Public – Private Partnership (P3) procurements

Public-Private Partnerships—often called P3s or 3Ps—represent a fundamentally different approach to delivering infrastructure and services. Instead of government paying upfront for construction and then managing operations, a private partner designs, builds, finances, and often operates a facility over a long-term contract, typically 25-30 years. You're shifting risk, not just writing a cheque.

How It Works

P3s bundle responsibilities that traditionally sit with different parties. The private consortium takes on design, construction, financing, and maintenance under a single agreement. They put up capital. They eat the cost overruns. In return, they receive payments tied to performance—a hospital wing that actually functions, a highway that meets availability standards.

At the federal level, PPP Canada (now absorbed into the Canada Infrastructure Bank) historically provided guidance and funding support for these arrangements. Provincial agencies like Infrastructure Ontario and Partnerships BC have run more P3 projects than the federal government, though departments like DND and Correctional Service Canada have used the model for facilities. The Treasury Board requires Value for Money assessments before proceeding—you need to demonstrate that the P3 structure delivers better outcomes than traditional procurement methods.

Payment mechanisms vary. Some projects use availability payments where government pays the private partner monthly fees if the facility meets performance standards. Others rely on user fees—think toll highways where the private operator collects revenue directly. The contract specifies exactly what happens when performance slips: payment deductions, cure periods, sometimes termination rights. These agreements run hundreds of pages because you're defining a relationship that spans decades.

Key Considerations

• Complexity costs money upfront. Procurement timelines stretch 18-36 months. Legal, financial, and technical advisors don't come cheap. Projects under $100 million rarely justify the transaction costs.

• Risk transfer must be real. If government keeps interfering or bearing risks contractually assigned to the private partner, you've created expensive theatre. The Value for Money analysis needs to reflect who actually bears construction risk, demand risk, and operating risk.

• Flexibility decreases over time. That 30-year contract locks in design and operational approaches. Changing requirements mid-contract triggers expensive variation processes. What seems like a good idea in 2024 might look different in 2045.

• Public accountability doesn't disappear. You still answer to citizens and auditors. Commercial confidentiality claims often clash with access to information obligations, creating ongoing tension throughout the contract term.

Related Terms

Alternative Financing and Procurement, Request for Proposals (RFP), Value for Money, Design-Build-Finance-Maintain (DBFM)

Sources

• Public-Private Partnerships - PSPC - Federal guidance on P3 models and frameworks

• Infrastructure Canada - Federal infrastructure programs and project information

• Government of Canada Supply Manual - Official federal procurement policy and procedures

In practice, P3s work best for large, complex infrastructure where you can clearly define performance requirements and genuinely transfer risks that the private sector can manage better than government. Don't force the model where it doesn't fit.