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Canadian Rural Partnership Rural Development  Acrobat Portable Document Format (.PDF) Download the Adobe Acrobat Reader
P3 Advisors was asked to undertake a review of the current status of P3s in
rural, remote, northern
and First Nations communities. The objective of this review was to address the following issues A thorough desk research was conducted, and interviews with selected officials involved in P3s in
rural and northern communities were undertaken to determine the level of use of P3s. Evidence has shown that P3s are being used in rural Canada, more particularly in certain sectors
such as Water, Recreation and Culture, Transportation and Accommodation (Housing and Offices).
Documented evidence of these examples is very limited, therefore dissemination of information
becomes challenging. Most of the respondents to the questionnaires and interviews were very
pleased with the P3s they have initiated and cite that services have improved and value for money
was achieved. All levels of government are encouraging the use of P3s or its derivatives for leveraging their
investment in public infrastructure and associated public services. But the lack of coordination,
guidance, communication and standardization has inhibited the use of P3s as one of the delivery
tools for much needed infrastructure renewals. While issues such as the size of the projects, access, connectivity and lack of knowledge may
affect the feasibility of P3 service delivery and infrastructure for rural Canada, the benefits of
embarking on the P3 journey out-weigh the risks for well planned initiatives. The potential for P3 arrangements to respond to rural Canada needs is very high. Location does
not seem to be a major factor. It is rather the lack of capacity that is seen as an important factor in
the deployment of P3s, specifically the required skills and expertise may not be resident in a
community which is contemplating a P3, therefore the import of such skills would be required. The
challenge for First Nations is accentuated by the peculiarities of the funding models. Rural, northern and First Nations communities could benefit greatly from P3s. The road map ahead
could include the following concepts: The objective of this study was to develop a better understanding of how
rural, remote, northern
and First Nations communities can utilize appropriate public-private partnership (P3) mechanisms
to improve the service delivery infrastructure of their community and region. This study identified
that public-private partnerships (P3s) can address gaps in service delivery and infrastructure in
rural, remote, northern and First Nations communities. This study was not intended to produce
a "how to guide", yet it does provide recommendations on how public-private partnership
mechanisms are best used. A list of the short-comings of P3s was included, as well as was a list
of things that such communities "need to do" in order to implement successful P3s. The Steering Committee raised the following as their key concerns associated with stimulating P3s
within a rural, remote, northern and First Nations context: These key concerns are addressed in further detail later in this final report. For the purposes of this study, P3s in Rural and Northern Canada, an exact definition was not
used. The Steering Committee members had agreed that the definition should be as flexible and
inclusive as possible. The "rough" guidelines of Rural and Small Town Communities (RST) were taken
into consideration when we conducted the research. However, as requested, we concentrated on
smaller centres, keeping the definition of "rural" both open and flexible because of the limited
amount of literature publicly available for review. Focused on the smaller centres (using the RST definition as our rough guideline) we addressed
questions such as: 'What is the state of public-private partnerships in rural and northern
communities?' We found there were only a handful of public-private partnerships in small rural
centres that had any literature for us to review, so we expanded the study to include public-private
partnerships in centres with a population of under 25,000, and then with a population of under
50,000. Next, we concentrated on smaller centres (again using the RST definition as a rough guideline). We
analyzed how public-private partnerships can be used and applied in rural and northern
communities. We made exceptions when there were good or interesting examples of public-private
partnerships in rural centres with a population larger than 10,000, and we made exceptions when
dealing with northern centres. Lastly, we studied examples of public-private partnerships in larger rural centres. We found that
there were useful lessons that could be learned from these examples. By definition, the areas referred to as being Rural and Small Town (RST) are areas where the
population lives outside of the Census Metropolitan Areas (CMAs) or the Census Agglomerations
(CAs). A CMA has an urban core of 100,000 or more and a CA has an urban core of 10,000 to
99,999. CMAs and CAs include all neighbouring municipalities where 50 percent or more of the
workforce commutes into the urban core. Thus, RST areas represent the non-CMA and non-CA
population. A drawback of the RST definition is that it considers some of Canada's more remote communities
of 10,000 - 20,000 as being "Urban". In addition to the RST definition, there has been some
discussion on defining metro-adjacent, non-metro adjacent, and northern and remote. The
definitions would be based on the amount of labour income from urban areas and the degree to
which the economy of the rural area is integrated into an urban economy. However, specific limits
and guidelines have not been set and this definition has not been further developed. The focus has been therefore placed on smaller centres, with populations under 10,000, and those
areas that are not heavily influenced by a larger centre. Some flexibility in the study was required
in order to include some northern and remote centres that have a population larger than 10,000. It was recommended that for the purposes of this study, we use the term "First Nation
community",
when referring to our research/literature review. This term includes First Nations, Métis, Inuit and
Innu communities. P3s are defined as arrangements between public sector and private sector entities which provide
public infrastructure, facilities and related services. The most successful partnerships draw on the
strengths of both the public and private sector to establish complementary relationships. Typical
partnerships involve identifying and appropriately allocating risk; sharing the responsibilities and
associated rewards; and accessing resources (capital, infrastructure and skills) which otherwise
would not have been available to the sector standing alone. The contracts are not prescriptive, but
provide the opportunity for the private sector partners to introduce innovations which may not have
been possible for the public sector institution. Typically, the ability to convert capital funding
requirements into a constant expense stream is one of the major driving factors. P3s should be viewed as an alternative tool for the delivery of public infrastructure and/or services.
