Proceedings of the Standing Senate Committee on
Aboriginal Peoples
Issue 12 - Evidence - March 11, 2015
OTTAWA, Wednesday, March 11, 2015
The Standing Senate Committee on Aboriginal Peoples met this day at 6:49 p.m. to study challenges relating to First Nations infrastructure on reserves.
Senator Lillian Eva Dyck (Deputy Chair) in the chair.
[English]
The Deputy Chair: We'll begin the proceedings.
Good evening. I would like to welcome all honourable senators and members of the public who are watching this meeting of the Standing Senate Committee on Aboriginal Peoples, either here in the room or via CPAC or on the Web.
My name is Lillian Dyck from Saskatchewan, and I'm the Deputy Chair of the Standing Senate Committee on Aboriginal Peoples. The chair, Senator Patterson, could not be here tonight and sends his regrets.
The mandate of this committee is to examine legislation and matters relating to the Aboriginal peoples of Canada generally. This evening, we are hearing testimony on a specific order of reference authorizing us to examine and report on the challenges and potential solutions relating to infrastructure on reserves, including housing, community infrastructure, and innovative opportunities for financing and more effective collaborative strategies.
We have completed our hearings on housing and are now focusing our study on infrastructure, although we recognize that the two issues often overlap.
Today, we will hear from two witnesses: the Office of the Auditor General of Ontario in our first hour; and PPP Canada in the second hour.
Before proceeding to the testimony, though, I would like to go around the table and ask the members of the committee to introduce themselves, and I'll start on my left.
Senator Moore: Good evening. Welcome. Wilfred Moore from Nova Scotia.
Senator Sibbeston: I'm Nick Sibbeston from the Northwest Territories.
Senator Watt: Charlie Watt from Nunavik.
Senator Ngo: Senator Ngo from Ontario.
Senator Beyak: Lynn Beyak from Ontario.
Senator Raine: Senator Greene Raine from British Columbia.
Senator Enverga: Tobias Enverga from Ontario.
Senator Tannas: Scott Tannas from Alberta.
The Deputy Chair: Members of the committee, please help me to welcome our guest for the first hour, Ms. Bonnie Lysyk, the Auditor General of Ontario. The clerk tells me that you've already had a full day in Toronto, but you've kindly agreed to fly to Ottawa after your full day of meetings so that you could be here with us tonight. We very much appreciate your efforts and your willingness to help us in our study, and we look forward to your presentation, if you would like to proceed. Thanks.
Bonnie Lysyk, Auditor General, Office of the Auditor General of Ontario: Thank you. Good evening. As mentioned, I'm Bonnie Lysyk, the Auditor General of Ontario, formerly provincial auditor of Saskatchewan. I want to begin by thanking honourable senators for inviting me here today to speak and answer your questions regarding our audit report on Ontario's alternative financing and procurement processes, or AFPs.
This audit, published in our 2014 annual report, looks specifically at the use of AFPs by a provincial agency called Infrastructure Ontario to procure large infrastructure projects. Before I get into our findings, a bit of background: I'm sure you're aware that AFPs are also known as P3s, public-private partnerships. They've been increasingly used around the world since the 1990s and in Ontario since around 2001.
Under traditional infrastructure procurement, the government itself manages, finances and oversees construction of big-dollar-value projects. Under P3 arrangements, governments transfer some responsibilities and risks to private sector partners. In Ontario, they have been used to build highways, hospitals, courthouses and other important infrastructure assets.
The government's objective in going the AFP route is to generally avoid upfront costs and responsibility for cost overruns and performance issues by transferring risks to the private-sector partner. Typically, the private-sector partner is responsible for financing and construction. In some cases, they will also be responsible for maintaining and/ or operating a project for up to 30 years after its completion. This offers governments some advantages. They do not have to pay for the asset until it is built, and costs are reliably known at the outset. On the other hand, P3 financing costs tend to be higher because governments can usually borrow at lower interest rates than most private companies.
Now, with regard to our audit of Infrastructure Ontario's use of AFPs, we set out to answer three questions. The first was whether the decision to use the AFP model in selected instances was properly supported by a competent analysis of alternatives. In this regard, we found that Infrastructure Ontario runs value-for-money assessments for each major proposed project to confirm whether its delivery would be more cost effective under an AFP or traditional procurement.
We looked at 74 major infrastructure projects, either completed or still under way, that the agency identified as more cost effective when delivered under AFPs. While we found that AFPs helped the agency to deliver most projects on time and on budget, we questioned some key agency calculations about the estimated cost of these projects in their determination that the AFP delivery model would be cheaper.
Specifically, for these 74 projects, we noted that the tangible costs, such as construction, financing, legal services, engineering services and project management services, were estimated to be nearly $8 billion higher than they were estimated to be if the projects were contracted out and managed by the public sector. The majority of this — $6.5 billion — relates to higher private-sector financing costs.
Infrastructure Ontario estimated that this $8 billion difference was more than offset by the risk of potential cost overruns if the construction and, in some cases, the maintenance of these 74 projects was undertaken directly by the public sector. In essence, Infrastructure Ontario estimated that the risk of having these projects delivered late and over budget was about five times higher if the public sector were to directly manage them. However, we found they had no empirical data to support the key assumptions they used to assign costs to these specific risks.
We did find that two of the quantified risks included in Infrastructure Ontario's value-for-money assessments should not have been included. When you take the impact of these two risk assessments out of comparative cost calculation equation, we found that 18 projects would have cost $350 million less under public-sector delivery than under private-sector delivery.
The second question in our audit dealt with whether all significant risks and issues assumed in Infrastructure Ontario's value-for-money assessments were included in final agreements with AFP partners. Here we found that Infrastructure Ontario was not checking to ensure that the risks they assumed were to be borne by the private sector or, in fact, spelled out in the final AFP agreements. When Infrastructure Ontario completed this exercise at our request, we noted some inconsistencies between what was assumed in the assessments and in the final agreements.
The last question we looked at during our audit centred on whether public expenditures were incurred with due regard for economy. In most cases, Infrastructure Ontario has delivered AFP projects on time and on budget. However, this delivery model does come at a higher cost. We believe a properly structured contract under public-sector procurement can manage those risks considered to have been mitigated or transferred under the AFP approach. For instance, cost overruns in public sector procurement often occur because of incomplete project design, which can lead to costly change orders. Other examples include unknown site conditions, work stoppages and/or delays due to weather.
Many of these pitfalls can be avoided if the projects are properly planned and effectively managed. Just as AFP contractors are responsible for and make contingencies for these factors that could result in cost overruns, public- sector contracts can be structured so that many of the risks are the responsibility of the contractor.
