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
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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
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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
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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)
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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
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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-OperateMaintain form of AFP)
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7
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
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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
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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
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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
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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
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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)
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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’
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