A P3 will have a specific term, which will be defined in a legal agreement. In many cases,
municipally or publicly owned land will be provided as part of the agreement, but this does not
define a P3. P3s should not be confused with economic development initiatives. Economic development could
be one of the objectives of a P3, but it will not be the sole objective. Characteristics of typical P3 projects A typical P3 project has Design, Build and Operate elements as part of the transaction. Project
financing could also be included. Although each P3 project is unique, the following characteristics
are usually present in P3 initiatives: Scope of P3 Options There are several contractual types that a public sector entity could contemplate when exploring
a P3 arrangement. These will range from a simple Operations and Maintenance, to a Build-Own-Operate-Transfer (known as BOOTs), or a Lease-Develop-Operate where the public sector retains
ownership. Whichever option is pursued, a thorough review of the advantages and limitations
usually takes place during the planning stage to ensure that the ultimate P3 contractual
arrangement selected is consistent with the objectives and expectations of the public sector entity. Most of the successful P3s with infrastructure components have been done as BOOTs, while most
of the P3s dealing with services have been Operations and Maintenance agreements. Whichever
contractual arrangement is selected, it is the transfer of risk that truly defines a project as a P3. The
more elements that are bundled into one package, the more the risks to the public sector are
reduced. A P3 arrangement is different from a simple contracting out, or outsourcing, of services where the
public sector still retains significant control of how the services are delivered. In a P3, the public
sector defines outputs and outcomes, and the private sector designs solutions to meets these
outputs and outcomes, without having to get approval and consent from the public sector for every
decision. Appendix A provides a comprehensive review of P3 options and their advantages and
disadvantages. It is important when choosing the appropriate P3 option to ensure that the public
services that will be delivered through a P3 provide value for money to the taxpayers. A value for
money test could be as simple as determining the total cost of providing the infrastructure and
services throughout the lifetime of the project using traditional versus P3 methods and being able
to show that the cost is lower using a P3. Some of the advantages of using a P3 could be: Some of the disadvantages and limitations of using a P3 could be: Concerns about P3s Over the last several years there have been mixed reports about the success of P3s in creating
additional public infrastructure. Some of these concerns arise from misconceptions about P3s, while
some are genuine issues of concern. Successful P3s confront and deal with these issues during
the planning stages. Some of the concerns that have been identified are as follows: P3 Defined for this Study For the purposes of this study the definition of Public-Private Partnerships was left very flexible and
open for interpretation. We were advised by steering committee members to be as inclusive as
possible when reviewing the literature that was available from these rural and northern
communities. Alternative Service Delivery (ASD) initiatives were added if they fit the established
definitions and criteria. The overarching criteria were that the type of project to be included had
services provided by a P3 or ASD, and it had to be a public service, and not only an economic
development, activity. P3 Forward The Canadian P3 marketplace is growing. There are a few large, and several smaller fully
operational P3 projects. For example the Highway 407 toll road in Ontario, the Confederation Bridge
between Prince Edward Island and the mainland, the Ontario government's joint venture delivery
of the land registry system (Teranet) as well as several projects in the water and
cultural/recreational market sectors. The creation of Partnerships British Columbia, the former
Ontario SuperBuild Corporation and the Canadian Infrastructure Program have reinforced the public
sector's interest in exploring, and implementing, partnerships that allow for the delivery of much
needed infrastructure. We have also recently seen the Federal Government show its support for
P3s with Prime Minister Paul Martin's appointment of a Parliamentary Secretary whose only focus
is Public-Private Partnerships (December 2003). In conducting this study, P3 Advisors worked in collaboration with the Steering Committee
members, and adhered to the following broad steps: There were three sources of information categories for the desk research. Category One: Existing information from within the P3 Advisors Inc. staff and subject matter
experts, and from the Steering Committee members. Category Two: Information collected through desk research from web sources, specifically the
sources identified in the study, including public and private sector activities. Category Three: Information collected from the Steering Committee members and other P3 experts
