Timothy Renshaw

A few words from Oz about using P3s to pave the yellow-brick road

Tue Jul 2, 2013 12:01am PST

It's laying a licking on Canada when it comes to establishing and strengthening trade links with Asia, but Australia can also teach this country a thing or two about public-private partnerships (P3s).

Not just the book-learning end of P3s; the land Down Under also has a tight grip on the business end of the partnership initiative that can kick-start major projects and reduce financial risk and costs for taxpayers in the bargain.

P3s were in the news again recently following release of the Fraser Institute's Using Public-Private Partnerships to Improve Transportation Infrastructure in Canada.

The report's authors concluded, among other things, that Canadian governments should harness P3s to help them deliver much-needed transportation projects and other infrastructure rebuilds.

Considering that municipalities across the land face infrastructure deficits variously estimated at hundreds of billions on up to a trillion dollars, all levels of government would be well advised to heed the FI recommendation.

P3s are not a silver-bullet solution to all government-infrastructure challenges, but they're a key piece in the puzzle – regardless which side of the political fence proponents and opponents are on.

Governments Down Under face many of the same challenges as their Canadian counterparts.

In enlightened areas of Oz, however, pragmatism rather than politics prevails.

Earlier this year, Steve Bracks was in town banging the P3 tambourine at an event hosted by the Canadian Council for Public-Private Partnerships.

The former premier and Australian Labor Party leader of Victoria, which generates the country's second-highest GSP (gross state product), is a P3 convert – even though his political pedigree is closer to B.C.'s NDP than it is to the BC Liberal Party.

Bracks' decision to embrace the P3 option was as much about getting things done as it was about pursuing political objectives.

"It was really about making our political objectives our social obligations," he told Public Offerings.

It removed many expensive projects from government books, but the Bracks P3 plan also played to government strengths and conceded its weaknesses.

By involving companies at the start of major infrastructure projects, his government tapped private-sector innovation, which is fundamental to marketplace survival – and something that governments don't cultivate.

The private sector took on the lion's share of financial risks, and Bracks' government offloaded the threat of being held to ransom by public-sector unions.

That combination proved to be a big seller for Victoria's initially skeptical electorate.

But, as the Bracks government discovered, P3s don't work for all projects.

Its steep school-of-hard knocks learning curve included the critical importance of crafting P3 contracts that accurately and effectively allocate financial and other project risks.

It also found that smaller projects rarely deliver enough P3 benefits to either side in the partnership. Best to stick with toll roads and other major infrastructure undertakings.

Bracks said his government's commitment to applying fiscal transparency to the process – by openly comparing the numbers from private and public options – improved project analysis and viability.

It also kept the electorate in the loop.

So the P3 lessons from Down Under as rolled out by Bracks range from the importance of due diligence at the start of any project to ensuring government has the in-house expertise to craft contracts to precisely determine taxpayer risk allocation and calculate future financial-market challenges.

Government also needs to know that it can't do everything well.

If done right, P3s designate ruling parties as the priority setter and infrastructure delivery monitor, which leaves project innovating and execution to the private sector.

It's the kind of enlightened partnership that could deliver positive payoffs in a lot of communities in B.C. •

Tags: unions, Fraser Institute, transport



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