Our audit report recommends that Infrastructure Ontario gather more data on the actual costs of AFP and traditional projects, and that it revise its methodology when assessing projects to ensure its risk valuation in favour of an AFP decision is justified.
I would like to take a moment to discuss what our audit didn't say. Despite what you may have read in the media, this audit was not a verdict on AFPs themselves. We passed no judgment on whether AFPs are a good or bad way to go. Instead, we took a very specific look at the application of AFPs' value-for-money model used by Infrastructure Ontario at a certain point in time. Our conclusion was not intended — nor should it be read as — a determination on the usefulness and viability of AFPs as such. We believe there is a role for both private- and public-sector project delivery. As the government's experience with AFPs continues to develop, it may be time to assess what those roles and financing mix could be going forward.
Now I would be happy to take your questions.
The Deputy Chair: Thank you for your presentation.
We did note the media coverage. As always, the headlines are somewhat sensational. I noticed that you say that what you have determined in Ontario can't necessarily be applied to P3s elsewhere.
Ms. Lysyk: The messages in our report could be applied to P3s elsewhere. How a model is developed and used in British Columbia, for instance, might have different components and probability factors attached to cost estimates that are different from Ontario, but the logic behind what we are speaking of in the report is transferable.
Senator Enverga: Thank you for the presentation. Of the 75 P3 projects in Ontario, 34 projects included a component for maintenance or an operating component. This means that the private-sector partner is responsible for the ongoing maintenance of the project. The committee has heard that ongoing maintenance was an important feature in P3 project proposals which bundled projects in remote communities in Manitoba.
Are P3 projects which include the maintenance or operating component more likely to provide value for the money; why or why not? Would you be able to get that?
Ms. Lysyk: You have the same situation when assessing P3 delivery on that type of P3 versus another type of P3. I can't speak to the situation you're speaking of in Manitoba. All I can say is that you have to factor in that there are additional financing costs associated with P3s. Usually P3s are justified because there is risk assumed that the public sector cannot deliver the same way the private sector can. That's quantified and that quantification turns the tables from government deciding to do something via either the public sector or the private sector.
What we're saying in our report is there is not empirical evidence behind those calculations used in the model to justify the choice of a P3 versus a traditional build. We are saying that, when you make that assessment of whether to go P3 or traditional build, you have to factor in the higher financing costs and make a decision whether you think you want to incur that or not. Also, if a contract is being set up for a traditional build, you must ensure that the risks you would build into a P3 contract are built into a traditional contract.
Senator Enverga: To what extent did inclusion of operating and maintenance expenditures account for the higher costs of these projects relative to publicly managed projects?
Ms. Lysyk: The assumption that goes into a VFM model when dealing with operating costs is that the public sector historically has not put money aside to maintain infrastructure. The logic behind a P3 is that your P3 partner engages with you and has a contract with you to actually maintain that building to a certain standard so that 30 years from now that building is at a certain standard.
I guess we're saying that if the public sector had the discipline of putting money aside every year to maintain that facility, you could achieve that. There has to be discipline in wanting to appropriate money for maintaining infrastructure in the government.
Senator Enverga: You mentioned discipline. From your experience, do you think our P3s are disciplined enough? What are the experiences that you have had?
Ms. Lysyk: In terms of P3s with the maintenance component, we identified on figure 3 in our report that the majority of the projects in Ontario are the demand build, finance and maintain. Some of the factors in here are long term. There has not been enough experience as to whether or not, at the end of day, it is successful.
Senator Sibbeston: Would you please comment on the possible usefulness or practicality of P3s in remote areas or in First Nation communities, which may not be as organized or sophisticated as, say, the Government of Ontario, recognizing that it may cost more but, in the end, the First Nation may end up with a much better product. The whole process of building usually involves amassing materials, workers, and so forth, and, in the more remote parts the country, this is always more difficult.
Ms. Lysyk: I think it comes down to the same kind of disciplines you would apply public sector versus private sector. If you go P3s, you want your private-sector partner to ensure they are managing the project for the outcome you want achieved.
I can't make a distinction between a P3 working in the North in a First Nation area versus it being in the South. I think the discipline being applied is the same. All I'm saying is, first, there has to be a need identified in the First Nation community if you take the logic and you transpose it. Then there has to be a decision as to how to finance that. Are you going to go P3 or perhaps government working with First Nations to build something? Either way, you want your P3 partner to have the experience working in the First Nations or you want the government to have the experience in First Nations.
Even when dealing with a P3 partner, there is still a monitoring requirement. You still need someone outside the P3 partnership to be responsible to ensure that P3 partner is doing what they said they should be doing. The fundamentals of how to manage something in the public sector versus how you manage a relationship with P3s is pretty much the same.
Senator Sibbeston: We are having experiences with Auditors General these days in the Senate. We are all being examined.
Ms. Lysyk: That's federal, not me.
Senator Sibbeston: I know, but it is still probably the same mentality and approach. We find them to be extremely by the book, extremely idealistic and sometimes not very practical. I live far away in the North and I travel back and forth. There are instances where —
The Deputy Chair: Are you going to pose a question related to the topic?
Senator Sibbeston: Yes, I am. I appreciate you didn't give a definitive answer, but in the remote areas there are not contractors. It's not like Toronto, where you have thousands of contractors and a sophisticated government. In the North, that would not be the case. Maybe a P3 approach might be more beneficial. For example, someone comes along and says, "We have the money and the expertise. We can do it for you, but it's going to cost you a little more.'' I could see First Nations jumping at that opportunity because it's so difficult getting projects done properly in the North because of the many variables that exist there.
That was what I was trying to say. Maybe if you looked at it on the practical side, you could see the advantage of P3 in the more remote parts of our country.
Ms. Lysyk: I'm familiar with First Nations in the North and I have travelled in the North a fair bit. To be more direct in this, I've seen P3s fail just as much as traditional public-sector builds fail. It all comes down to management of a P3 arrangement or management of a traditional build. I'm being very direct in saying, practically speaking, there are failures in both and there are successes in both.
I think you have to tailor what you want to do to the need of the community and make a choice. P3s come with higher financing costs. That's the position in our report. If you're willing to accept higher financing costs because you think that the public sector or the First Nation can't build that facility on their own, then you're going to pay more for it, but you'll still have to manage that arrangement.
The Deputy Chair: That was my question, too, that in the cases of the First Nations where they don't have any capital, would a P3 be good? It would come at a higher cost, but because they don't have the capital to enter into a private-sector relationship perhaps a higher cost would be justified because then it could actually be done.