in the market. The output of this step is presented in Appendix B - Literature Review Results Based on the outcome of the desk research and taking into consideration the agreed upon
definitions, potential projects were identified, categorized and listed under the following headings: Sector A project template was prepared with, and agreed upon by, the Steering Committee. The outcome
of this step is included in Appendix C - Long List of Identified P3 Projects. A review by the Steering Committee of the potential P3 projects was conducted and based on the
definitions and objectives of the study, a short list of projects were identified from the
aforementioned Long List, and categorized under the same headings as in Step 2.2 above. The
Short List included 10 projects, plus an additional 5 projects used as back-ups. A questionnaire was developed. It was discussed with the Steering Committee members and used
to conduct the case studies. Appendix D provides the content of the Questionnaire. Interviews, where possible and practical, were conducted with a selected number of case study
project personnel, and the information gathered during these interviews was incorporated in the
next step of this study. The Final Report was drafted based on the information collected. It addressed the objectives of the
study, as identified in Section 1.0 of this document. The Draft Final Report was discussed with the Steering Committee and their comments
were
incorporated into the final document. During the conduct of this study, P3 Advisors relied on publicly available information, and input from
various sources. When reading the report the following should be taken into consideration: Desk Research A thorough desk research was conducted. All of the publicly available information was reviewed and
listed in Appendix B. While keeping in mind the scope and parameters of this study, we found that
the documented evidence of Public Private Partnerships in Canadian rural,
northern and First
Nations communities is very limited, therefore the dissemination of information was challenging. The only information sources we were able to use for the purpose of this study were found in
documents published by the Canadian Council for Public Private Partnerships, or on the Industry
Canada website. We found that there was little published which provided relevant information
relating directly to rural, northern and First Nations communities in Canada. The researched material did not provide nor include any high level analysis of the value of P3s in
rural and northern communities. There were, however, many documents (identified in Appendix
B) that discussed P3s in general terms, and we were able to use these to help formulate some of
the statements and opinions provided in this study. Identification of Projects - Long List The desk research yielded a total of thirty-six projects that met the criteria used to define P3s and/or
Alternative Services Delivery (ASD) in a rural or northern setting. In further discussions with the
parties identified in these projects, they were able to give us information regarding other projects
that have been implemented, or are in the planning stages which fit into the established criteria, but
where there was no published information. The Steering Committee members acknowledged that additional projects do exist, and that they
could number as many as an additional dozen. Therefore we estimate that the number of P3
projects in rural and northern communities, to date, is fifty. Table 3.1 below summarizes the list of the thirty-six projects that were identified. Appendix C provides additional information about each of the thirty-six projects. Table 3.1- Summary of the P3 Identified Projects (Long List) Note: Short List Projects are underlined in this table, as per 3.1.1, sub-heading 'Short List of Identified Projects' Based on the information collected, it is evident that P3s and ASDs have been used in rural and
northern communities and most particularly in the following sectors: From the analysis of the thirty-six identified projects, we have made the following observations: The following issues and challenges were typically encountered in urban
centres and are likely to
be present in rural areas as well. Some of the typical characteristics were: Short List of Identified Projects The short list of P3 projects that were identified in consultation with the steering committee are
underlined in Table 3.1 above. As part of the assessment of the status of P3s in
rural and northern communities, interviews were conducted with contacts involved in a select number of the Short
Listed projects. As of the publication date of this report (March 2004), 8 case study interviews have
been conducted. Additional desk research into the short listed projects has also been conducted. The analysis of the case study interviews could be summarized to-date as follows: While the above desk research and interviews revealed important findings, other findings, while
anecdotal, could also be drawn: Although the report had identified a number of projects that met the criteria set by the Steering
Committee, the amount of literature published on these projects was minimal. Nevertheless, the
information gathered from interviews, observations and input from Committee members, as well
