Changes and Benefits brought from Modern Procurement to Bridge the Infrastructure Gap Remo Bucci, P.Eng Infrastructure and Capital Projects October 27, 2016

Overview As governments make funding commitments to bridge the infrastructure gap, significant challenges need to be addressed to complete the large, complex and expensive projects that are being planned Public sector agencies are using and refining modern procurement methods to meet these challenges October 27, 2016

Background Value of the Infrastructure Gap Many studies have been done over the past 10 to 15 years on the amount and source of the infrastructure ‘gap’ A recent study by the Federation of Canadian Municipalities estimates the ‘gap’ to be > $120 billion October 27, 2016

Background cont’d Growth of the Infrastructure Gap Lack of capital and maintenance funding has fueled the growth of the ‘gap’: From the 1950’s to 1980’s spending dropped from 3% of GDP to 0.4% of GDP Construction of new infrastructure did not keep up with the high pace of growth Deferral of annual maintenance led to the premature end of useful life October 27, 2016

Examples of Significant Initiatives to help Bridge the ‘gap’ $11.5 billion to enhance expand or otherwise improve the state of good repair of GTHA’s transit infrastructure (includes the Hurontario Light Rail Project) October 27, 2016

Examples of Significant Initiatives to help Bridge the ‘gap’ cont’d Part of the province's plan to invest more than $130 billion over 10 years into public infrastructure October 27, 2016

Changes in Modern Infrastructure Procurement Since early 2000’s Canada has moved to procure large public infrastructure projects through Public Private Partnerships (PPPs) Infrastructure Ontario’s form of PPP is Alternative Finance and Procurement or ’AFP’ (e.g. Hurontario Light Rail Project is a Design-Build-Finance-Operate- Maintain form of AFP) October 27, 2016

How PPP’s help bridge the ‘gap’? 1. Faster Deployment of Project Pipeline Larger size and premium nature of projects increases global interest attracting best in class global participants to local market Allows for significant sizing of projects and/or bundling into large value procurements that accelerate deployment of pipeline October 27, 2016

How PPP’s help bridge the ‘gap’? cont’d 2. Shorter Time to Construction Bundling Engineering, Construction and Procurement in a parallel maximizes channels to market and saves time Output based risk allocation approach enables projects to be quick to market and ultimately quicker to construction October 27, 2016

How PPP’s help bridge the ‘gap’? cont’d 3. Maximizing Innovation and Value Lifecycle based Output Specifications enable trade-off decisions on engineering, construction and maintenance services maximizing the opportunities to innovate Innovation results in higher quality often at a lower price helping to meet project budgets October 27, 2016

How PPP’s help bridge the ‘gap’? cont’d 4. On Time Delivery Risk allocation and significant security (private financing) provides incentives that anchor on-time delivery Projects have a predictable schedule to operations fostering ability to plan deployment of projects, funds and resources October 27, 2016

How PPP’s help bridge the ‘gap’? cont’d 5. Maintenance Funding Commitments Payments are ‘hard-wired’ into contracts Works both-ways as Public Sector partner has to pay as long as the Private Partner delivers the service 25 yr to 30 yr maintenance terms ensure annual and /or lifecycle maintenance cannot be deferred October 27, 2016

How PPP’s help bridge the ‘gap’? cont’d 6. Maximizes Expected Useful Life Contracts include hand-back conditions to ensure that assets meet the expected useful design life (up to 50 yrs) Creates incentives to engineer and construct infrastructure assets that lasts (delays the need for significant funds to replace / refurbish) October 27, 2016

Summary As governments move to commit funding to bridge the infrastructure ‘gap’ a significant amount of projects will be completed in the next 10 years + Modern procurement methods such as PPPs (or AFPs) will continue to be used to help bridge the ‘gap’ October 27, 2016