Ms. Lysyk: I think, in Ontario's case, ultimately the government still pays for the P3. All that's happening with the P3 situation in Ontario is that the initial, upfront money is put up by the private sector. They do the build. When the build is complete, the government reimburses them. When there is a long-term maintenance contract, the government still reimburses them. All we're saying, at the end of the day, is the government, in terms of Ontario's P3 strategy, is still covering the costs associated with that infrastructure and still owns the assets.
A model where a First Nation wouldn't own the assets and would just pay lease payments on a P3, that's a different structure than what's happening in Ontario.
Senator Tannas: Thanks for your testimony here.
Just a little bit on Senator Sibbeston's question, because I think that's quite to the point. This issue of, when you look at the Government of Ontario, they say they've got the expertise, engineers and people who know how to put together bids for projects and oversee contractors and so on, whereas the government that's going to be asked to help build infrastructure with us is a First Nation government. The federal government may provide the funding channels for it, but it will ultimately be the First Nation government. They have no choice, really.
In your study in Ontario were there any situations where the government specifically said, "Look, we don't know what we're doing in this space. We don't happen to have the expertise to do this, and so we would have to replicate it all''?
Was there significant value — what did you call it?
Ms. Lysyk: Value-for-money assessment.
Senator Tannas: — value-for-money changers or levers in that particular circumstance of the no expertise, zero, nada, and we need to get somebody in? That's number one.
Number two, we're here to talk about what we are, to talk about the money-costing P3s, but did you also look at money-making P3s — P3s that involve the exploitation of an asset or that a government has control over and profit- sharing, if you will, any of those, or do they even fall into the bucket of what you were looking at?
Ms. Lysyk: I'll answer your second question first. The answer to that is no.
With respect to the first question, with the P3 arrangements, the Province of Ontario still has Infrastructure Ontario that services other ministries who don't have the expertise to manage the relationship between the contractors and have the asset built. They are sort of an intermediary.
The Ministry of Transportation in Ontario is quite experienced in the building of roads, so if they enter into the P3 arrangements, they still have expertise in keeping the P3 partners on the straight and narrow in terms of what they contract they have with them says should be done.
To your point, you still need, no matter where you enter into a P3 arrangement, as the buyer of the P3 service — so in this case I'm going to say the First Nation — there still needs to be some expertise in the contracting with a private- sector partner.
Senator Tannas: You might have to buy that, too.
Ms. Lysyk: That's right. You'd have to buy perhaps somebody to work on your behalf.
Senator Moore: Thank you, Ms. Lysyk, for being here. In your presentation it's interesting that the tangible costs were estimated to be nearly $8 billion higher than they were estimated to be if the projects were contracted out and managed by the public sector. The majority of this $6.5 billion relates to higher private-sector financing costs. I always thought that governments could borrow money at a lower rate than private sector, so that doesn't make sense to me.
Ms. Lysyk: The chart that is from figure 5 in our report, that is the cost. For the private sector to put the money up front, borrowers don't offer them the lower rate that government can borrow money at. So private-sector partners do incur higher financing costs.
If you look to British Columbia, the Auditor General's report in British Columbia, at the back of a report that was issued about two months ago, they actually outline the interest rates behind a lot of the P3 contracts being handled in British Columbia. I believe the interest rates ranged from about 3.9 per cent to about 19.5 per cent. So, depending on the arrangement, that could be a huge component, depending on who your partner is and what their borrowing ability is.
Senator Moore: You mentioned that you found that two of the quantified risks included in Infrastructure Ontario's value-for-money assessment should not have been included, and then that when you take those out it changes the numbers. What were those two risks?
Ms. Lysyk: They had assumed twice the cost for the public sector to maintain the building, to maintain the facilities. So, in the modelling, they had put in twice as much that the public sector would have to pay to maintain facilities than under a P3. Their assumption was flawed there.
As well, there was an assumption that under a public-sector build, there is a cost with delaying of government approvals, but that equally happens under P3 arrangements. We quantified the impact of that on their model, and it's about $5.9 billion, which, if you look at the chart in figure 5, instead of it being a $6.6 billion overall benefit to doing P3s, it results in a $2.6 billion overall.
These numbers that we used here, I should mention, these are Infrastructure Ontario numbers. I should also mention that we clear all our reports and all our information by our auditees. Infrastructure Ontario agreed with the way we presented the material and with our points on the quantification of those two risks that we believe shouldn't have been in the model.
That's where we come down to the recommendation that these models are used to justify the decision to either go P3 or traditional. In the 74 projects in Ontario, all of them have been justified under this model to be P3, not traditional, because of this methodology that's used. We're just saying the methodology needs to be looked at and empirical evidence has to be obtained to substantiate the theoretical determination of a P3 model being used versus a traditional government build.
Senator Moore: So, you went back and asked the questions, but what would be the basis for saying that the public sector would be twice as expensive to maintain? What would be the basis of that? Did they look at other projects, or how do you get twice as much?
Ms. Lysyk: No. Infrastructure Ontario uses two engineering firms to basically do these types of assessments. My staff talked to the engineering firms and tried to determine how the calculations were arrived at, what was behind the calculations that values a P3 better than a traditional build. We weren't able to obtain any substance other than it's professional judgment. We think there needs to be more than just professional judgment behind this type of determination.
Senator Tannas: I have a tiny supplemental on that. Did you throw those completely out, saying they don't count? Until you get some empirical data around it, it takes on average, here's a prison and here's a prison, this one took 300 days to build and this one took 250 days, enough of those that they could show there was extra time, and here's a prison with 100 employees, public, and here's 80, and they're both operating? That kind of thing is what you were looking for? You couldn't find it and so you chucked it?
Ms. Lysyk: Well, in those two cases, it's the logic that's flawed. So the logic of using them in the model is flawed. What we're highlighting in terms of the cost is the quantification of those assumptions. In terms of the whole assessment process as to whether or not something was or was not cheaper under P3 or under a traditional build, we have to go into our general analysis and say, overall, if you assumed that the quantification of risks is accurate, P3s overall looked like they were costing less for the public sector than the traditional build. But it's all because of these assumptions.
It's important that there be empirical evidence. Obviously, there have been failures in the public sector. Things have been late, not delivered. P3s have been successful to deliver on time and on budget, but there's a cost. All we're pointing out is there is a cost that perhaps isn't always reflective when a VFM assessment is done.
Senator Raine: Thank you very much. I'm not a financier and I find it a little bit — obviously the Ontario Government building infrastructure for your citizens, your needs, is one thing, but we are looking for solutions to try to find ways to finance a huge backlog of infrastructure needs in remote and less remote First Nation communities where they don't have the fee simple land system and they don't have the same security of financing as the Province of Ontario does.
