January 9, 2013

Canada can export its P3 knowledge

AECON GROUP

The Israeli government contacted Aecon for consultation on its first P3 project, the Cross Israel Toll Road. Aecon did consult with them with the stipulation that the company be allowed to bid on the project, which they did and were eventually awarded the contract.

PETER KENTER

correspondent

The world faces an infrastructure deficit estimated at $20 trillion over the next two decades.

Canadian construction companies have what it takes to compete for the public-private partnerships (P3s) that will meet that demand, provided they do their research and follow basic ground rules.

That’s the word from a panel of construction company CEOs appearing at the national conference of the Canadian Council for Public-Private Partnerships in Toronto.

>Canadian construction companies have an excellent basis for exporting their expertise simply because of the number of successful P3 projects they’ve racked up domestically, said Geoff Smith, president and chief executive officer (CEO), EllisDon Corporation.

“It’s hugely important to the success of P3s that you had all of these dollars in publicly-funded infrastructure projects using a whole new model and there really hasn’t been one huge failure, one scandal, one government that’s gone astray,” he said.

“That lack of failure really greased the skids for everyone.”

>John M. Beck, chairman and CEO of Aecon Group Inc., noted that the company’s success with the original 407 highway project in Ontario caught the attention of the world as the first road with a barrier-free, electronic tolling system.

He said that the Israeli government later contacted his company for consultation on its first P3 project, the Cross Israel Toll Road.

“Our answer was that we would consult with them, but we also wanted to bid on their project,” said Beck.

“We bid it and won it because we had the credibility and the proven success of the previous project and the support of the Canadian and Ontario governments in promoting ourselves there.”

>Paul Douglas, president and CEO of PCL Constructors Inc., said that companies need to develop solid relationships to succeed internationally.

“You need to develop relationships with people, who are playing all over the world, and develop the banking relationships where money is prepared to follow you,” he said..

“Once you understand what it takes to win at this game and how to manage the risks, you can go in with a tremendous amount of confidence, just as well as anyone with strong balance sheets.”

Paul Dunstan, president, Plenary Group North America, noted that some countries, such as Australia, have developed P3 models that are similar to domestic models.

“The process, the framework, the risk transfer and the contracts are very similar to the ones we have in Canada,” he said.

However, in other jurisdictions P3 processes differ significantly, added Douglas.

“One of my greatest fears when we enter a new jurisdiction is picking up a risk that we can’t control, can’t insure and can have a significant impact on our bottom line,” he said.

“If your team misses a risk, it could be a company breaker.”

Douglas noted that companies may assume that the U.S. P3 environment, for example, reflects that of Canada.

However, each state may have unique requirements for bonding, letters of credit, division of securities, fire regulations, Disadvantaged Business Enterprise programs and union postings.

“Do your homework before going into new jurisdictions,” he said.

Entering a jurisdiction that is just beginning to develop a P3 framework presents its own risks and rewards.

“If you get there early, you can help them form their policies and procedures,” said Dunstan.

“But if you’re too early, you can spend a lot of time and money chasing deals.”

Smith also recommended that companies pursuing international P3s send out their A-teams to secure the work.

“In the past, we’ve made the mistake of keeping our best people at home in our core markets, instead of sending them out into the international market,” he said.

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