as the reports cited, indicated that Public-Private Partnerships are a viable and beneficial means
of providing necessary infrastructure and services to rural and northern
communities. In fact,
there is emerging evidence that some kind of private sector participation is becoming an acceptable
option, particularly in certain regions of Canada, and especially in the sectors of Water/Wastewater
Treatment, Transportation, and Recreation and Culture. Despite perceived constraints of P3 projects in rural and northern communities, there have been
a significant number instituted. It is our conclusion that this number will increase dramatically in the
future as there is a perceived willingness on the part of rural and northern
communities to join
together to overcome the challenges that they face. There could, however, be some specific barriers or capacity challenges, including: A worthwhile note on the UK model (which was initially adapted in the late eighties and has been
continued by the current government) is that the UK centralized the decision making and funding
for new infrastructures, enacted regulations to deal with impacted employees (2 years guaranteed
employment) during the transition from public to private sectors, and provided funding for the life
of the projects, and not just contributed to capital costs. Furthermore, extensive guidance material
and training was also provided to support the local governments in exploring the possibilities of
using P3s. Where there has been a concerted policy to embrace P3s as an alternative, and where a
community has a champion to drive the initiative forward, there have been a number of successful
projects, despite the constraints. The types of partnerships created and the P3 structures vary
according to the needs of the community, and the goals of the project. Anecdotally, where explicit processes exist and good communication plans are in place, where the
community and unions are brought on side early in the process, and where there is a definitive
leader for the process, the likelihood of success increases dramatically. Some unions have taken
the stand against P3s, either for philosophical reasons, or for real or perceived reasons, such as: From the research, observations, and input from the Steering Committee members and others, the
following outlines the Benefits and Risks of P3s in the service delivery area. Some of the Benefits of P3s could include: Some of the Risks could include: Due to some of the risks outlined above, a great challenge may be posed in the provision of
services to rural and northern communities, particularly those that are extremely remote. Access,
transportation and connectivity issues, and a lack of knowledge or expertise could create specific
barriers to the provision of services. However, despite a lack of literature on the subject, it is our
observation that more remote communities, associations, and not-for-profit organizations, along
with other public entities, are more willing and open to collaboration in order to address the service
needs of these areas. With creativity, commitment, and determination, service delivery is attainable
in rural and northern communities. P3s can address gaps in service delivery in rural, remote, northern and First Nations communities.
The challenge is to create an environment where P3s are one of the methods explored as part of
the planning cycle to demonstrate that the business cases are favourable, and that value for money
could be achieved. The sectors where service gaps exist are consistent with the P3 service provider community
capacity. These sectors include Water/Waste Water, Cultural/Recreation, Transportation,
Housing/Office Accommodation and Education. In all of these sectors several international,
national, and regional firms operate, therefore the major obstacle is not having an insufficient
service provider community, but rather having enough suitable projects. This was further
evidenced by the rural examples and case studies that were analyzed, where there was not one
dominant type of private sector provider, but where some included international firms, others local
or regional firms. Government can assist in providing support and facilitation during the process as well as providing
access to specific funding sources promoting P3s. Examples of successful P3 initiatives in the service sector in more remote areas outlined in the
report are: Aboriginal Development Program, Regional Municipality of Wood Buffalo, Northern
Alberta (where jobs, training and technical and university education is provided for band members);
Nunavut Office Building and Housing Units (where an apprenticeship training program was part of
the benefits of the project provided to the community); Town of Espanola/Cambrian College
Satellite Campus (where education and training programs were offered to residents of the
community); and for the Slate Falls First Nation - Access Road (that improved services and quality
of life for the First Nation). From the research, observations, and input from Steering Committee members and others, the
following outlines the benefits and risks of using P3s in the delivery of infrastructure in
