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Public Works and Government Services Canada

9.60. Public–Private Partnership (P3) procurements

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  1. A Public-Private Partnership (P3) is defined as a long-term contractual relationship between a public authority and the private sector that involves the following:
    1. Provision of goods or services to meet a defined output specification (i.e. defining what is required, rather than how it is to be done);
    2. Integration of multiple project phases (e.g. design, construction, finances, operations);
    3. Transfer of certain level of risk to the private sector, which is anchored with private sector capital at risk; and
    4. A performance-based payment mechanism.
  2. Budget 2011 presented the Government desire for Canada to be a leader in P3. The Budget introduced new measures that made it mandatory for departments and agencies to evaluate the feasibility of delivering infrastructure projects through a P3 procurement approach. Specifically Budget 2011 states:
    "Going forward, federal departments and agencies will be required to evaluate the potential for using a P3 for large federal capital projects. All infrastructure projects creating an asset with a lifespan of at least 20 years and having a capital cost of $100 million or more, will be subjected to a P3 Screen to determine whether a P3 may be a suitable procurement option. Should the assessment conclude that there is P3 potential, the procuring department will be required to develop a P3 proposal among possible procurement options."
  3. Furthermore, Budget 2011 also encourages federal organizations to explore the possibility of using the P3 procurement approach for other types of projects, such as information technology (IT) infrastructure projects. This therefore compels federal departments and agencies to consider the use of P3s in all procurement projects, including those with capital costs less than $100 million dollars or with a lifespan of less than 20 years.
  4. Innovative practices, such as P3s, should be considered in options explored to source a project. Practices could include, for example, the bundling of smaller planned projects.
  5. Supporting resources: More information on the concept of P3s and how it has worked in the Canadian federal context can be found in the Report on the State of Comptrollership in the Government of Canada. The Standing Committee on Government Operations and Estimates has produced a report on P3s titled Public-Private Partnerships: A Tool in The Tool Box, and Treasury Board has issued a Guideline to Implementing Budget 2011 Direction on Public-Private Partnerships.

9.60.5 Public–Private Partnerships delivery models


  1. Public–Private Partnerships (P3s) can take a number of different forms based on client needs, availability of funding, expertise available, risks associated and strategic considerations. The project urgency and timeline may also impact the form of the P3.
  2. The P3 delivery models are:
    1. Design-Build-Finance (DBF);
    2. Design-Build-Finance-Maintain (DBFM);
    3. Design-Build-Finance-Operate (DBFO); or
    4. Design-Build-Finance-Operate-Maintain (DBFOM).
  3. Using the DBF delivery model, the private sector is responsible for designing, building, and financing the construction.
  4. Using the other P3 delivery models, the private sector designs, builds, finances, maintains and possibly operates the asset(s) to predetermined output specifications.
  5. Unlike traditional procurement methods, where Canada funds projects internally and awards separate contracts to one or more firms for the design, construction, operation and maintenance, P3s draw upon private sector financing and are governed by a single performance-based contract called a project agreement that integrates the above models.

9.60.10 Federal roles and responsibilities in Public–Private Partnerships


  1. Treasury Board Secretariat (TBS): TBS officials have both a challenge and advisory role on relevant supporting documentation such as the P3 Screen, risk analysis and Value for Money (VFM) analysis.
  2. PPP Canada Inc.: In 2008, the Government of Canada established PPP Canada Inc., a federal Crown corporation, to advance federal efforts to increase the effective use of P3s in Canada. PPP Canada Inc.'s role is to provide advice and expertise to departments and agencies regarding P3s. It has also developed many tools in support of P3 project planning and assessment activities.
  3. Public Works and Government Services Canada (PWGSC): For PWGSC projects, the Department is accountable for project screening, options analysis and the procurement process. PWGSC is also responsible for recommending the most appropriate delivery model for each PWGSC initiative. While benefit can be derived from the advice of external experts, including PPP Canada Inc., accountability remains with PWGSC.
    1. Real Property Branch (RPB) – P3 Development and Advisory Services, P3 National Center of Expertise (P3 NCOE):
      1. The P3 NCOE's role is to provide PWGSC with expertise, advice and functional guidance to fully assess, and as required, develop P3 projects.
      2. Where RPB is the project authority, involvement of the P3 NCOE is mandatory.
      3. Where Acquisitions Program is the procurement authority on behalf of another department or agency, the involvement of the P3 NCOE is optional (joint client and operational sector's decision).
      4. For projects originating within RPB, third party financial analysis (i.e., VFM) will be validated according to existing RPB procedures.
      5. For PWGSC projects outside of RPB, validation of financial analysis, if required, may be done by using a third party consultant.
      6. Supporting resources can be found in the Directive on Real Property Branch Obligations to Consider Public-Private PartnershipsThe information is only accessible to federal government department and agency employees..
    2. Acquisitions Program (AP)
      1. As the common service provider for acquisition services, AP will act as the procurement authority for client departments' projects that are over their delegated authority as it would for any other procurement method.
      2. AP's involvement should start early in the planning of P3 procurements.
      3. Other government departments are responsible for their choice of procurement method and supporting analysis, however, should AP be identified as the procurement authority, validation of financial analysis must be confirmed.

