Public-Private Partnerships (P3s) are increasingly seen as a viable alternative to finance infrastructure projects that the public sector is unable to fund. Both Canada and the United States have recently increased the number of infrastructure projects funded by P3s. The Wilson Center’s Canada Institute and Global Public Affairs conference on October 3, 2013, discussed experiences in implementing P3 projects and the lessons learned. The panel also discussed similarities and differences between P3s in Canada and the United States.
Mark Romoff, moderator of the first panel, gave a brief history of P3s in the past 20 years and mentioned that there are 250 current projects in development. He added that projects in Canada focus on urban infrastructure, energy, telecommunications, and hospitals. However, he said that awareness about P3s in Canada is still a work in progress.
David Caplan, former Member of the Ontario Parliament, explained his experience as Provincial Minister of Infrastructure. He talked about the challenge of promoting private sector alternatives to development, such as P3s, while a member of the Liberal Party. The Liberal Party has historically opposed a more active role of the private sector in the government. He described the internal tensions between his colleagues in the provincial Parliament and how his promotion of P3s led to his move from the Infrastructure Ministry to the Health Ministry. He added that convincing the general public about the benefit of P3s was challenging, as Canadians are generally opposed to measures that resemble privatization efforts of public goods.
Joe Pavona, from the State of Michigan, explained his experience working for Governor Rick Snyder. He added on the challenges presented by Caplan, focusing specifically on political challenges behind P3s. He argued that seeing P3s as favoring the private sector is a misconception. He concluded that good leadership is necessary in order to overcome internal challenges and successfully implement P3s.
Pavona and Caplan described the external challenges to the implementation of P3s. Caplan described resistance from the public--especially in Canada--because people consider P3s a form of privatization. Another criticism of P3s is the perception that they are more expensive because they have to account for private investment and profits. Finally, Caplan made references to the complicated legal nature of P3s. He concluded by saying that better promotion and clarification of P3s could help solve the problem.
Pavona added that it is challenging to determine how multiple stakeholders—including the business sector, public sector, government--fit in P3 projects. He said that there is a need to identify the specific roles that can contribute to the successful implementation of P3 projects. Pavona and Caplan concluded that public scrutiny remains one of the biggest challenges facing P3 projects.
During the question and answer session, Romoff discussed his experience promoting P3s to governments that are generally not receptive to private alternatives to development. For example, he talked about convincing the federal government about the benefits that P3 can provide. Pavona elaborated on the ability of P3s to create jobs in the infrastructure sector of the economy, noting that emphasis should be placed on the economic development capabilities of P3 projects.
The second panel focused on the differences between P3 structures in the US and Canada. Speakers talked about shared experiences that can be used to enhance existing structures in both countries. They also spoke about differences in financing options and projects between the two countries.
Jill Jamieson from Deloitte began by mentioning that the problem with the US P3 market is that many investors do not consider it a growing one because there are still a relatively small number of projects being carried out. However, there is a great need for infrastructure projects. She describes P3s as bipartisan measures that can overcome the criticisms of alleged ‘masked’ privatization or the fears of losing employment.
Bert Clark, current President of Infrastructure Ontario, mentioned that people should be careful when thinking about what P3s actually do. He referred to misconceptions and explained that P3s are very useful in delivering timely infrastructure projects with high efficiency and a low budget. This is important for provinces or states that are running on budget constraints but are eager to develop infrastructure projects.
Doug Benson, a partner at Dickinson Wright, talked about his experience implementing P3s in Canada from his perspective as an attorney. He stressed that P3s work as a delivery model. He expressed regret that P3s have become an excuse for ideological opposition. He argued that P3s are successful because they focus on developing infrastructure that the government is unable to maintain, such as bridges, roads, and highways.
Panelists considered the differences between the US and Canada. Clark mentioned that Canada has universal health care. As a result, many P3 projects in Canada are focused on hospitals. This is not the case in the U.S., where hospitals are built mostly by the private sector. Clark added that the U.S. has an advantage with its long history of project finance, something that does not happen in Canada.
Jamieson alluded to the ‘wonky’ distribution of responsibility between the federal, state, and local levels, describing it as a mismatch. She said that there are not really P3s, but rather P4s encompassing federal, state, local, and private sector interests. The U.S. also has a complicated legal system, but not many P3 programs. In contrast, Canada has a programmatic approach that includes a streamlined federal agency that focuses on P3. The U.S., however, lacks P3 institutions that can deal with P3s at a federal level.
Benson spoke about the need to standardize documents between jurisdictions to avoid mismatches, use time efficiently, and attract foreign investment. He added that the financial vehicles used in Canada are very different from those used in the U.S. The panel concluded that there is no need to explain what P3s are, but rather a need to consider how to implement them.