Ontario to address P3 risk allocation among other model changes: Infrastructure Minister

Ontario Infrastructure Minister Laurie Scott announced there will be some changes to Ontario’s P3 program the annual conference hosted by the Canadian Council for Public-Private Partnerships.

The Minister’s Market Sounding Initiative was announced at last year’s conference and the Ontario government is developing a plan based on those outcomes.

In September, the government launched a P3 pipeline containing $65 billion in P3 projects including five significant transit projects in the Greater Toronto Area.

Now it’s time for the next round of changes, Scott said.

To reduce this risk (utility relocation), the government will be providing Infrastructure Ontario with new authority,

— Laurie Scott

Ontario Infrastructure Minister

“We recognize that if we are going to be successful in delivering our marquee transit projects, changes will need to be made,” Scott told delegates at the conference in Toronto Nov. 19.

“This includes changes to the risk allocation on these projects. I’m pleased to tell you here today that the government has a plan to address some of the key risks facing horizontal infrastructure projects. The full details of our plan will be released by Minister (Caroline) Mulroney in the coming months.”

She provided a brief overview of the three key elements of the plan which will make it easier for people who want to bid on P3 projects: utility relocation, land assembly and modernization of the environmental assessment process.

“The difficulty with utility relocation caused significant delays on the Eglinton Crosstown project and remains a source of risk for our new subway projects,” said Scott.

“To reduce this risk, the government will be providing Infrastructure Ontario with new authority to ensure that utility lines can be expeditiously relocated while treating utility companies fairly. Additionally, Infrastructure Ontario will be looking at other ways of reducing utility relocation risk including through improved mapping and the use of early works.”

The second key element of the plan relates to land assembly.

“We know if we want our projects to achieve substantial completion on time, our P3 partners must have timely access to the land they need to construction stations and prepare mobilization sites,” Scott noted.

“Based on recent experience, we know that the current system for assembling project lands is not working. It is susceptible to delays and the private sector’s ability to mitigate this risk is limited. Therefore, our plan will include modernization of the province’s authority to assemble project lands and minimize the prospect for delays in this process while still treating property owners fairly.”

The third element of the plan will be a modernization of the environmental assessment process.

“The current environmental assessment process system has been proven cumbersome and the land assembly system susceptible to delays,” Scott said.

“We are also aware of weaknesses in the system that allows individuals to prolong the process long past the point that their concerns have received a fair hearing… We are not talking about relaxing any environmental protections we are simply improving the speed and the efficiency of the process.”

Participants in a market sounding held at the conference indicated improvements are needed to Infrastructure Ontario (IO).

I would ask infrastructure Ontario to take action to reduce the burden of bid cost,

— Laurie Scott

Ontario Infrastructure Minister

“I have the utmost confidence in Infrastructure Ontario’s ability to deliver Ontario’s ambitious P3 infrastructure agenda but I know Infrastructure Ontario isn’t perfect and since it’s one of the most important agencies in government it is critical that it grow and improve,” Scott explained.

Another suggestion that came out of the market sounding was that it’s is time for Ontario to put other tools in the tool box.

“You told us how the integrated project delivery model of contracting can be used successfully in projects that feature significant interface risk to encourage the contractor and the authority to work together to find solutions to manage and share these risks,” said Scott.

“Ontario will be deploying the alliance model for the first time on the Union Station expansion project. You also told us about other contracting models that we should have in our toolbox… When designing future procurement, we will be open to considering if these or other delivery models are the right tools to deliver infrastructure in Ontario.”

In the market soundings, the government also heard the costs of P3 projects needs to be reduced.

“We recognize that there is a significant cost to respond to a P3 RFP and many have been concerned that these costs have increased in recent years,” said Scott.

“We also recognize without high quality bids P3 projects cannot succeed. Therefore, I would ask infrastructure Ontario to take action to reduce the burden of bid cost. These actions would include streamlined a way to design the way presentations are conducted, reducing the number of submittals where possible and being more judicious in the use of commercially confidential meetings.”

One of the most talked about concerns in the market sounding was promoting a competitive environment for Ontario’s P3 procurements.

“Promoting competition is not only in the public interest to ensure that people in Ontario get value for their dollar, it’s also essential to ensure health and vibrancy of Ontario’s construction and professional services sectors and the jobs they create,” said Scott.

“I have asked IO to take action to improve the competitiveness of our P3 market. This action will include removing prescriptive bonding requirements. We heard from several smaller contractors that these requirements were too onerous and therefore preventing them from bidding on projects.”