As I understand it, with a P3 you go out to the private sector and find somebody who is willing to put their money up and get the project done. You pay more for using their money for a short time and then refinance it with Ontario's borrowing power, and they are either on the hook for maintenance or they aren't, depending on the project.
I'm sure you understand First Nations and the relationship between them and the governments, both provincial and federal. Do you think the provincial P3 model would work for a First Nation?
Ms. Lysyk: I can't say I'm all that familiar with how this would work in a First Nation. Our report focused on Ontario and Ontario's projects. All I can say is that, at the end of the day, there still is a cost for the First Nation community whether it's built by the private sector or whether it's built by the public sector, and somebody has to pay that, and you have to know how much you're paying for both of those options. I guess I can't comment on whether or not a P3 would work unless I had a specific example or a real-life example, I suppose.
Senator Raine: We've become aware that infrastructure and capital project funding, and even ongoing operational and maintenance funding, have been capped for many years for First Nation communities. There's such a backlog now that I think we're all looking for some kind of magic formula that would create an incentive for people to invest in infrastructure, but they don't have the ability to tax, to create a revenue stream to actually fund these projects. It has to come from the federal government.
Ms. Lysyk: Right.
Senator Raine: I guess it's pretty complicated for us to go down that path with traditional P3s.
Ms. Lysyk: Right. If the federal government has to fund any infrastructure and you want to use P3s and the P3s are then used in the First Nation communities, there's still that exercise in determining, first, obviously what the need is and making an assessment of how much it costs under a traditional build versus a P3, and truly understanding the costs associated with a P3 and either saying, "It's fine to pay additional financing costs,'' or to say, "No, government finances it.'' You could still have partners do the build.
Generally, what we see is it's the same players in the Ontario market who do the construction. It's only a limited market in Ontario as to how many parties are actually building these facilities in Ontario, and I imagine that would be the same in every province.
Senator Raine: What you're saying, then, is you just need a good procurement system that can include, if it's desirable, an ongoing maintenance contract and penalties for not building on time and on budget?
Ms. Lysyk: That's correct. It all comes down to the contract at the end of the day, the contract and the willingness to take action to enforce contracts. In the past there were issues in contracts. They were not enforced and so it looks like a public sector build isn't the way to go. There are also P3 contracts where there have been issues in them as well.
Senator Raine: I'm from British Columbia, and you mentioned that the financing costs for private borrowing ranged between 3.9 and 19.5 per cent. I'd just like to know where I could get 19.5 for my money.
Ms. Lysyk: Yes. I don't remember the specifics, but it was the Auditor General of B.C.'s report that was issued about two months ago that lists the projects. It actually identifies the financing by project, so it's quite transparent.
The Deputy Chair: I'll follow up with a short supplementary to Senator Raine's questions. You mentioned that there was monitoring of P3s, and there's been talk of ensuring that projects are delivered on time and on budget. I guess at those points, then, the government would repay the private sector part of the initial start-up costs. Who does the monitoring?
Ms. Lysyk: In Ontario, it depends on the particular project. Generally Infrastructure Ontario keeps on top of the projects. If it's transportation, it's usually the Ministry of Transportation that does the monitoring. It's the assets that are purchased when government provides the funding back to the P3 or the private sector. So private sector puts up the fund for the building of a hospital, and then the government reimburses the partner for the costs of building that hospital.
The Deputy Chair: We had heard from a number of witnesses that, when it comes to building houses, oftentimes there are difficulties in monitoring the construction. When you're dealing with private contractors, sometimes you get houses that are not built up to the proper standards. I'm wondering if in either the P3 model or a public sector model, do these agreements or contracts normally contain some kind of provision that there has to be monitoring of the quality of the project, of the construction?
Ms. Lysyk: I don't see a difference if it's a house versus something else; there's still monitoring. I can give you an example of where there was a problem.
The Herb Gray Parkway was being built in Ontario and it turned out that the steel, the metal that was being used in it, was a problem. Had that not been caught — and it was the ministry that identified there were some concerns — the infrastructure could have been built with some safety issues.
Senator Enverga: You mentioned a while ago that we need a good procurement system and sometimes, when a contractor or a P3 doesn't meet the specifications, there should be a willingness to enforce. You mentioned that, right? As an auditor, do you force them to enforce this contract?
Ms. Lysyk: Do we recommend that Infrastructure Ontario monitor and enforce? Yes, we do. We are not commenting here that they are doing a bad job on it. We have a lot of respect for Infrastructure Ontario and they do a good job in looking at projects, as well as the Ministry of Transportation. Had they not done that, you would have seen a comment in this report.
Senator Enverga: Infrastructure Ontario asked two engineering firms to make a bid, right? Is that true or do you open it up to all the P3 companies?
Ms. Lysyk: Right now in Ontario there are two engineering firms that do the value-for-money assessments for Infrastructure Ontario. They do the calculations of risk and costing of that risk, and they provide that information to Infrastructure Ontario. If you were to go on the Infrastructure Ontario website, you would see the VFM assessments for all of these projects and those assessments were done by those two engineering firms.
Senator Enverga: When they do the assessments, are they the ones that build the infrastructure? Are they the same?
Ms. Lysyk: No, but I think when you go to one the reports issued by the office in 2008 — I was not the Auditor General at the time — on the building of the Brampton Civic Hospital public-private partnership, one of the comments and recommendations we had was the party that does the VFM assessment shouldn't be the same party that is involved in helping to manage the P3 project going forward. We saw that there could be a perceived conflict of interest and that it needed to be addressed.
Senator Enverga: Thank you.
The Deputy Chair: Thank you for your testimony this evening, Ms. Lysyk. It was illuminating and timely. Your report is very recent, as up-to-date as we could possibly get. If I heard you correctly, you were telling us some of the advantages and disadvantages of P3s and that, as we move forward, we have to be careful that we examine P3s as well as private sector contracting as well. You said maybe it's good for one situation but not for the other, and not to choose one over the other and that there may be more specific needs that one or the other would fit.
Thank you very much for taking the time to appear here this evening and for your presentation.
Ms. Lysyk: Based on your questioning and on what I thought your committee was addressing, if you have not seen this yet, it might be helpful to you. It is put out by the Columbia Institute in British Columbia and speaks to the infrastructure needs, waste-water treatment and things that might be pertinent to your committee. I can leave a copy for reproduction. It was not part of my submission, but, given your questioning, I think it might be helpful.
The Deputy Chair: We will pass it on to the analyst.
Ms. Lysyk: Thank you for having me here. I feel very honoured to have been invited.
The Deputy Chair: Thank you for your presentation.
