Canada dry

Sober decisions made by Partnerships British Columbia during the credit crisis have allowed a more practical delivery model to evolve, writes incoming President & CEO Sarah Clark

Building infrastructure in any jurisdiction is a challenge at the best of times. It is not a straightforward undertaking when you combine volatile economic markets, uneasy investors and governments where the constant priority is to get the best deal for taxpayers. Prudent governance and flexibility in approach is key to ensuring any new public infrastructure provides the best value.

The PPP market in British Columbia (BC) continues to demonstrate value for money by incorporating lessons learned into new projects, while at the same time, adopting best practices to benefit individual projects and the external conditions influencing them.

The fall of 2008 and most of 2009 were especially challenging times for financial markets around the world, with major impacts on projects that were in the market at the time. BC had to adapt several competitive selection processes in order to preserve value for money and ensure the projects were completed within the intended scope, on time and on budget.

For two projects, Fort St. John Hospital and BC Cancer Agency Centre for the North, an innovative wide-equity financing structure was introduced to mitigate the impact of current financing costs and keep the projects affordable. While this approach is not seen as providing optimal risk transfer, there is significant private capital under threat, enabling sufficient risk transfer to be achieved.

In another example, the multibillion dollar Port Mann Highway 1 Project, originally in the market as a real toll concession, could not conclude successful negotiations with the preferred proponent. It was decided instead to proceed directly with the design and build joint venture with Kiewit/Flatiron and forgo the 40 year concession.

This quantum of completed projects and evolving market has provided impetus for the evolution of Partnerships BC’s service delivery model. Leveraging the expertise and best practices developed over the past eight years, Partnerships BC has expanded its services to include the provision of planning and procurement services for complicated project delivery models that may not include private sector financing, such as design-builds and large service contracts.

For example, the $448.2m Interior Heart and Surgical Center at the Kelowna General Hospital was broken into multiple components to ensure a smooth transition between the renovations and construction of the new buildings. The procurement models include two design-build contracts and a PPP procurement to build a new Heart and Surgical Centre. Partnerships BC is providing the complete procurement service and assisting the client to integrate all three components into one large masterplan.

The return to normality in the financial markets this year is producing affordable and available financing in both the debt and capital markets, helping to ensure a viable PPP market. Over the next few years, it is anticipated that the current number of projects in procurement will be consistent—approximately three to four per year.

Projects currently in the market include: Evergreen Line Rapid Transit Project; Surrey Pre-Trial Services Centre Expansion Project; and Surrey Memorial Hospital Redevelopment and Expansion: Emergency Department and Critical Care Tower Project. In the pipeline for next year are two major hospital schemes and a major energy project.

More than 35 projects have been delivered by Partnerships BC to date, with a combined value of $10bn. Of that, $4bn comes from private capital. All of these projects have been delivered on time or ahead of schedule, and on budget.

The outlook for PPPs in BC is very positive. With our growing reputation for an efficient procurement process and our ability to quickly move transactions through to financial close, we expect brisk competition with both existing and new participants on our future projects.