New Canadian Prime Minister Justin Trudeau has announced that infrastructure projects larger than C$100 million will no longer be required to consider the public-private partnership (PPP; P3) delivery method.
Prior to the announcement, all large projects were required to undergo a screening process that newly appointed Minister of Infrastructure and Communities Amarjeet Sohi called in a statement to The Globe and Mail “an onerous requirement for municipalities [who] know better how to build the infrastructure that their communities need”.
“If municipalities lack [financial] capacity, then let's build the capacity,” he said. “Why impose certain conditions?”
Sohi said the change is meant to simplify and add transparency to the process of qualifying for federal infrastructure funding on the part of municipalities. He suggested that the P3 consideration process can add up to a year to project procurements.
According to a 2014 report by Ontario Auditor-General Bonnie Lysyk, due to the requirement to consider P3s, that province alone spent nearly $8 billion above what it would have paid to develop infrastructure internally. The report identified higher cost of financing for the private sector and risk assumption compensation as the most significant factors contributing to the increased costs.
Currently, there are roughly 220 P3 projects, worth more than $70 billion, either currently under way or in the planning stages across Canada.
The move came as a shock to those familiar with Trudeau's pre-election promises. When standing in front of a crowd of infrastructure investors and developers at the 2014 Canadian Council for Public-Private Partnerships (CCPPP) National Conference, Trudeau touted himself as a proponent of P3s, noting that he had engaged with the private sector on multiple occasions with an eye toward forming partnerships.
It is unclear what impacts the decision will have on development of infrastructure projects in the coming months, as the government plans to start doling out disbursements for projects early next year as part of a plan to growth federal infrastructure investment to $5 billion annually.