Colleagues, in our second hour of the Standing Senate Committee on Aboriginal Peoples, we welcome PPP Canada, represented by Stefan Dery, Director, Investments, and Naresh Debidin, Director, Project Development - Federal. Gentlemen, we look forward to your presentation, which will be followed by questions from the senators. Please proceed.
Naresh Debidin, Director, Project Development - Federal, PPP Canada: Good evening, and thank you, chair, honourable senators, the clerk and staff for the invitation to appear this evening before the Standing Senate Committee on Aboriginal Peoples.
I'm pleased to be here on behalf of PPP Canada, along with my colleague Stefan Dery, to answer any questions that you may have with respect to the use of public-private partnerships, or P3s, and their use by First Nations to help to meet their infrastructure needs.
Let me begin by explaining our roles within PPP Canada. As Director of Project Development, I work with federal departments and agencies to assess capital projects for P3 viability and develop robust analysis of procurement options aimed at maximizing value for taxpayers. My colleague Stefan Dery is our Director of Investments, and he works with P3 Canada Fund recipients to ensure well-structured procurements that realize that value for taxpayers.
[Translation]
As PPP Canada's Chief Financial Officer already mentioned before this committee, P3s are a long-term, performance-based approach to procuring public infrastructure where the private sector assumes a major share of the risks related to the financing, delivery, and the performance of infrastructure, from design and structural planning, right through to long-term maintenance. This means that governments do not begin to pay for the asset until it is built, and that a substantial portion is paid over the life of the asset only if it is properly maintained and performs according to pre-established standards.
[English]
Financing a P3 project is not funding a P3 project. P3s are not a source of funding or capital for First Nations. The approach cannot replace a fiscal commitment to address infrastructure needs. There will always be an obligation to repay this private financing over the long term of the P3 contract. This might prompt you to wonder about the value of private sector financing. The financing component of a P3 contract forces the private sector to provide the capital necessary to deliver the required infrastructure and brings with it the increased costs of private sector borrowing. This cost is offset by the benefits of enhanced due diligence and third-party oversight, both of which are critical to delivering the on-time and on-budget reputation that P3s have earned. In addition, private sector financing keeps the private sector fully engaged in meeting its obligations as doing so is the only mechanism through which it will be repaid.
Contrary to what you have been told, First Nation communities are indeed eligible to receive funding under the P3 Canada Fund. In fact, the definition of eligible recipients was broadened in 2014 to make First Nations and Inuit communities eligible. The P3 Canada Fund allows for various types of support, such as contributions, repayable contributions and loans, but none of them take the form of a return-based equity stake. In fact, of the $1.3 billion committed under the fund, only one instance has had any repayability component. PPP Canada considers repayability where the asset is expected to generate meaningful revenue.
In addition to the P3 Canada Fund, First Nations communities also have access to a number of other federal funding sources for their infrastructure needs. These include the new Building Canada Fund and a variety of programs at Aboriginal Affairs. Furthermore, many of these other funding sources are also able to provide funding for P3s.
[Translation]
The P3 Canada Fund is a merit-based program targeting full-scope P3s, more specifically a design-build-finance- operate-maintain or DBFOM model. Since P3 procurement differs from a traditional procurement method, we recognize that not all eligible recipients, such as first Nations, may have the experience and capacity necessary to develop a P3 and bring it to market.
[English]
There are a number of areas where First Nation communities face challenges in implementing a P3. First, with funding, First Nations themselves do not have the taxation powers of the federal, provincial or municipal governments and, therefore, cannot provide the same assurance of payment that governments can.
Second, First Nation communities might face challenges related to their internal governance, limited technical capacity and unpredictable election cycles. All of these contribute to deterring the private sector from wanting to put its capital at risk. These challenges also impair the capacity of First Nation communities to manage the long-term, performance-based contractual relationships created by P3s.
Finally, First Nation communities face a challenge of scale. P3s are most well-suited to larger projects. Individual First Nation communities, by virtue of their size, are unlikely to have projects meeting the market's expectations for size and value. This dynamic is not restricted to First Nations, as we see similar challenges among small municipalities.
Overcoming this challenge is a central motivator of our work with the Atlantic Policy Congress in Atlantic Canada. The Atlantic Policy Congress, or APC, is looking at the upgrade and replacement of a number of water and waste- water systems in more than 30 First Nations communities. PPP Canada has been working with the APC and Aboriginal Affairs for the past three years to help in the development of this project.
To help address these challenges faced by First Nations, PPP Canada continues to do outreach with First Nation communities across the country and works with Aboriginal Affairs as potential projects are identified. P3s have proven successful in areas where First Nations have the greatest needs, such as health care facilities, schools, and water and waste-water systems. We are committed to supporting First Nations in the development of their potential P3 projects.
We hope that this helps in clarifying some of the misinformation you may have heard from a variety of witnesses, and we look forward to your questions. Thank you.
The Deputy Chair: Thank you. Mr. Dery, are you also going to give a brief presentation?
Stefan Dery, Director, Investments, PPP Canada: No, I am not.
The Deputy Chair: Thank you for the presentation. It's very clear. Perhaps I will start with some general questions.
I know that, on our trip, in our hearings, I think in Thunder Bay, there was talk of a number of First Nations getting together because of the need to have enough projects or a large enough project that it would be suitable for something like a P3. You are indicating that this has been ongoing with the Atlantic Policy Congress, where you have 30 First Nations working together.
Can you tell us where that's at? Are you close to finalizing something? How has the progress been on that?
Mr. Debidin: The APC project is proceeding well, but I would characterize it as still having a lot of work to do. We are currently at the phase of engaging technical advisors to do work on the technical planning of these water and waste- water systems and simultaneously continuing to develop the government mechanisms to bring the communities together and to determine how they are going to work and manage this relationship on an ongoing basis.
The Deputy Chair: When the P3 is finalized, do you think that the groundwork that you've done here can be applied to other regions of the country? Will you be able to have a protocol that could be applied elsewhere, let's say in northern Ontario?
Mr. Debidin: I think that's certainly the hope. A huge part of the value of APC initiative is the demonstration effect. Of course, the applicability of that model is always going to depend on having a group of communities with similar, compatible needs, and an ability and willingness to work together is always going to be a critical requirement.
The Deputy Chair: You say you have been working with the Atlantic Policy Congress for about three years. Is that the normal length of time that would be taken if you were working, let's say, with several small municipalities? Is that just a factor involved with smaller groups that are working together, or is there some specific barrier?
Mr. Debidin: Every situation is different. I would say that that length of time is not unusual. Even when you're dealing with a large, sophisticated jurisdiction, planning through a large undertaking always takes time and energy.
