City of Ottawa P3 Policy - The Canadian Council for Public-Private ...

FINANCE AND ECONOMICDEVELOPMENT COMMITTEEREPORT 3110 APRIL 2013216 COMITÉ DES FINANCES ET DUDÉVELOPPEMENT ÉCONOMIQUERAPPORT 31LE 10 AVRIL 2013Public-Private Partnerships PolicyDocument 1Approved By: City CouncilCategory: FinanceApproval Date: xxxEffective Date: xxxPolicy StatementThe City of Ottawa shall use a consistent governance model and selectioncriteria when evaluating and implementing a public-private partnership (P3)approach as an alternative means of procuring and financing City projects forinfrastructure and or service requirements.PurposeThe purpose of this Policy is to outline the City’s approach to evaluating andpursuing a potential P3 option for the implementation of a City project.ApplicationThis Policy applies to all City of Ottawa employees except Ottawa PoliceServices, City of Ottawa Library Services Board and elected officials.Policy RequirementsObjectives of the P3 OptionThe primary objectives in delivering a City project using a P3 model are:• To find innovative ways of effectively and efficiently addressing the priorityinfrastructure and service needs of the City;• To maximize Value for Money to the City by engaging private sectorexpertise and financing;• To pursue partnerships in which project risks related to financing, design,construction, and operations are appropriately allocated between publicand private sector partners.The City shall consider a project for a potential public-private partnership if any ofthe following conditions are met:• The infrastructure/service requirement has been identified as a priority;

FINANCE AND ECONOMICDEVELOPMENT COMMITTEEREPORT 3110 APRIL 2013217 COMITÉ DES FINANCES ET DUDÉVELOPPEMENT ÉCONOMIQUERAPPORT 31LE 10 AVRIL 2013• The infrastructure/service requirement is included in the Term of Councilpriorities; Development Charges Background Study; Term of CouncilCapital Forecast; current approved budget; or long term capital plan;• Project risks related to financing, design, construction and operations canbe shared and allocated appropriately between the City and a privatepartner;• The City has the resources and expertise available to undertake theplanning, design and procurement processes.Phases of a P3 projectWhere a potential P3 project has been identified, the following project phasesshall be followed:• P3 Project Assessment• Project Initiation• Procurement• Implementation• Contract Management and On-Going MonitoringP3 Project AssessmentThe department shall assess the feasibility of using a P3 approach to deliver aCity project using a three-step decision making process: an initial screening, astrategic assessment and a business case analysis of the City’s financial risk.Projects with potential for a P3 approach, but presenting exceptions to the P3Project Assessment criteria, should be escalated to City Council forconsideration, with the exceptions highlighted and the department’s rationale forrecommending the project under a P3 delivery model.Initial ScreeningThe initial screening of a project’s potential for a P3 approach shall assess thecharacteristics of the infrastructure/service requirement and its risks; theopportunities for partnering with a private sector partner in a competitive market;the availability and expertise of City resources to undertake the planning, designand procurement processes.Strategic AssessmentProjects deemed suitable for a P3 approach under the initial screening shallundergo a more detailed strategic assessment of the potential risks and rewards

FINANCE AND ECONOMICDEVELOPMENT COMMITTEEREPORT 3110 APRIL 2013218 COMITÉ DES FINANCES ET DUDÉVELOPPEMENT ÉCONOMIQUERAPPORT 31LE 10 AVRIL 2013available to the City and a private sector partner. Projects which demonstratethat risk can be appropriately allocated between the City and a private sectorpartner shall undergo a detailed business case analysis.Business Case AnalysisThe business case analysis shall develop a Public Sector Comparator (PSC), adetailed cost breakdown of the implementation and operation of a project over itsexpected duration under a traditional project model delivered by the City. ThePSC shall be used to determine the City’s potential financial risk from procuringthe project using a P3 approach delivered by a private sector partner. During theprocurement process, the PSC shall be compared against the P3 project cost todetermine whether positive Value for Money, or a net benefit to the City, isrealized by implementing a project using a P3 delivery model.Project InitiationA Project Director, appointed by the department, shall assemble a team ofsubject matter experts (SMEs) to plan the procurement strategy, the design andconstruction implementation, transition to operational state and contractmanagement stages. For specific projects, the City Manager may assign the leadroles to offices other than the department, as warranted. The department shallsubmit the recommendation for the purchasing strategy and the selected P3delivery model to City Council for consideration.ProcurementThe procurement process for all P3 projects shall be undertaken using an open,fair and transparent process, in accordance with the City’s Purchasing By-law.An independent Fairness Commissioner may be retained to oversee and monitorthe fairness of the process. The department shall submit the selection of thepreferred partner, and recommendation to finalize the business agreement toCity Council for consideration.ImplementationThe City and P3 partner shall participate in a design review process and changeapproval process to ensure that the design and construction phase of the projectcomplies with the contract specifications. During the construction phase, theconstruction budget and build milestones shall be monitored for deviations fromthe contract, and reported to Council, as required. A transition plan shall bedeveloped to monitor and report on activities required to bring the project to itsoperational state.

