P3s can take a variety of forms and share the following four attributes: allocate the appropriate risk transfer to the party best suited to manage it; consider the whole life cycle of the asset; drive innovation and efficiencies; and leverage private capital and expertise.
P3s in Canada have a more than 30-year history typically using availability-based models. In these P3 models, payments are made to the private sector by governments, based on the availability of the asset. In cases where the asset becomes unexpectedly unavailable, the private sector can be penalized financially.
In availability-based models the private sector partners accept responsibility for the design, construction, financing, regular maintenance, and rehabilitation of the asset over the contract term to meet pre-defined performance specifications. The typical contract term for the maintenance work is 20 to 30 years.
The private sector partner is not fully paid for construction work following substantial completion, but is paid in installments over the length of the maintenance term. Because the private sector is responsible for the maintenance and performance of the facility for 20 to 30 years, there is additional incentive to use high-quality and durable materials that will ultimately benefit the government and public.
In some cases, P3s can include user fees such as toll roads, which can be used, in part or in full, as part of the payment to the private sector. These are referred to as concessions.
The Design-Build-Finance-Operate-Maintain (DBFOM) model is the most comprehensive P3 model as it transfers the most risks from the public sector to the private sector.
In a DBFOM agreement, the private sector partner assumes responsibility for the full life cycle of the infrastructure – from design and construction to maintenance, rehabilitation and the delivery of services to Canadians – and finances the cost of the project on its own. The infrastructure is operated and maintained to a certain standard, set by the public sector owner, and the private sector partner is paid based on performance.
Projects that use DBFOM agreements:
The Design-Build-Finance-Maintain (DBFM) model transfers significant long-term risk from the government owner to the private sector.
Like a DBFOM, the private sector partner assumes responsibility for the full life cycle of the infrastructure – from design and construction to maintenance and rehabilitation – and finances the cost of the project on its own. The infrastructure is maintained to a certain standard, set by the public sector owner and the private sector partner is paid based on performance.
Projects that use DBFM agreements:
Disraeli Freeway & Bridges Project, Manitoba
Progressive P3s are a new evolution of the P3 model, which is currently being used in some jurisdictions in Canada, including municipalities.
Introduced in 2021 in Ontario, the Progressive P3 procurement and delivery model alters the procurement strategy of the P3 model to bring in a private partner earlier in the process. By bringing in a private sector partner during the early design phase of the project, both sides work together to define project requirements, design, pricing and risk, before entering into a final P3 project agreement.
This model is currently being used for hospital and other social infrastructure projects — where appropriate —based on the features of the project (size, complexity, physical or geographic constraints, etc.).
Projects that use Progressive P3 agreements:
A concession P3 can include the same components as other full life cycle P3s, such as DBFOMs and DBFMs. However, the private sector partner also receives revenue or partial revenue from the asset. The revenue is generated from a service provision, such as a toll on a highway.
In some cases, the revenue generated by the asset may not be sufficient to fully repay the private sector partner or the risk may not be fully transferred. Therefore, some government payments may still be required.
Projects that use Concession agreements:
Also known as Design-Build-Bid, this traditional procurement option sees the government owner award two distinct and sequential contracts for the design and construction work:
Under the DBB model, the operations, maintenance and financing of the project remain the responsibility of the government owner.
Integrated Project Delivery (IPD)/Alliance is a relatively new model introduced to Canada in 2020. It consists of a non-adversarial approach between the contracting parties, including the adoption of no-dispute provisions. As of 2023, no projects have yet reached substantial completion using this model.
The IPD/Alliance contract is formed by the government owner, private sector designer, construction contractor, suppliers, and potentially stakeholders (e.g., local organizations, community stakeholders, funding organizations, etc.) to plan, design, construct and commission a capital project.
Compensation under an IPD/Alliance model is directly tied to cost, schedule and profitability milestones of the overall project.
Projects that use IPD/Alliance:
