What is a P3?

The following is excerpted from Asking the right questions: A guide for municipalities considering P3s, 2nd edition, written by John Loxley and Salim Loxley for the Canadian Union of Public Employees 

 

P3s are multi-year, often multi-decade, contracts in which a corporation or consortium of corporations assumes responsibility for activities previously undertaken by the public sector. These responsibilities include direct financing of infrastructure, as well as management, operation, maintenance and/or ownership of facilities.

P3 models have varying degrees of private involvement. At one level, the private sector may operate or maintain public sector infrastructure, delivering services within the municipality’s prior budget and retaining a portion of any savings. At the other extreme, the private company may design, build, finance, own, operate and maintain the facility. In between, the private partner undertakes some combination of these tasks. In some cases, assets are sold to the private sector and then leased back over the life of the contract.

Contracts range in length from 20 to 40 years (Ontario’s Highway 407 is an extreme 99-year contract), though service contracts can be shorter. The attraction for the corporation or consortium is that private delivery of municipal infrastructure and services can be extremely profitable. The return on private equity can be as high as 10 to 20 per cent, and in some cases higher. Long-term high rates of return at a low risk guaranteed by the public sector are very attractive for private sector investors in the current economic climate.

[Notable examples of Municipal P3s in Ottawa include Ottawa's LRT, and Lansdowne Park]

 

TEN ESSENTIAL QUESTIONS TO ASK

P3s can negatively affect public services, local democracy and the public interest and are neither the best, nor the only option. The following 10 questions should be considered by mayors, councillors and citizens whenever public-private partnerships are proposed for the delivery of local infrastructure projects:

  1. Will there be full public consultation about the project, including the question of whether the project should be publicly or privately delivered?
  2. Will elected officials be fully informed about the alternatives and be able to speak freely about the information they receive concerning development of the P3?
  3. Have the full, lifetime costs of delivering the project through a P3 been calculated and compared to public alternatives delivering the same level and quality of service, and will the detailed information and calculations be made public?
  4. To what extent does the financial viability of the P3 proposal rely on cost savings through risk transfer to the private sector, and if so, was the analysis objective and will it be made available to the public?
  5. Could any promised risk transfer instead be delivered through a public procurement process that involved a fixed price contract?
  6. Will the municipality be responsible for guaranteeing the private sector’s profits? Who will be liable for cost overruns, or project deficiencies?
  7. Does the municipality have the capacity and resources to properly evaluate, administer and monitor a contract of the length, scale and complexity of the P3?
  8. Does the P3 permit the municipality the flexibility to make future changes in service delivery or other public policy decisions, to end the P3 in the procurement stage, and to terminate the contract if it is not meeting the public interest?
  9. Are the private consultants involved in the project truly impartial or are they affiliated to organizations or businesses that have profited from or have an interest in the delivery of P3s? For example: the Canadian Council for Public-Private Partnerships or P3 bidders.
  10. What impact will the P3 have on the local economy and on workers’ jobs, pay and benefits?

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