rural and northern communities. Some of the Benefits of P3s in rural and urban settings include: Some of the Risks in using P3s for infrastructure project could include: Both Federal and Provincial governments have increased their focus on rural Canada in an effort
to increase education, training and the connection to information technology for rural
Canadians. Gaps in these efforts are linked to areas where their extreme remoteness creates
access issues, and where, because of their location, there is a heavy reliance on resource
industries that are less dependant on a knowledge based economy. Providing Water and Waste
Water treatment facilities has met with some resistance when allowing private companies to own
the water system. In the Transportation sector, particularly when roads, and marine infrastructure,
multi-jurisdictional boundaries are crossed, these issues have to be resolved. In providing
Recreation and Cultural infrastructure there have been fewer issues, primarily due to the fact that
there are greater opportunities for revenue generation through user fees. An emerging factor for
some P3s in rural communities is retaining the financing in-house and relying on the private sector
to bring the design, construction, operations and life cycle renewal expertise. The sectors where service gaps exist are consistent with the P3 service provider community
capacity. These sectors include water/waste water, cultural/recreation, transportation,
housing/office accommodation and education. In all of these sectors several international, national,
and regional firms operate, therefore the major obstacle is not having a sufficient service provider
community, but rather having enough suitable projects. Evidence has shown that P3 projects relying heavily on Information Technology (IT) as part of the
type of infrastructure and services to be delivered have had many challenges. P3s do not lend
themselves easily to IT projects, they are more applicable to "bricks and mortar" type projects
where innovations in design, construction and operation play a more predominant role than
technological innovation. Despite the barriers of access, transportation issues, and the risks outlined above, there are good
examples of P3s creating infrastructure in rural and northern communities. As in the services
sector, creativity, vision, commitment and determination have produced successful P3s for
infrastructure delivery. Examples include: Aurora College Family Student Housing, built five years sooner and at a cost 4% lower than through
traditional procurement. It is estimated that it will generate $16 million in economic benefits to the
community as well as provide local and First Nation employment. Chilliwack Multiplex ice arena, municipal airport and downtown revitalization projects are other
examples of successful P3s for infrastructure. Cranbrook Multi-Purpose Recreation Complex is an
example of the City of Cranbrook capitalizing on private sector expertise in the building and
operating of a large facility at less cost. Goderich Harbour Revitalization is an example of overcoming some jurisdictional issues where the
port was bought from Transport Canada, the land sold to Sifto, a private company, and a non-profit
group was established to improve the port and surrounding areas. The results are lower user fees, a more competitive port, and a long-term plan
for improvements to the surrounding area. Slate Falls First Nation Access Road is an example of the provincial and federal governments
partnering with a private company to build a road for the benefit of the company and the community.
Although the co-ordination of environmental processes delayed the start-up of the project,
construction did move ahead. Harmonization of federal and provincial environmental processes
should be addressed to expedite future projects. We have seen a surprising number and variety of P3 projects in rural and
northern communities
covering many sectors. Although we are unable to validate our observations due to the lack of
published literature, we can assume that, due to the predominance of projects in the areas of
Water, Waste Water Treatment, Transportation (including roads, marine and airports), and
Recreation and Culture, P3s have been used to meet these types of needs in these communities.
With respect to the truly remote areas, access to the community in terms of efficient
transportation
means, education, housing, health care and connection to the knowledge based economy seems
to be of primary concern. Perhaps a voluntary survey canvassing the priorities of the
rural and northern communities would be helpful, but depending on circumstances, needs seem to vary from
community to community. The interest in P3s seems to be increasing as more and more success stories come to light. P3s
are seen as a viable alternative, with many benefits in the deliverance of public infrastructure and
services. The sharing of risks, rewards and responsibilities, and the creativity of designing a
process and structure to meet the requirements of the particular circumstances is being met
favourably. As expertise is gained, as trust increases, and as access to private capital grows, the
response to P3 initiatives will be more positive. There are certainly issues that must be addressed, particularly for rural and
northern communities.