To give an example, in the federal space there have been two large P3 projects: one for the RCMP "E'' Division in British Columbia and the other for the Communications Security Establishment here in Ottawa. Both of those projects had gestation cycles of 10 years plus. So the planning horizon is often long.
When we're talking about APC or First Nations, maybe the projects aren't as big as those two examples, but relative to the communities undertaking them, they're sufficiently complex that you're going to see longer gestation cycles, definitely.
The Deputy Chair: I will ask one more short question. You say that P3s have proven successful in areas where First Nations have the greatest needs, and then you list health care facilities, schools and water and waste-water facilities. Do you have any examples where this has been successful, where something has taken off?
Mr. Debidin: In the First Nation context, unfortunately, none we can find. Certainly the examples of success have come more in the provincial space. For example, Ontario has had huge success with hospitals, and we're seeing more and more waste-water systems.
Senator Enverga: Thank you for your presentation.
You mentioned in your report that PPP Canada continues to do outreach with the First Nation communities across the country and works with AANDC as projects are identified. How successful are you? Have you met and seen every kind of First Nation? I know you're saying who has the most need, that's the one you were successful with.
What kind of conditions do you give them? Do they have to be in a certain location? What about remote locations? How successful are you with those? Normally those are the ones that need the most.
Mr. Debidin: The remote location question has come up on a few occasions and we heard it earlier today. Certainly remote locations add an element of complexity to the project, but I don't think that's a uniform issue.
I think my colleague Stef can probably talk a bit about Iqaluit Airport. Iqaluit is fairly remote, but it's a bit different, contrasting it with a location that's remote but not a capital, for example. There are different kinds of remote that you can think about.
In Iqaluit, we have a case where you're northern and remote, but you have a large airport. That P3 procurement has been successful and construction is under way. There you have a project of a certain size and certain market appeal, but where you try to translate that remoteness to maybe the northern Prairie provinces or northern Ontario or something like that, where the population is still low and you don't have the concentration maybe of Iqaluit and you don't have a project as big as maybe an airport, there are different nuances to that question of remoteness.
This is all to say it's not something you can't overcome, but it's definitely something you have to pay good attention to.
Mr. Dery: To add to your question on that, P3s are a great model in terms of allowing for private-sector innovation and innovation in terms of how to design and build a facility under unique circumstances where the private sector can bring its expertise to address unique challenges. The P3 allows the flexibility to the private partner.
Some great examples in terms of the Iqaluit Airport, in terms of how the private partner is or how to use a unique design approach in addressing some of the conditions — the permafrost and building the facility — and how to bring materials up in an efficient manner, from that perspective.
Senator Enverga: How about the financing? What do you require of the First Nations? Do they have to come up with a certain percentage, or does it depend on what you expect on that kind of project?
Mr. Dery: That goes back to the funding-versus-financing issue that we brought up. P3s are a financing solution and not a funding solution.
In terms of when you're assessing a project on a case-by-case basis, you want to ensure there is sufficient private- sector finance at risk to make sure that the project company in question is sufficiently incentivized to perform its obligation under a P3 contract. There is a sort of balance in terms of identifying what that adequate private finance component is in the project.
Mr. Debidin: Generally speaking, in the classic P3 model that we tend to talk about here in Canada, the public- sector side of the transaction isn't putting any of its funding available until the assets are built.
If we were to replace government with First Nation community, the requirements that the market would look to for that community are a very strong assurance that the payment stream associated with that contract over 20, 25 or 30 years is a payment stream that they can count on. That is something that we touched on in our remarks. That's something that governments are very well positioned to do and is a bigger challenge for First Nation communities.
The other thing that the market will look for is a predictability of process and predictability over the long term in managing that contract. Those are some of the challenges that come up in that space.
It's certainly talked about in the space of financing, because those are the preoccupations of the people putting their capital up to deliver these projects. They want some assurance that that repayment capacity is there over the long term.
Senator Enverga: When you say you need some assurance, is it assurance from the First Nation or assurance from the government?
Mr. Debidin: Assurance from someone who has the clout or credit-worthiness to make that assurance.
Mr. Dery: Further to that question, the market will, through the procurement process, ensure that the project is an attractive project, bankable and that there is a funding stream for them to participate. Ultimately, if there are challenges associated with funding a project, there may be questions and issues as proponents go through the procurement process. Fundamentally there has to be a funding stream present for them to be interested in the project.
Senator Enverga: Being the government here, what would you suggest? I'm pretty sure that not of all these contracts are successful. What do you think the government should do to make every funding project, every project a success? Is there anything we can do?
Mr. Debidin: If, when you are talking about contracts, you mean P3 contracts, for success, we can't think of any example where a Canadian P3 has gone to market and not been successful and hasn't been delivered on time, et cetera. There's not something that's really critical in a failing that needs to be addressed by the government around the model itself. It's more the challenges of applying that model to what are very small communities and projects that have a particular sort of governance associated with them. Those are the things we're trying to overcome through the APC work; we're trying to find ways around them.
Senator Raine: Thank you very much. Irving Leblanc, acting director of housing and infrastructure at the AFN, told the committee that funding agreements for most communities from AANDC are for 1- to 5-year periods, where P3s need a 20- to 30-year payback. The same concern was raised in the testimony of Mark Romoff from The Canadian Council for Public-Private Partnerships.
In your opinion, are the short-term funding agreements that First Nations receive from AANDC a barrier to moving forward on P3s on reserve? If so, what could be done to address this?
Mr. Debidin: They certainly pose a challenge. I think that issue speaks to that assurance of payment stream. It's an impediment. It's not something that we would necessarily have a view on how to resolve, but it's certainly an impediment.
Senator Raine: As a follow-up, with the Atlantic Policy Congress you have a lot of different First Nations, some bigger with own-source revenues and some smaller. How are you managing to pull them together, or do you know how they are being pulled together to actually move forward, given these sort of short-term funding periods from AANDC?
Mr. Debidin: AANDC is very much a part of that process and is involved in our work with them. They are aware of how that process is developing and what implications that might have for their programming going forward.
As to what is pulling the First Nations together, it very much seems to be a common pressing need and usually, as we see in these cases, it's the particular personalities involved unified around that one need.
Senator Raine: I guess it helps because they're all really geographic and they are the same Nation, if you like, in a greater sense.
In your opinion, does it look like AANDC will go to a longer-term model if they manage to pull it together?
Mr. Debidin: I can't speak to that, unfortunately.
Senator Raine: But logically they would have to, if it was going to work.
Mr. Debidin: That's a sound conclusion.
Senator Raine: Thank you.
