Public Private Partnerships
A “PPP” or “P3” is a public-private partnership where the government and a private sector partner enter into an agreement to design, build, finance and/or maintain a piece of infrastructure. A P3 agreement can include any combination of these functions; one size does not fit all.
The City has used this funding model for both the North Commuter Parkway & Traffic Bridge Replacement Projects and the Civic Operations Centre. For all of these projects, this funding model proves to be the most fiscally responsible and efficient way to ensure we are providing residents with the services they want and need, planning for future growth and enhancing the quality of life for everyone within Saskatoon.
Right approach and right for taxpayers
The P3 approach has been used successfully in major municipalities and provinces across Canada and we believe that it is the right approach for Saskatoon and these important projects. When the long term risks and total costs of the COC are added up, the P3 approach delivers significant savings for taxpayers and real value for every dollar spent.
Projects delivered on time, on budget
The type of P3 agreements we are pursuing offers several potential advantages, but three stand out. First, well-managed P3 agreements ensure on-time, on-budget delivery of large projects. In many cases, P3 projects come on stream faster. Second, fixed payments over the life of the agreement make it easier for cities to plan and budget accurately. Third, P3s enable cities to transfer much of the financial risks associated with public infrastructure away from the taxpayer.
Savings and service…sooner
Public-private partnerships also provide a way to finance needed facilities that may not be affordable for the City to deliver on its own. It means that state-of-the-art facilities can come on stream faster, address resident needs sooner, and minimize the impact on resident taxes. And, it means that any savings can be used to fund other core services or offset other costs.
Better value for money
Dollar for dollar, P3s tend to deliver better "value for money" over the long term--when all the construction costs, risks, and ongoing repairs associated with a project are accounted for. The diagram below shows how a typical P3 stacks up to the traditional way cities build and maintain infrastructure.
How do public-private partnerships stack up?
"Value for Money" is a useful way to compare P3 and traditional ways of building and maintaining large-scale infrastructure projects. When the life-cycle costs, risks, and repairs of an asset are considered, it is often more cost-effective for cities to deliver projects with a private-sector partner than building and maintaining facilities themselves.
P3 Glossary of Terms
Base Costs – costs required for the construction of the asset and maintenance over the project’s useful life. These include hard and soft construction costs, regular maintenance and operations costs and life-cycle maintenance costs.
Ancillary Costs – costs associated with up-front procurement costs, legal, technical and advisory fees, project management costs and contract management over the life of the project.
Financing Costs – costs associated with borrowing and financing a project. Financing costs are typically higher for the private sector than for the public sector. However, savings in other aspects of the project tends to result in a net savings to the public sector.
Risk Premium – the monetary value assigned to risks associated with the project. In the case of P3 procurement, these risks are carried by the private sector partner.
Retained Risks – additional, unplanned costs that may occur over the project term due to unforeseen events, like construction delays. In the case of P3 procurement, the financial consequences of retained risks are carried by the private sector partner.
Value for Money – the net value or savings that can result when the costs of traditional and P3 procurement are compared and a project’s total costs (life-cycle costs) are taken into consideration.
The Canadian Council for Public-Private Partnerships
Infrastructure Investor: Canada, An Intelligence Report
New Tools for New Times: CanadaWest Foundation Report
Dispelling the Myths: A Pan-Canadian Assessment of Public-Private Partnerships for Infrastructure Investments