An important characteristic that is detailed further in this section, is the ability to create enough
capacity and resources for funding planning tools, such as business cases, the strengthening of
organizational structures (such as developing procurement road maps), or the hiring of external
resources and expertise as required. While P3s are only one of the possible delivery tools in the
toolbox, a thorough analysis of their usefulness and applicability to solve the shortfall in
infrastructure and/or services needs to be fully explored before deciding on the best delivery
method. These could include conducting stakeholder input sessions, vendor consultations,
communication with employees and business case development. In some cases this requires
specialized expertise that may not be resident in the smaller communities, or may be expensive to
obtain. All levels of government could have a role to play in promoting the study of P3s and their
applicability, but they could also assist by providing some "soft costs" during the planning stage. Typically government grants and contributions have focused primarily on the capital side of projects,
however P3s are involved in life cycle analyses and funding commitments. It will be important for
the government to fully understand the operational impact of P3 arrangements in order to ensure
that their objectives in funding P3s are going to be met, as most of these objectives could be tied
to the operational phase of the project. Therefore a review of which project parts governments fund
might be an area worth exploring. This should not in any way detract from exploring all funding
sources (public or private) as the more public funding available up-front for the capital expenditure,
the easier it will be to justify the business case, and secure partial funding from private sources. Harmonization of environmental considerations will expedite the process, and clear policies and
guidelines will assist. A mechanism to deal with multi-jurisdictional challenges quickly and
effectively will also be advantageous to the process. In this regard, consideration for having one
level of government (federal or provincial) lead the environmental assessment process or having
clear published environmental strategies in place during the planning stage is very helpful. Governments could play a key and central role in P3 development. Aside from promoting the
potential use of P3s through education, training and the provision of funds, there is a real need for
governments to champion the P3 process by providing access to expertise (legal, financial,
procurement and technical), particularly in the rural and northern communities. The type of
expertise will depend on the type of project being considered, the community, the sector, the
complexity of the P3 arrangement and the availability of local expertise. Another area where
government can provide financial support would be in the advancement or payment of some of
the upfront costs to develop the feasibility of conducting the project as a P3. If governments want to promote the use of P3s for public infrastructure and services, governments
could provide a "clearinghouse" function which would help smaller communities join together to
create economies of scale and provide enough opportunities to attract the right private sector
partners. As part of its funding role, higher levels of government could provide the financial
commitments that the private sector market might be looking for in order to create a bankable deal.
These commitments could be in the form of grants, contributions, guarantees, interest free loans
or "in kind" such as land, property or equipment. When several communities get together to
develop infrastructure through P3s or other means, significant governance issues might arise, such
as whose interest will be served first, who takes priority in decision making, etc. Government can
play a role in facilitating and resolving these types of issues. Legal impediments, tax considerations, and constraints on funding policies must be addressed.
These could include allowable legal arrangements based on Municipal Acts or the tax treatment of
certain transactions ( e.g. capital leases versus operating leases) or in certain cases an imposition
of a certain debt/equity ratio for the project. Finally, funds for adequate communication plans
should be considered. The success or failure of many projects, particularly in close knit
rural and northern communities will depend upon the perception of a fair, open, and transparent process,
and on the information provided to interested stakeholders. The provision of financing for infrastructure is typically part of a P3 arrangement, however there
have been several examples of small projects where the financing was retained by the public sector
entity in order to access financing at a lower cost, or through provincial funding agencies. Provided the correct elements are in place, our research shows that the likelihood of success is not
dependent on location. P3s that were not a total success were stymied by factors other than
location. Union opposition, misinformation, lack of transparency, and the absence of leadership
were the primary causes for lack of success. However, it is difficult to categorically assert that
location is not a factor, as most reported projects were in relative proximity to larger urban centers.
Nevertheless, the success of the projects in Nunavut, James Bay, Slate Falls and the Northwest
Territories suggest that location does not play a major factor. Although P3 models are an interesting avenue for delivery of much needed infrastructures in First
Nations communities, it is important to ensure that appropriate measures are incorporated in the
process so that the stakeholder objectives are achieved. Our observations have led us to
acknowledge that to date, the drivers of the successful P3-type projects were the First Nations
communities. The methodology was not imposed, but rather was sought out by the communities,
as a means to satisfy an actual need. As a result, we believe that there are two streams of activity that can be followed. Firstly,
understanding and communicating information about the projects that have been successfully
delivered will provide inspiration for other First Nations communities to follow similar routes. This
will include understanding which elements have been present in unsuccessful projects and relaying
that information as well. Some of these elements could be collective agreement clauses regarding
no contracting-out, the failure of the private sector proponent to secure financing, or the bankruptcy
of the private sector. Some of the strategies that could be explored include ensuring that adequate
securities are in place (letters of credit, performance bonds etc.) to pay for corrective actions.
Secondly, embarking on a concerted effort to establish an environment that is receptive to P3
projects can be accomplished through the following means: Given the sophistication and complexity of P3 arrangements, appropriate resource funding should
be made available for both First Nations communities, as well as for other rural and
northern communities who may not have access to the required expertise or the costs associated therewith.