Senator Moore: Thank you, witnesses, for being here. I just want to go back to a question that Senator Dyck asked. At the end of your brief, you say "P3s have proven successful in areas where First Nations have the greatest needs — health care facilities, schools, water and waste-water facilities.'' But did you say that none of these successful projects have been on First Nations? Is that right?
Mr. Debidin: That's right.
Senator Moore: This almost reads like — okay.
Mr. Debidin: The example was intended to show that the model has been successful in delivering exactly the same types of assets that First Nations have a need for, not to suggest that there had been successful examples in First Nations communities.
Senator Moore: Okay. I didn't understand that.
With regard to the Atlantic Policy Congress project, that's between PPP Canada and these 30 First Nations, what role does the department have?
Mr. Debidin: The department is a party to that discussion and that involvement. They're very active in that work. As I understand it, they are a critical enabler financially of that work being under way.
Senator Moore: They're a critical enabler?
Mr. Debidin: With funding to make that work.
Senator Moore: So will they put up the money or will they guarantee?
Mr. Debidin: They're assisting in funding the project development work that's happening right now.
Senator Moore: Okay, but Senator Raine asked the key question here. This is not going to be a five-year thing. Most of these projects are quite long and there's always been an obligation to repay the private financing. How does that philosophy or need work with regard to the culture within the department to do one-, two-, three-, or four-year financings? How do you handle that?
Mr. Debidin: That's a challenge AANDC will have to resolve.
Senator Moore: They will have to resolve it. Okay.
It's interesting. In your remarks you say, on page 2, "Contrary to much of what we might have been told,'' and later on, "We hope this helps to clarify some of the misinformation you may have heard.''
Tell us about that. I guess this must have been evidence presented by other witnesses. What were those things that you want to make sure to clarify here?
Mr. Debidin: Critically that First Nations are eligible recipients under the P3 Canada Fund. Obviously, in preparing to be here tonight, we reviewed past testimony and identified a few key things. That was one of them.
The other one was that P3 Canada or the P3 Canada Fund's involvement in projects is based on putting up to 25 per cent of the equity necessary to make these projects go and expecting a return. That is not how our fund operates. We wanted to clarify that our support usually takes the form of contributions, repayable contributions, et cetera.
There seemed to be a persistent confusion among some of the testimony between the funding and financing aspect. Those were some of the key things we wanted to talk about.
Mr. Dery: Another clarification as well was that the P3 Canada Fund would sort of only focus on projects where there was a revenue component, for instance. We just wanted to make sure that was clarified.
Senator Moore: We heard evidence from one witness that I think P3 Canada puts up some money to assist in the preparation of the brief of the proposal. I forget the witness, but I think the person said that's what happened with regard to a project in Winnipeg, but that there was a similar project with regard to some First Nations and that contribution I guess that let them put together their project plan was pulled by P3 Canada. Is that so?
Mr. Debidin: I can't speak to the specifics of those projects, but we take a merit-based approach to our applications and how we handle them. The terms and conditions governing our program tend to evolve over time. As I mentioned, in 2014 the eligible recipients were broadened out. There are supports that we can offer today that we couldn't offer back in the past. So it's difficult to sort of address that without going into the details of one project, which we're not in a position to do.
Senator Moore: Anybody else around the table remember that? That was the evidence we heard.
The Deputy Chair: Was that Manitoba?
Senator Moore: It was in Manitoba. It was a First Nation there.
The Deputy Chair: Northern Manitoba, MKO?
Senator Moore: They were ready to go ahead and then this particular thing was pulled out right at the start and they didn't have the funding to put together their plan, their proposal.
The Deputy Chair: I'll interject with a question here. You presented to us two or three challenges that face First Nations in accessing or implementing P3s, and the first one you mention is funding. Because First Nations themselves don't have the same kind of taxation powers that other governments have, they can't provide the same assurance of payment that governments can.
The question is: Can the federal government provide this assurance of payment and, if not, why not?
Mr. Debidin: The government could provide that assurance in some way. I think the government would have to come up with a mechanism for doing that. That's an issue that sort of lands at Aboriginal Affairs' feet. That's a question that really falls inside the responsibility of Aboriginal Affairs.
The Deputy Chair: So that falls onto Aboriginal Affairs?
Mr. Debidin: Yes.
The Deputy Chair: Thank you.
In your presentation you were talking about doing outreach with First Nation communities across the country and working with Aboriginal Affairs to identify potential projects. Can you tell me how you do that? Are you sort of just going around, or are you advertising, working with local organizations, AFN?
Mr. Debidin: We tend to do that through Aboriginal Affairs. Aboriginal Affairs acts as our interlocutor with First Nations. Obviously, the department has access to the array of needs from First Nation communities and they tend to be the broker, if you will, for making those connections.
Mr. Dery: We also have a network of key regional contacts that can help facilitate the project development in various regions.
The Deputy Chair: When you say provincial counterparts, could you give me an example?
Mr. Dery: We'll work closely with Infrastructure Ontario and with Partnerships BC. Those are, for instance, sort of the key P3 players domestically, and we'll work collaboratively with them.
The Deputy Chair: I was curious. If you're working with Infrastructure Ontario, for example, they're not necessarily focused on First Nation communities. I'm wondering if there is a need to modify the way you're looking for potential projects.
Mr. Debidin: Most of the effort on the First Nations happens through Aboriginal Affairs, and our fund is application-based. So we try to identify, with Aboriginal Affairs, those projects that are most aligned with the priority sectors, the highest likelihood of success, and that's where we try to engage and make that work. That's how we came to have the APC work that we're working through right now.
The Deputy Chair: For example, if a First Nation has submitted an application for development of a school or something, and that's submitted to Aboriginal Affairs, would Aboriginal Affairs then come to you and say, "Here's a community that needs a school,'' and then you would go visit them?
Mr. Debidin: Yes, it could be. Usually the way it would play out is that there would be a discussion around that proposal. Is there alignment? Is there potential? The process of putting forward an application to the P3 Canada Fund is not trivial. We don't like to encourage projects that aren't going to be successful to necessarily come forward and make that investment in time and energy.
We'll usually have a bit of a discussion with AANDC around that to make sure anything that looks like it might come forward as an application makes sense, to minimize disappointment and wasted effort.
Senator Raine: P3 Canada Fund does have a threshold of size before it's really logical to do a P3. It's not for one school.
Mr. Debidin: Right. The fund itself doesn't have a threshold for size. It's more that the market is only going to be interested in things of a certain size.
Senator Raine: What size is that?
Mr. Debidin: The $40-million range. There's experience with lower dollar values, but they tend to be more one-off types of arrangements, which is why the APC work is so interesting to find a way of grouping those demands together into something that totals up to a larger number.
