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INSIGHTS

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 3. Alberta infrastructure: A positive outlook for P3s...


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May 27, 2024


ARTICLE


ALBERTA INFRASTRUCTURE: A POSITIVE OUTLOOK FOR P3S IN ALBERTA

Alberta's Minister of Infrastructure, Pete Guthrie, recently provided insights
into the future direction of Alberta's infrastructure market. In addition to a
discussion surrounding the 2024 budget allocation, Minister Guthrie expressed
strong confidence in the Public-Private Partnership (P3) model, highlighting the
recent launch of additional P3 procurements at a webinar on April 25, 2024
hosted by the Canadian Counsel on Public Private Partnerships.

The P3 model is a collaborative arrangement between government entities and
private sector companies, whereby the private sector traditionally assumes a
major share of the risks. This model aims to leverage the expertise of the
private sector to deliver large scale public infrastructure projects more
effectively and cost-efficiently than traditional public procurement methods.
Stated benefits often include accelerated project timelines, innovation and
better value for money. The Project Delivery methods under this model include
Design Build Finance Operate/Maintain (DBFO or DBFM).

Historically, Alberta's use of P3s has focused on school bundles, a framework
which has successfully delivered 40 operational schools in the province since
2010. Doubling down on this success, the Minister revealed the province’s desire
for a more expansive application of the P3 model. The Province hopes to utilize
P3s more broadly in healthcare and rail projects, as well as any project
exceeding $100 million. This broader application is already underway, with the
Red Deer ambulatory care facility set to be delivered using the P3 model.

Minister Guthrie went on to address the growing pressures on municipalities due
to population increases. To address these issues, the province has allocated
$7.2 billion to municipal infrastructure improvements, which includes $539
million for the expansion of water and wastewater systems, $111 million to
transportation, and $1.6 billion specifically directed towards LRT projects in
Calgary and Edmonton. A large portion of these Calgary and Edmonton projects
will be delivered by P3. See our recent comments on Alberta’s Passenger Rail
Master Plan here.


TRENDS IN OTHER PROVINCES

The Minister noted infrastructure trends in other Canadian provinces, which
indicate a shift away from traditional P3 models and toward other progressive,
collaborative approaches. This shift has already taken root in British Columbia,
evidenced through its recently published 2024 Major Infrastructure Projects
Brochure. Notably, none of the major infrastructure projects proposed by
Infrastructure BC are set to utilize a P3 procurement model, and instead will
adopt Design Build, Progressive, and Alliance models, among others.

Ontario continues to navigate its infrastructure procurement strategy based on
the principle of selecting the "right model for the right project," as
articulated by the Ontario Minister of Infrastructure in 2022. Despite ongoing
P3 projects, there is a discernible shift in sentiment towards more progressive
delivery systems in Ontario, reflecting a broader national trend away from
traditional P3s.


EXPLORING OTHER COLLABORATIVE MODELS

While Alberta appears to be forging ahead with the P3 model, the Minister
Guthrie also noted that the province is open to exploring other collaborative
delivery frameworks. This includes the province's commitment to Unsolicited
Proposals (USPs). In 2023, the province refined its USP framework, with an
emphasis on transparency and accountability. In light of industry feedback, the
province is now working to expedite the USP process by involving relevant
ministers earlier on in the planning stages. This approach hopes to emphasize
collaboration to ensure projects are integrated into capital plans more swiftly.

The Alberta Government has also modernized several contracts, including their
Construction Management, Design Build, Design Bid Build, and consulting
contracts, along with associated procurement documents. These updates are set to
roll out this month and the Minister has said they will address key areas such
as cost escalation, dispute resolution, and the incorporation of prompt payment
concepts.


CONCLUSION

While the Canadian infrastructure market suggests a national decline in the
popularity of P3s, Alberta is actively reaffirming its commitment to this model
with the goal to apply it to a broader range of projects. BLG will be closely
monitoring these upcoming projects.

If you have any questions regarding these initiatives or the P3 model in
general, please feel free to reach out to the authors or any of the contacts
listed below.

 * By: Theron Davis, Bill Woodhead, Connor Dunphy-Brace


 * Services: Construction, Capital Markets, Infrastructure


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KEY CONTACTS


 * THERON DAVIS
   
   SENIOR ASSOCIATE
   
   Location Calgary Email TDavis@blg.com Phone 403.232.9761
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 * BILL WOODHEAD
   
   PARTNER
   
   Location Calgary Email BWoodhead@blg.com Phone 403.232.9765
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