The costs associated with engaging the required expertise should be factored in during the planning
stage to ensure that best value will be obtained. Some of the benefits that were achieved included placing greater emphasis on ensuring the long-term viability of projects both from the public and private sector perspective. The viability of the
project stems from an appropriate allocation of project risks, and the establishment of payment
mechanisms to reflect the transferred risks. They also enable the project participants to provide
safeguards on services and related infrastructures. The discipline and planning which are two of
the attributes of the P3 approach may in fact provide for greater accountability. Many rural and northern communities lack the expertise and organizational structures to
effectively carry out a P3. Expertise in the form of specialized legal, financial, procurement or
technical P3 specialists and having the appropriate knowledge and experience must be imported,
and the cost of these resources has the potential of reducing the viability of a project. As the
market matures, these resource costs should diminish. Market interest in P3s is increasing as the understanding of the benefits associated with the
methodology are becoming more widely accepted. If the public sector is able to provide funding
for a business case analysis, and if appropriate, based on the business case, funding to cover
some of the resource costs, then P3s could proliferate, as typically in a P3, the ultimate business
case drives the decision for the most viable service delivery option. Furthermore, another area
where rural communities might lack capacity is in their ability to monitor the progress of the P3
implementation. Most smaller communities will conduct very few P3s, and the skills required to
monitor the P3 arrangements may not be easily found locally. With a maturing P3 market in
Canada, there will eventually be more resources, training and guidance to monitor P3s, but in the
interim those skills might have to be imported at a cost. Governments could play a role in creating
awareness of the type of monitoring that is typically found in P3s, and subsidize the creation of local
capacity to monitor P3s through skills training, guidance and on-the-job training. Based on the comments of those who participated in the case studies and other research activities
undertaken, it is clear that one of the unique characteristics of P3 projects in
rural communities
is the diversity of the procurement processes that were followed. Several examples in the case
studies that were reviewed, especially for Operation and Maintenance P3 arrangements, the
process that was followed was a sole source procurement process. In many cases there was a
valid reason to use that process. For example, in one case when the private sector was the primary
user of the facility, or when the private sector partner was delivering a similar service in another
community close by. The other case studies reviewed that were more typical types of P3 projects, involving infrastructure
design and construction, were conducted via a P3 procurement framework that was competitive,
open, transparent and fair. While in some smaller communities there is always a fear of attracting
enough bidders to ensure a competitive process, marketing the project during the planning phase,
either through a formal process or through an informal market sounding exercise, will enhance the
likelihood of attracting the right number of bidders. Another advantage of conducting pre-consultation before embarking on the procurement process is to fully understand the risks
associated with projects in rural communities and the values attached to mitigate these risks.
Typically these activities are part of the development of the business case for moving forward, and
it may be conceivable that the results of the market sounding, in terms of the risk profile of a
planned P3 project, may prove to be too high for the public sector to bear costs, and a more
traditional approach might be more suitable. Generally local, regional, national and international consortia will analyze the market potential of a
particular project and decide if that project meets their objectives. To date, there are an adequate
number of companies vying to participate in P3 arrangements. Should measures be instituted as
discussed above, and P3s continue to grow, then there will be an even greater number of private
sector companies seeking partnership arrangement. Thus the integrity of the process will be
ensured. The advantages of P3s, both in service delivery and in the provision of infrastructure, are well
documented. Such benefits are equally applicable to rural and northern
communities. Despite
the difficulties of access, lack of resources and expertise, rural and northern communities can
achieve the most important benefit, which is receiving services and infrastructure where often none
existed before. The jobs, education, housing and other services generated as a direct result of P3s
provide an enormous positive economic impact on the communities. For a P3 to be successful, both parties engaged in the P3 arrangement must be knowledgeable
and have the required expertise, including procurement process specialists and other professional
resources, to ensure a fair, open and transparent process. From the research and case studies that
were evaluated and the general knowledge relating to this issue, most P3 transactions require
expertise that is typically not resident within the local government, especially legal and industrial
relations expertise. The cost of importing these resources may be prohibitive for a rural community.