9.60.15 Public–Private Partnership screening


  1. The Public–Private Partnership (P3) screen forms a part of the early process of narrowing the options. Once the requirement has been identified, organizations can determine whether a P3 is a viable option for further consideration. It is important to screen early to ensure that the activities through the planning process are appropriate.
  2. PPP Canada Inc. has developed a P3 Screening Matrix and supporting guide that must be used by departments and agencies when the project meets Budget 2011 criteria. Considerations that are explored through the P3 screen include, but are not limited to the following:
    1. private sector interest and capacity;
    2. asset characteristics and size;
    3. time horizon;
    4. public acceptance or interest;
    5. opportunity to transfer risk;
    6. performance specifications;
    7. innovation;
    8. organizational capacity;
    9. financial or funding considerations.

9.60.20 Value for money


  1. In the Government of Canada, Public–Private Partnerships (P3s) are governed by various Treasury Board policies and their associated standards and directives. Ensuring value for money in the management of assets and acquired services is a guiding principle of the framework and its associated policy instruments.
  2. Deputy heads are accountable for ensuring that proper due diligence is conducted and that investment decisions demonstrate value for money in line with the principles outlined in Treasury Board policies
  3. Once a P3 has been identified as a potential procurement method for further considerations through the P3 screen, value for money will be the determining factor for selecting the preferred method.
  4. Value for money analysis essentially represents a risk-adjusted comparison of the costs and benefits of different investment options. It is an iterative process that takes place throughout the initial planning and identification and project definition stages of the planning process. This analysis is based on significant input from the project team and client who are most familiar with Government of Canada and project-specific requirements.
  5. Internal and external specialty subject matter experts with financial or technical knowledge and experience are best positioned to support an objective assessment and consideration of current market trends.
  6. The decision as to whether or not to proceed with a P3 considers the analysis of program requirements, strategic considerations as well as project-specific qualitative, quantitative, and risk factors.
  7. The recommendation to proceed or not with a P3 is prepared by Government of Canada officials, taking into consideration input from internal and external subject matter experts.

9.60.25 Stages in Public–Private Partnership procurement process


  1. Even though it is important for Public Works and Government Services' Acquisitions Program (AP) to be involved early in the process, many of the steps set out below would have already been processed by the client prior to AP receiving the requisition. Since each project has different objectives and timelines, some of these steps may need to be modified accordingly.
  2. Before using a Public-Private Partnership (P3) screen or undertaking any analysis of options, departments and agencies should ensure that the organizational needs have been clearly defined. A needs analysis and a preliminary options analysis are also to be included as part of the business case.
  3. Treasury Board Secretariat views P3s as having the following stages:
    1. Initial Planning and Identification
      1. Preplanning
        • Needs analysis
        • Feasibility analysis
        • P3 screening
        • Decision PointP3 identified as a potential option through screen
      2. Options Analysis
        • Potential indication of market interest or issue a Request For Interest
        • Project complexity and risk assessment
        • Business Case
        • Preliminary value for money analysis
        • Decision PointP3 identified as preferred option in the initial value for money analysis
        • Analysis of advisory service requirements
        • Develop project schedule
        • Develop project charter
        • Plan for competitive process
    2. Project Definition
      • Develop output specifications
      • Develop project agreement
      • Develop payment mechanism
      • Develop competitive process documents
      • Update value for money analysis
    3. Project implementation
      1. Competitive Process
        • Issue request for qualifications
        • Issue request for proposals to qualified bidders
        • Engage in collaborative dialogue with bidders
        • Refine project agreement accordingly
        • Proposal evaluation
        • Recommendation of selected proposal
        • Revise value for money analysis with selected proposal information
        • Decision pointP3 identified as preferred option through updated value for money analysis.
      2. Implementation
        • Finalize offer with selected bidder
        • Financial close
        • Partners enter into contract
        • Design, construct, and commission
        • Contract management and monitoring