FINANCE AND ECONOMICDEVELOPMENT COMMITTEEREPORT 3110 APRIL 2013219 COMITÉ DES FINANCES ET DUDÉVELOPPEMENT ÉCONOMIQUERAPPORT 31LE 10 AVRIL 2013Contract Management and On-Going MonitoringThe P3 Agreement shall define the roles, responsibilities and accountabilities ofthe City and P3 Partner for the term of the contract. Annual reports shall updateCouncil on the P3 partner’s financial and service level performance. The P3Agreement shall stipulate that the P3 partner shall be responsible for reportingannual budgets i.e., for project management, preventive maintenance, etc., andthe reporting of key performance indicators.ResponsibilitiesCity Council shall approve the authority to deliver a project using a P3approach, selection of the P3 delivery model, the procurement strategy, selectionof the preferred partner, and authorization to finalize a business agreement.The department shall act as the administrative authority for the P3 project andshall select and lead a team of staff subject matter experts (SME’s) through thefollowing:• Stages of assessment• Negotiation of legal agreements• Implementation and project delivery• Monitoring of technical provisions of the contract• Reporting on the private partner’s financial and service level performance• Conducting compliance audits• Issuing non-performance notices• Seeking remediation of non-performance issues.Supply Branch shall ensure that the spirit and guiding principles of the P3 Policyare adhered to throughout the process; lead the procurement process inaccordance with the Purchasing By-law; and coordinate the submission of anannual report on the P3 partner’s financial and service level performance to CityCouncil.Legal Services or, alternatively, external legal counsel retained by the City Clerkand Solicitor to act on behalf of the City, shall review and approve all contractualdocuments that comprise the P3 Agreement.Monitoring/ContraventionsGeneral Managers/Directors shall oversee the assessment of P3 opportunities,selection of P3 delivery model, implementation and monitoring of the P3

FINANCE AND ECONOMICDEVELOPMENT COMMITTEEREPORT 3110 APRIL 2013220 COMITÉ DES FINANCES ET DUDÉVELOPPEMENT ÉCONOMIQUERAPPORT 31LE 10 AVRIL 2013Agreement and administration of P3 contracts to ensure compliance with thisPolicy.Supply Branch shall lead the procurement process, in accordance with thePurchasing By-law and coordinate the submission of a report on contractualperformance on an annual basis, to ensure Policy compliance.An independent Fairness Commissioner, when appointed, will monitor and reporton the integrity of the competitive process to ensure compliance with thePurchasing By-law.Failure to comply with this Policy could expose the City to financial loss,negatively affect the City’s credit rating and borrowing capacity, and limit theCity’s capacity to deliver services to the public in terms of quality, affordability,public access, health and safety, user rights, security, privacy and public input.ReferencesAccessibility Design Guidelines – BuildingsAccessibility PolicyBilingualism PolicyGreen Building Policy for the Construction of Corporate Building – CorporatePolicyOttawa Option PolicySponsorship and Advertising PolicySustainable Purchasing GuidelineTangible Capital Asset PolicyLegislative and Administrative AuthoritiesMunicipal Act, 2001Municipal Conflict of Interest Act, 1990Municipal Freedom of Information and Protection of Privacy ActParks and Facilities By-law No. 2004 – 276Purchasing By-law – July 2011Definition(s)Department: The department assigned the lead roles for evaluating andimplementing a P3 approach as an alternative means of procuring and financingCity projects for infrastructure and or service requirements. For specific projects,the City Manager may assign the lead roles to offices other than the sponsor orclient department for the infrastructure/service requirement, as warranted.

FINANCE AND ECONOMICDEVELOPMENT COMMITTEEREPORT 3110 APRIL 2013221 COMITÉ DES FINANCES ET DUDÉVELOPPEMENT ÉCONOMIQUERAPPORT 31LE 10 AVRIL 2013Public-Private Partnership (P3): A contractual agreement between a publicauthority and a private entity for the provision of infrastructure and/or services inwhich:i. The private sector participant assumes the responsibility for financingpart or all of the project; and/orii. The City seeks to transfer risks that it would normally assume, basedon the private sector participant’s ability to better manage those risks;and/oriii. The arrangement extends beyond the initial capital construction of theproject.Public Sector Comparator (PSC): The hypothetical, risk-adjusted net presentvalue cost of a project as if it were to be delivered by the public sector. Itincludes an estimate of the total cost of the project over its life including costs ofdesign, construction, maintenance and facilities management services andadjustments for risk, insurance, and taxation. The traditional PSC model is basedon construction that is done on a Design Bid Build (DBB) basis, which is thetraditional method of procurement of the public sector for this type of project.Value for Money (VFM): An analysis in the context of a P3 project, refers to theprocess of developing and comparing the total project costs, expressed in dollarsmeasured at the same point in time, related to the estimated costs to the publicsector of delivering a project using traditional procurement processes (underwhich total estimated costs are known as the public sector comparator(PSC),and the estimated costs to the public sector of delivering the same project to theidentical specifications using the P3 approach. The difference between the PSCand the total estimated costs using the P3 approach is referred to as the VFM. Ifthe total estimated cost of using the P3 approach is less than the public sectorcomparator, there is positive value for money by procuring a project using a P3approach.Keyword SearchFairness commissionerP3Public sector comparatorValue for money

FINANCE AND ECONOMICDEVELOPMENT COMMITTEEREPORT 3110 APRIL 2013222 COMITÉ DES FINANCES ET DUDÉVELOPPEMENT ÉCONOMIQUERAPPORT 31LE 10 AVRIL 2013EnquiriesFor more information on this Policy, contact:ManagerStrategic Sourcing and Supply Chain ManagementSupply BranchFinance DepartmentCity Manager’s OfficeTel: 613-580-2424, ext. 25165Appendices• Public Private Partnership - Procedures• P3 Business Case Template