Depending on the complexity of the project and the size of the investment required in capital work,
technical and financial advisory expertise may also have to be engaged. The size of the project may prove to be challenging in attracting the right number of interested
bidders as the economies of scale may not provide adequate returns. It could be the case that the
value for money of the project may not be achievable through a P3, and a more traditional
procurement method will have to be selected. Evidence from the research and the case studies
suggest that the size of the project was not a determining factor in deciding if a P3 was the right
procurement vehicle. Rather it was the type of risks that were transferred from the public sector to
the private sector with adequate compensation or return for such risks. We can conclude that P3s,
due to their inherent flexibility, may be structured to address most perceived disadvantages. The procurement process needs to be structured, in as many steps as required, to provide
evidence that the best value has been achieved. It is noted that in some instances, based on
evidence collected, sole sourcing of P3 arrangements has worked in smaller communities. While
sole sourcing may not be seen as a competitive process to achieve the best value, there are
circumstances where sole sourcing may be an advantage, as long as the public sector entity retains
certain controls to manage the service delivery to the public at large. P3s require political commitment. The project should be well defined and the expected outcomes
well established. There must be a realistic understanding of the benefits attainable, the risk profile
and the value of the risk transference. Internal or external resources and the budget to acquire the
necessary expertise must be available. Important stakeholders must be committed to the process,
and a viable communication strategy planned and implemented. With flexibility, creativity and
political will, barriers can be overcome. Small communities or regions can overcome the difficulty of achieving economies of scale by
joining together to contract with one private sector service provider (thereby reducing some of the
overhead costs, training and skills transfers) versus contracting for the services for each community
separately. Local knowledge and expertise will be found or supplied by relevant public sector
authorities, and working collaboratively with the private sector P3 provider, solutions to the technical
challenges that a P3 can address will be found. As this study has shown, the barriers (size of the project, remoteness and distance, return on
investment, capacity, etc.) to effective P3s in rural and northern communities could be overcome
if a P3 structure is implemented that fully exploits the benefits of risk transference. Embracing the
appropriate P3 model and assuming that the business case is sound for moving the project forward
as a P3, and as well ensuring that all party and stakeholder issues are addressed in a true spirit of
partnership, P3s will yield benefits for all parties involved. As this study has shown, there are many forms of P3 arrangements. There are, however, some
procurement methodologies that have been standardized by sector or type of P3 arrangement.
This standardization in terms of the number of steps in the process, and the ability to use practical
template procurement tools, will create a more efficient environment to address the uniqueness of
a P3 procurement. While communities and regions must devise the best possible solution for their
particular requirements, studying the available examples will assist them in identifying P3s that may
be similar to theirs, on which they can base their community's unique requirements. For example, depending on the sector and type of services required, a procurement process for
a new water plant might involve three steps (Request for Qualification, Request for Proposals and
Negotiation) while a P3 for just Operations and Maintenance may only require two steps (Request
for Proposals, and Negotiations). The scenario will depend on the expected outcomes, the benefits sought, the risk profile and the
value of the risk transference. Stakeholder interests, and being cognizant of the community's
values and goals, will also have an effect on the type of P3 arrangement selected. Evidence from
the literature review and case studies were consistent with this statement. In one case the P3
private sector partner was a major local user of the facility. In another case, the P3 private partner
was a not-for-profit service provider from a community in the same region. A P3 arrangement in
rural Canada which failed involved an international organization which was based far away from the
local community and had a difficultly overcoming this barrier. It is therefore very important that as
part of the planning stage, a thorough identification of the most suitable type of private sector
partner is explored and if the ideal partner does not exist, then the community needs to re-think its
P3 strategy. With a concerted Federal Government policy to embrace P3s as a viable alternative for
rural and northern communities, much assistance can be provided such as training, dissemination of best
practices, funding planning and procurement activities. As a "clearinghouse", the government may
be able to bring communities and regions together to pool their resources in order to embrace a P3
model for their mutual benefit. Evidence to date demonstrates a growing interest in P3s as one of the tools available for the
delivery of public infrastructure and services, and governments at all levels have been exploring
P3s in some capacity or another. While the research conducted as part of this study may not have
confirmed conclusively that P3s are being utilized across all sectors and in all regions of Canada,
P3 options are being discussed, evaluated and in some cases utilized, by communities that have
ensured that P3s are providing value for money and addressing a much needed shortcoming in
public infrastructure and/or services. The following list of concepts may prove to be beneficial for
rural, northern and First Nations communities:
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