Alberta primed to pursue public-private partnerships

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Dec 23, 2020

On December 1, 2020, the Alberta Ministry of Infrastructure released an updated Public-Private Partnerships Framework and Guideline (the Framework) as part of its strategy to pursue public-private partnership (P3) infrastructure projects in Alberta (the full Public-Private Partnership Framework and Guideline can be found here). The Alberta Ministry of Infrastructure also released the Unsolicited Proposal Framework and Guideline (the Unsolicited Proposal Framework) to enable the Alberta government to consider unsolicited infrastructure investment opportunities and encourage the private sector to come forward with creative ways and financing solutions to help provide infrastructure in Alberta (the full Unsolicited Proposal Framework and Guideline can be found here).

The Alberta government announced the return to P3s in 2019 as an alternative way to advance infrastructure projects in Alberta, following the previous NDP government’s move away from the structure. The government established the Public-Private Partnerships Office (the P3O) within Alberta Infrastructure in June 2019 as the central authority within the government with responsibility for the management of the P3 assessment and procurement processes in the province. The P3O is the “Centre of Excellence” for P3 delivery with responsibility for the overall P3 portfolio. Since the establishment of the P3O, the government has launched an RFP process for the construction of five Alberta high schools and expects a contract to be in place with the successful P3 proponent by the end of September 2021.

What are public-private partnerships?

A P3 project is defined in the Framework as “an infrastructure project in which a private contractor provides some or all of the financing for the project; designs and builds the project, often providing operations and maintenance for the project; and receives payments from government over an extended period of time, subject to deductions for failing to meet contractually defined performance standards.” For a project to be classified as a P3, there must be some private financing element and the Framework expands the scope of P3s to include variations such as design-build-finance and build-finance structures.

The Framework

The Framework is intended to be used as a guide to the government in assessing whether to use the P3 model for capital projects and how to deliver capital projects as P3s in accordance with established practices in the province. The Framework is a much-needed update to the Treasury Board and Finance 2011 P3 Framework and Guidelines. The Framework outlines the assessment framework, which describes the government’s approach to assessing and approving P3s for capital infrastructure projects, and a procurement framework, which describes the procurement process for P3s.

Assessment

The assessment process is an internal government process, supported by specialty consultants, used to identify, assess and potentially approve projects as P3 candidates. The P3O leads the assessment to identify whether a potential project could offer Value for Money (as defined in the Framework) if delivered as a P3 and, if so, which P3 delivery option is best suited for the project. A Business Case (as defined in the Framework) will provide an in-depth analysis of whether the project should provide Value for Money when compared to a traditional procurement process and is used to seek Treasury Board Committee approval to proceed with the project as a P3. Value for Money is assessed based on a comparison on a net present value basis of the life cycle costs and risks that are borne by the public sector (referred to in the Framework as the Public Sector Comparator) relative to the project costs when risks are transferred to the private sector (a Shadow Bid). This comparison of Value for Money together with consideration of project risks and public sector impacts form the basis for approval of a P3 project.

P3 Procurement

If a project is approved as a P3 through the assessment process, the government may advance the project to a P3 procurement process, usually comprised of the following three stages:

  1. Request for Qualifications (RFQ) – The RFQ phase involves an open call for qualified teams to submit a response. The RFQ phase seeks to identify the three most qualified respondent teams being short-listed to participate in the RFP stage of the procurement. This phase should typically take 12-16 weeks to complete.
  2. Request for Proposals (RFP) – The RFP phase is usually limited to the three proponent teams selected through the RFQ phase, as this allows each proponent team a reasonable chance of success in the procurement while ensuring there is sufficient competition to generate the best value to the province. This phase should typically take 32-40 weeks to complete.
  3. Commercial and Financial Close – During the Commercial and Financial Close phase, the project documents, including the project agreement, are executed and the preferred proponent meets all requirements to secure the private financing. This stage should typically take 2-8 weeks to complete.

The Framework reaffirms the government of Alberta’s commitment that the procurement process should be open, competitive, timely, fair and transparent, and sets out guidelines for clarifications, interviews, communications, confidentiality and conflicts of interest in the procurement process.

Evaluation criteria

Specific evaluation criteria for the RFQ and RFP processes will be set out in the RFQ and RFP issued for each project and will be established prior to any submissions being reviewed. The Framework provides guidance on the evaluation criteria to be applied for P3s:

  • For most projects, the preferred proponent will be the team with a compliant bid that submits the lowest cost.
  • The lowest cost is on a net present value basis and includes all project requirements as set out in the RFP and other documents.
  • The evaluation criteria do not recognize any intangible or qualitative additional value that a proponent may be able to offer.
  • For projects with significant potential for qualitative or other added value, a scoring system may be used to evaluate the proposals.

Unsolicited proposals

The government has also recently published the Unsolicited Proposal Framework to govern proposals for projects submitted by private entities to the P3 without an explicit request by the government. Unsolicited proposals follow a process similar to the process for P3 projects initiated by the government, and provide an opportunity for the government and the private sector to work together to meet infrastructure and service needs, and to bring private sector innovation to help address those needs.

Conclusion

The government of Alberta has confirmed its commitment to use P3s as an alternative way to advance infrastructure projects in the province in collaboration with the private sector in a way that encourages innovation and draws upon the resources and expertise of the private sector.

You can find further information on substantive developments in this area from time to time here. For more information on Osler’s Construction and Infrastructure Law Groups or how Osler may assist you in navigating the P3 regime, click here.

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