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Everybody agrees: Building more public schools is a good thing.

Yet, when the Manitoba government announced earlier this year its $100-million plan to build four schools using a public-private-partnership model, the news was met with considerable controversy.

Public-private partnerships – P3s for short – are by no means new. For decades, they have been used to build large infrastructure projects, and the debate on their merits has lasted just as long. For its proponents – often private-sector firms and fiscally conservative governments, P3 projects provide cost certainty to the taxpayer and foster innovation.

But to its detractors – generally public-sector unions and other left-leaning organizations – the model can be inflexible, involving hidden costs and other problems arising from a lack of transparency.

With the P3 approach, the government partners with the private sector – a consortium of builders, designers, operators and financiers – to build a public asset, like hospitals. While the government controls the process, the consortium designs, builds and then operates and maintains the project for a set period of time. Using this method to build schools, however, is not as commonplace.

"The empirical evidence is soft on P3 school projects as this is a relatively new space, but there is a wealth of experience, lessons learned and best practices to carry over from other types of projects, ," says George Theodoropoulos, a managing partner at Toronto-based Fengate Real Asset Investments, which invests in P3 deals.

While other P3 infrastructure projects – bridges and hospitals, for example – do have a rather long history of success, the track record for P3 school projects is relatively short. Some of the first P3 school projects, for instance, were completed in Alberta in the 2000s.

Inevitably, those first projects involved growing pains, but the most recent schools built in the province using the P3 approach better demonstrate the advantages of the model, according to Mark Romoff, president and CEO of The Canadian Council for Public-Private Partnerships (CCPPP), which advises government and other stakeholders on P3 initiatives.

"Alberta has really led the way with 41 schools built using the P3 model –on time and on budget," notes Mr. Romoff.

Seeing Alberta's success, Saskatchewan followed suit, also building schools cost-effectively, he adds. "Based on those experiences, Manitoba is moving ahead, working very closely with Saskatchewan to understand how [Saskatchewan] got the results it wanted in the hope they can be emulated."

As with all major infrastructure projects,, these initiatives haven't been without hiccups. A 2014 study conducted by the Canadian Union of Public Employees argued that the cost savings were overstated by government in large part due to a lack of transparency regarding the procurement process. As well, boards were surprised to learn after the first phase of the development about restrictions and additional fees for extracurricular activities at the schools.

Yet, those involved in P3 projects will tell you the model has evolved and improved by learning from and listening to considered criticism. The restrictions and fees were ultimately addressed in phase two, giving school boards the authority to oversee after hours rentals to third party community groups.

They will also argue the benefits, such as cost certainty for the government, outweigh the problems and point to the successful track record of P3 hospitals, roads, bridges and other infrastructure projects that came in under budget and on time.

"The reason [the] P3 model is good is it allows for the design, construction and operation of the school under one group working closely together on all stages of the project, which, in turn, expertly connects the dots and produces innovation," Mr. Theodoropoulos explains. "Think of it this way. If I'm designing something with operations in mind, I would talk to my operator and get their advance input to ensure optimum results, asking, for example: What kind of boiler system should be put in this particular school?"

Of course, the biggest advantage is cost certainty, he says. The government pays a monthly fixed fee for the design, construction and operation of the school for a set period of time, often 30 years. "The private-sector entity pays for the project up front, and so it recovers that investment of capital over the 30-year span through the monthly service payment. As well, a portion of that goes toward ongoing operations and maintenance over those three decades."

At the end of the contract, the school is handed back to the board to operate and maintain. The contract, however, would require the consortium to ensure the school is in an accepted standard of maintenance. "So, for instance, the roofing system of the school has to last another 20 years – beyond year 30 – which means the consortium would have to replace the roof before handover of the asset," Mr. Theodoropoulos points out.

And the school board holds all the cards in this respect, he says. "Government sends an inspector in year 23, for example, to ensure [that] the private-sector entity can meet the conditions of its contract at the end of 30 years, and if that inspector says it can't, government withholds money."

At the end of the day, the government is always in control because it owns and controls the asset, he adds. "The school is always owned by the public sector, never the private sector."

As of yet, P3 projects only make up a small portion of new school projects. But the model is becoming increasingly popular, as governments become more budget-conscious. In fact, there has been a significant growth in P3 projects overall in the past decade. Among these are high-profile infrastructure initiatives such as the Canada Line in Vancouver – the rapid-transit route that runs from downtown to the airport – and Bridgepoint Active Healthcare, a new rehabilitation hospital in Toronto.

"These larger, more complex and risky projects are the ones that lend themselves particularly well to the P3 approach," says Mr. Romoff, "because it helps spread risk between the public and private sectors."

That's why more than 260 P3 projects, valued at nearly $23-billion, have been completed or are under construction across Canada, Mr. Romoff notes. "Experience has shown in Canada [that] when P3s are done for the right reasons, and in the right way, they deliver huge benefits."


This content was produced by The Globe and Mail's Globe Edge Content Studio, in consultation with an advertiser. The Globe's editorial department was not involved in its creation.

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