnership models

While there are many types or models of PPPs, the following are some of the most common designs in Canada:

Operation and maintenance contract (O&M): A private economic agent, under a government contract, operates a publicly owned asset for a specified period of time. Formal ownership of the asset remains with the public entity. In terms of private-sector risk and involvement, this model is on the lower end of the spectrum.The Canadian Council for Public-Private Partnerships, "Definitions & Models", https://www.pppcouncil.ca/web/P3_Knowledge_Centre/About_P3s/Definitions_Models.aspx Build-finance (BF) model: The private actor builds the asset and finances the cost during the construction period, then responsibility is handed over to the public entity. In terms of private-sector risk and involvement, this model is again on the lower end of the spectrum. Design-build-finance-maintain (DBFM) model: "The private sector designs, builds and finances an asset and provides hard facility management (hard FM) or maintenance services under a long-term agreement." This model lies in the middle of the spectrum for private-sector risk and involvement. Design-build-finance-maintain-operate (DBFMO) model: In this model, the private partner is responsible for the entire project ranging from design to construction, operation and maintenance of the infrastructure, including fundraising.The European Court of Auditors (2018), "Special Report: Public Private Partnerships in the EU: Widespread shortcomings and limited benefits", https://www.eca.europa.eu/Lists/ECADocuments/SR18_09/SR_PPP_EN.pdf This model lies on the higher end for private-sector risk and involvement. Concession: "A private sector concessionaire undertakes investments and operates the facility for a fixed period of time after which the ownership reverts to the public sector." In terms of private-sector risk and involvement, this model is very high.

Sectors

Transportation

P3s have increasingly been used to build roads, bridges, and public transit infrastructure. The Confederation Bridge connecting Prince Edward Island to New Brunswick was one of the first PPPs in Canada. Notable P3 public transit projects include the Confederation Line in Ottawa, the Viva Rapid Transit in Ontario's York region, and the Canada Line rapid transit service in Metro Vancouver. Toll highways created through a P3 include the Sea-to-Sky Highway in British Columbia, the western extension of Autoroute 30 in Quebec, and Ontario Highway 407 near Toronto, discussed below.

Ontario Highway 407