Mr. Dery: I think this goes back as well to the VFM discussion that was brought by the Ontario AG. This is where you want to do that analysis in terms of value for money. Does it make sense to deliver a project as a P3, comparing it to a public sector comparator in terms the cost of the public sector delivering that asset? That's why, on average, it's the value that Naresh had referenced.
Senator Raine: Does Aboriginal Affairs have the expertise to do a VFM analysis?
Mr. Debidin: I can't answer "yes'' or "no'' to that. I think certainly they would rely on us to do that in the end.
Senator Tannas: Just quickly, because I don't think we've touched on it, if I remember correctly, P3 Canada did participate in helping to fund a money-making project. In that case, and going back to who you're canvassing for ideas and opportunities and so on, would you be taking a different tack, or would you still be going to AANDC to see if they have any bright ideas, as opposed to out where the First Nations governments are, where they're interacting with private enterprise? Can you give us a little bit of a drive-by on how you see the money-making side of P3s for resource projects, et cetera?
Mr. Dery: Sure. At a high level, I think the project you're referring to was the Kokish project. In that case, PPP Canada provided a preferential loan to help the 'Namgis First Nations have an equity stake in a project that had a revenue component that returned to the project. From that perspective, it's a little different from what we would define as our full-scope P3, which is a design, build, finance, operate and maintain project where the asset is government owned, for instance, and there's a 30-year life cycle that is managed by a private partner.
I think there's a distinction to be made in terms of the particular project that you're referencing and the other projects that the P3 Canada Fund supports in the development there. Obviously our priority is to develop those full- scope P3s in terms of —
Senator Tannas: Were you told to do that deal, or was that in your original mandate to come up with these ideas?
Mr. Debidin: Certainly not, and I think if that opportunity came to do it again, we would.
Senator Tannas: Are you actively looking for those kinds of opportunities, such as you were doing for the other kind?
Mr. Debidin: I believe so. Certainly, that project didn't come to us, as far as I know, through a channel other than AANDC. It still came through that channel.
Mr. Dery: The fund itself has the provisions for loans, for non-repayable contributions, for repayable contributions and loan guarantees as well. From that perspective, there is flexibility in terms of the support that the P3 Canada Fund can offer.
The Deputy Chair: With some of the other witnesses who have appeared before the committee, it seemed like some of the banks, financial institutions and different companies thought that the idea of a P3 was very viable in terms of helping First Nations with their infrastructure.
When you're talking about finding potential projects, it sounds like you're working mostly with the department. Do you have a mechanism to meet with the private sector that might have inside information as to where they wish to pursue this kind of opportunity, a P3? Do they come to you?
Mr. Debidin: The challenge with speaking to the private sector about potential projects is that one of the key factors for success and realizing that value in a P3 is competition. Going to the private sector and looking at the things that they might want to do creates a challenge. There's a private sector bidder who might want to do something. Is there a First Nation community or a public sector authority ready to buy what they're selling, and is there a competitive market for that thing?
We certainly maintain very active links — Stef's unit more than mine — with the bidder community and the participants in the Canada P3 market. However, we've only ever found challenges in the notion of the private sector unsolicited proposal. It's not a place where we tend to go in search of potential projects and, when we look at our fund, eligible recipients only include the private sector when they're sponsored by a public-sector applicant. So there's always a mismatch there for us.
Mr. Dery: If I can add to that, we talked about the three-year project development gestation cycle where structuring a bankable and attractive project for the private sector is time well spent. Where there's a project that's well structured, there will be active market participation. We saw that in the Iqaluit Airport project, a very Northern project, but we saw world-class firms participate in the procurement process, given the structuring of the project.
Senator Raine: As you know, we've had quite a few people testifying on the P3s and the challenges and potential opportunities. Jeffrey Frank of the Castlemain Group told us that it would be necessary to create a bondable aggregate, such as the First Nation Finance Authority, as a delivery mechanism to proceed with P3s on reserve.
Would you agree with this observation? What is the role of a delivery mechanism for P3s, and which organizations normally play that role? Are there any particular considerations of what might be needed for First Nations in terms of a delivery mechanism? If so, what might these be?
Mr. Debidin: I'll start from the middle, if that's okay.
Senator Raine: Maybe explain the delivery mechanism to us.
Mr. Debidin: Sure. I think what Mr. Frank was talking about was having a counter-party. There are two parties signing a contract. One is a private sector entity and the other is public sector entity. I think what Mr. Frank was talking about was having an entity that would essentially be representing the First Nations in a contract. That entity would enjoy the same kind of creditworthiness or market acceptance that the Government of Canada or the Government of Ontario or the Government of British Columbia would.
You asked who plays that role in the typical P3 market. It's usually a government. So, in the CSEC project I mentioned earlier, that was the Government of Canada. We talked about the Herb Gray Parkway; that's the Government of Ontario, Infrastructure Ontario. There's always a government entity that's fulfilling that role.
Is that a critical piece for making P3s work in the First Nation context? We think it might be, and that's why we're investing the time we are with APC, because not only does that initiative get over the hurdles of size, it also starts creating a template for governance and starts potentially crunching some of those issues around funding stability and an entity with that sort of creditworthiness where the private sector will feel comfortable putting its capital at risk.
Senator Raine: Do you see the First Nations Finance Authority as being that potential aggregate?
Mr. Debidin: Unfortunately, neither of us is familiar enough with that entity to have a view on that.
Senator Raine: Interesting.
Mr. Dery: I will add from the procurement perspective that these are very complex projects that have a long procurement time frame. There will be a request for qualifications that were short-list qualified entities that can participate in the project, following which there's a lengthy request-for-proposals process where there's dialogue that happens between the private sector parties and the sponsor to clarify questions that they have around the project.
From a delivery perspective, there's a fair amount of complexity and expertise that's required. You can imagine the technical advisers that are part of both sides of the table to make sure that the due diligence is being properly performed and that no stone is left unturned. Similarly, from a financing perspective, there's a fair amount of complexity associated with the delivery of a procurement process on P3 projects as well.
Senator Raine: Do you know if the Municipal Finance Authority of BC has ever worked in P3s?
Mr. Dery: I'm not aware.
Mr. Debidin: I'm not aware either. In most of the B.C. projects, Partnerships BC tends to play a fairly active role, but who is signing the contracts? Typically a municipality or a provincial department. I don't know about the Municipal Financing Authority.
Senator Raine: Thank you.
The Deputy Chair: I'd like to thank our witnesses tonight, Stefan Dery and Naresh Debidin, for their testimony tonight from PPP Canada. I thank all honourable senators for their questions. With that, we will end this session.
(The committee adjourned.)