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Public-Private Partnerships: The Better Way?

Jane Bird, the former CEO of Canada Line Rapid Transit Inc., talks about the public-private partnership that built Vancouver's Canada Line and whether the same approach could work in Toronto.

Vancouver's Canada Line under construction.

Last week, council dealt a crushing blow to Mayor Rob Ford’s tireless campaign to build subways along Sheppard Avenue. The plan failed, in part, because even the mayor’s allies could not see a feasible funding strategy for the subway plan. It’s no secret that Mayor Ford is a fan of smaller government and more private-sector involvement, and to the mayor, building transit is simple: just ask the private sector to do it. Others suspect that it may not be so easy.

So we asked Jane Bird, the former CEO of Canada Line Rapid Transit Inc., about the private sector’s involvement in Vancouver’s Canada Line—a 19-kilometre LRT line that was built there in advance of the 2010 Olympics. And if there is one thing that was clear from our discussion, it’s that public-private partnerships are complicated.

Were there concerns from the public about involving private partners in the Canada Line project?

I think it’s fair to say there was a pretty healthy debate at the time. There’s always a discussion about big transit projects. But there was a healthy discussion about whether there was a role, not so much on the construction side, because the private sector’s been building transit infrastructure since the turn of the century, but whether there was a longer-term role for the private sector to operate the line.

At the end of the day I think most people and the elected officials approved the project because it appeared that there was value to the public sector and the taxpayers by going this way. And I think we’ve had significant success and it’s sort of proven itself to be true.

Because the Canada Line is a free-standing line, was it easier to bring in private sector operation?

Absolutely, because it’s not interlined [with the rest of Vancouver's transit system]. As a result, we could do a proposal to the markets that said, ‘We want this service on this north-south line and it doesn’t matter if the technology is common to the other line.’

We weren’t restricted to one technology or one brand, we could have a broad competition between anybody providing technology that would get us the service requirements that we want. So we asked for a system that would be about 19 km, we wanted to get people from downtown Vancouver to Richmond in 24 minutes, we wanted a train every three minutes, we wanted it run from x-hour in the morning to x-hour at night, we wanted 16 stations, we wanted airport service. This is our recipe. And we asked the market for their best response to that requirement.

But you can imagine if you had a lot more restrictions on that, in terms of interlining with other technologies, that there would not have been as broad a procurement as we were able to do.

What can the private sector offer, besides money?

I think there’s a real role for the business community in support of how and when we’re going to do infrastructure renewal, whether it’s transportation, or roads, or water, or sewer, or ports, anything. Because the business community has a very significant interest, as do we all, in a strong infrastructure to support the economy.

What can the private sector do for public transit that government can’t?

In Canada Line’s case, structuring the contract as we did enforced a discipline and a rigour of thinking about the project that I don’t think government often does as well as they should. That approach to understanding what it is you want to do and what you intend to accomplish is an important conversation that we don’t give as much attention in the government as we should.

The second thing is, the private sector can provide a level of innovation through a competitive process that sometimes government can’t do. The competitive process involves companies that have worked all over the world, so they’ve done rapid transit in Barcelona, or Istanbul, or Berlin. So they bring all the innovation and all the design ideas that they’ve gathered working all over the world, so you get the benefit of what everybody’s doing rather than what locally or provincially we think is the solution. In the case of Canada Line, there were many instances where we had anticipated solutions to a problem, and SNC-Lavalin came up with solutions that were much better, no doubt as a function of some of the work they were doing elsewhere. Because government doesn’t always know the answer, so if you can create a design competition or a way to solve an engineering problem with the benefit of many minds with experience worldwide, that is a good thing.

And generally speaking, I think the private sector does a better job of managing risk than the government does. When the private sector takes a risk, they almost have to do a better job of understanding what that risk is, the likelihood of it occurring, and the cost if it were to occur. Government doesn’t do as good a job of that, historically. Because when things go wrong in government, usually the consequences are spread among thousands if not millions of taxpayers. So the consequences of mismanaging a risk for government are smaller than for the private sector, generally speaking.

So when you involve the private sector, you have to figure out what the risks are in a project and then figure out whether the government or the private sector is better able to manage it. In most cases, it’s better to transfer the risk to the private sector and pay a little to do that. Not all risks. If you look at Canada Line, environmental permitting risks were something that the government ended up keeping. So the consequences of not getting a permit would be on government. The cost of acquiring property for the line was a risk that we kept. But virtually all the rest of the risk, whether it be schedule risk, or ground condition risk, or overall construction or material cost risk, we transferred that to the private sector.

[Private sector involvement] secured more certainty for the project. The fact that the Canada Line was delivered early and under budget was in part due to the fact that the private sector was managing that risk.

Also, in our case, effectively the same company that designed and built the line is the same one that had to maintain and operate it for 30 years. So I think there’s a symmetry to that. It creates a commercial incentive to design and build something well if you have to bear the cost of operating and maintaining it over time. I think that is a benefit for government, because it’s a question of looking at the whole cost of the line for 30 years. If the private sector has to bear the cost of maintaining it, whether it’s cleaning the tiles or maintaining the trains, they’re more likely to invest up front in a quality product.

Were you generally in favour of public-private partnerships before the Canada Line project?

I think I’ve always felt that there is a place for the government and the private sector in most things. Each does certain things well. The art is to figure out where the government’s role should be and stop and where the private sector’s role should be and stop.

I think some of the confusion that arises, is that it’s not as easy as one-size-fits-all. What does it mean, public-private partnerships? It could mean anything. But it has the potential to work well if the government owners ask, ‘Is there a role, and what role would best suit the project that we’re trying to build or the objectives that we have?’ Rather than start from a preconception that private sector’s going to be involved.

Where do you see room for the private sector to get involved in Toronto’s transit system?

It would certainly be worthwhile to look and see if the transit projects that are currently under discussion would benefit from private sector participation. I think that would be a worthy piece of work to do. And then if one concluded there was a role, then define exactly what that role would be. Is it designing and building the line? Is it just financing the line, and what would that look like? What that role might be and what it might look like for that project, because it’s a project by project thing, I couldn’t comment, because it’s a pretty detailed piece of work.

Jane Bird shared her experiences with public-private partnership to build Vancouver’s Canada Line as part of The Munk School’s Moving Our Region speaker series yesterday afternoon.

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