...schedule concerns forward.” Despite the greater risks shouldered by the contractor, the P3 model, Basher says, “gives us greater control of the process. We can apply our constructibility expertise and bring that forward to the designers. It makes for a better product in the end.” The province plans another P3 for another section of ring road next year. Flatiron, Graham and Parsons all plan to pursue it, says Holte, although not necessarily in the same joint venture. Adds Bancarz, “Our conventional way of building things works fine for 95% of projects. But on a larger-scale, multifaceted project we just find P3s a better way to go.”

Nationwide Trend

Bilfinger Berger’s Small admits some surprise that Canada has forged ahead of the U.S. on P3s. “Canada has gone over to the U.K. and Australia and looked at the models there. There are firm political commitments from the governments,” he says. “They had the tenacity to push these through.”

P3s are now being used to reduce Canada’s infrastructure deficit, says Derek Burleton, senior economist with TD Bank Financial Group, Toronto. British Columbia, in particular, embraced this delivery method in response to the huge deficit the Liberal government inherited when it took office in 2001. That led to the creation of Partnerships British Columbia, an arm’s-length agency that provides advice to public-sector clients on P3s. Several projects have either been completed or are under construction, especially in preparation for the 2010 Winter Olympics, says Burleton.

The evolution of P3s has been “a rapid and steep learning curve. But Canada is gaining a reputation for stability and reliability and for projects that come in on time,” says Duncan Glaholt, a partner of Glaholt LLP, a Toronto-based law firm specializing in construction.

That reputation and the Canadian market potential have caught the attention of Honeywell Building Solutions. The Minneapolis-based firm is the facility management partner in two P3 ventures at opposite ends of the country. One is an approximately $460-million project to design, build, finance and maintain 18 new elementary schools in Alberta under a 30-year concession agreement. The concessionaire includes financier Babcock & Brown, and contractors Bird Construction Co., Toronto, and Graham Group. Construction is expected to be completed by June 2010. The second venture is the $246-million Woodstock General Hospital in Ontario. Other consortium members include financier LPF Infrastructure Fund and builder EllisDon Corp., Mississauga, Ontario. Construction started last November. “We’ve been involved in about 20 projects in Australia, are looking at potential global markets and have wanted to establish a presence in Canada for some time,” says Jim Keesling, Honeywell’s vice president of services.

The Woodstock hospital is one of 30 hospitals, health-care and other institutional facilities currently being built under Ontario’s Alternative Financing and Procurement (AFP) delivery model. Financial closings for six of those projects were completed since last October, says Jim Dougan, executive vice president of Infrastructure Ontario, the government corporation overseeing the AFP system. “And we have another 10 or 11 projects in the procurement stage.”

While the recession has had an impact, those projects demonstrate P3-driven infrastructure renewal is progressing. Financial liquidity is returning and bond life insurance investors are now considering AFP projects, says Dougan. Adds Alberta’s McQuay: “The recession has caused some problems, but so far we think we can ride through the storm. The financial crisis occurred in fall 2008, and we had just signed the P3 for schools a day before. The two projects we’re dealing with now will close in early 2010. I think we may be in a position where we never had to sign a deal during the crisis.”

One Ontario project wasn’t so lucky: An anticipated Deutsche Bank financing for the $498-million, 394-bed, 970,000-sq-ft Niagara Health Systems Hospital in Saint Catharines, Ontario, “suddenly evaporated,” says Paul Douglas, chief operating officer with PCL Constructors Inc., Edmonton, the construction arm of the Plenary Health Niagara design-build consortium. “We had to work very hard with Infrastructure Ontario and our partners to secure alternate financing, mostly from Canadian banks.”

Caution Advised

Douglas uses the incident to underline the tremendous risks and costs P3 projects pose for contractors and other private-sector proponents. Design, legal, financing and other pursuit costs usually amount to 3% to 5% of the...