9.60.30 Public–Private Partnership procurements - Key differences


If a Public–Private Partnership (P3) is chosen as the preferred delivery option, many of the steps in a typical procurement process are undertaken. This includes a Request for Qualification (RFQ), Request for Proposal (RFP) and response and proposal evaluations. Consideration should also be given to issuing a Letter of Interest (LOI) or a Request for Information (RFI). Information sessions, Industry Engagement activities and site visits will most likely be required. However, some elements of the P3 process may differ from traditional procurement processes, for example:

  1. A short list of qualified bidders is often established as a result of the RFQ. Limiting the procurement process to only qualified bidders will require the proper approvals (as part of the procurement plan).
  2. Emphasis is given to output-based specifications/requirements.
  3. An honorarium can be provided to the unsuccessful bidders who submitted a compliant bid at the RFP stage. This is subject to approvals (as part of the procurement plan).
  4. Proposals can be brought by consortia made up of different private sector firms rather than an individual company. The consortia often have international, national and local representation.
  5. Proposals are traditionally based on high-level designs rather than the completed designs found in traditional procurement.
  6. Commercially confidential meetings involve many face-to-face sessions with each pre-qualified consortium. These meetings help ensure that the public sector's needs are well understood. Due diligence must be carried out to ensure information is released simultaneously to all involved parties. These meetings are typically overseen by a Fairness Monitor.
  7. Given their complexity, P3s require significant involvement of third-party advisors.
    1. The P3 National Center of Expertise can assist in obtaining support for Real Property Branch projects and other related projects.
    2. Within the Acquisition Branch, the Contract Cost Analysis, Audit and Policy Directorate should be involved in any P3 project discussion regarding an RFQ bidder's financial capacity evaluation.
  8. There is a single project agreement that integrates phases of the project (design, build, finance, operations and maintenance) over a 25-30 year period. A draft project agreement is included as part of the RFP and refined with the private sector's input during the procurement process.
  9. Procurement is completed upon the successful bidder achieving financial close and subsequent signing of the project agreement. The next phase is traditionally the simultaneous design and construction, which paves the way for subsequent phases such as operation, occupation or delivery for the duration of the project agreement.

9.60.35 Public–Private Partnership Treasury Board approvals


  1. Public–Private Partnerships (P3s) may require a variety of Treasury Board (TB) approvals, including project approval, expenditure authority, contract approval, and the authority to enter into a real property transaction.
  2. These approvals depending on their particular details may be requested through TB submissions.
  3. Treasury Board Secretariat should be consulted early in the planning process and regular meetings should be scheduled with central agencies to identify the authorities required, to seek advice, and explain the complexities of the project.
  4. It should be noted that in the process of reviewing TB submissions, the Secretariat monitors policy compliance and may request supporting information from departments and agencies accordingly.

9.60.40 Public–Private Partnership project team


  1. The size and magnitude of Public-Private Partnerships require a multitude of public sector skill sets. Subject matter experts from the public sector are supported by a range of private sector experts (i.e., legal, financial, procurement, fairness/integrity and technical advisors).
  2. Typically, a dedicated team is brought together to coordinate all project activities, including planning, developing performance specifications, communications, procurement as well as oversight during design and construction.
  3. A dedicated project team should be composed at the on-set of the project approval, with clearly defined roles and responsibilities for each team member.
  4. Experts from the private sector can form part of this team and should this be the case, a confidentiality agreement must be part of the working team agreement.

9.60.45 Payments in Public–Private Partnerships


  1. Depending on the Public–Private Partnership (P3) project, the government may not issue any payments until the project is completed and certified by an independent certifier.
  2. Another approach is to provide milestone payments.
  3. In a P3, it is the private sector's responsibility to secure financing; this is often a combination of debt and equity financing.
  4. Once the asset is ready for use or the service has been delivered to a level of certified satisfaction, the government initiates payment to the private partner, as outlined in the project agreement.
  5. Payments may be subject to a holdback provision or liquidated damages (penalties) should the private partner not fully meet the obligations as outlined in the project agreement's predetermined performance specifications.
  6. For long term projects where operations and maintenance are an integral part of the project, payments are usually made on a monthly or quarterly basis, following in-service commencement, over the term of the Agreement.