Understanding PPP Tendering Periods in Canada: A Duration Analysis

Abstract

Public-private partnerships (PPPs) often require lengthy tendering periods that can deter bidders, reduce competition for contracts, and undermine the overall social benefits of PPP procurement. PPP tendering periods in Canada are notably shorter than in other countries with mature PPP markets such as those of the United Kingdom and Ireland. We explore Canadian PPP procurement by using data on 160 PPP projects. By using duration analysis, we find that higher PPP contract values and greater risk transfer are associated with longer tendering periods. In addition, we find significant variation in tendering periods across sectors. We support our analysis with a review of the extant literature on Canadian PPPs and interviews with PPP professionals. This identified other important factors such as securing necessary approvals before commencing procurement, creating specialized PPP procurement agencies, contract standardization, lower information and design requirements, avoidance of additional bid stages, and the use of substantial completion payments.

Keywords:

• Canada
• duration analysis
• procurement
• public-private partnerships
• tendering periods

Acknowledgments

The authors would like to acknowledge Steven Hobbs and Jeff Bowden for granting permission to use data from the CCPPP P3 Spectrum database (http://www.p3spectrum.ca).

Notes

1 Transaction costs in this context refer to the ex-ante costs of establishing a partnership. These encompass the technical, legal, and financial advisory costs, as well as the bargaining costs of negotiation incurred by both the public and private sectors in the procurement phase of a project.

2 In November 2017, the Government of Canada announced that it would dissolve PPP Canada, as it had fulfilled its mandate, and that it was launching the Canada Infrastructure Bank (CIB) (https://www.canada.ca/en/office-infrastructure/news/2017/11/government_of_canadaannounceswind-downofpppcanadacrowncorporatio.html). The CIB has a much broader scope and mandate related to infrastructure investment compared to that of PPP Canada, and it remains to be seen what impact the CIB will have on the PPP market in Canada.

3 Typically, tendering begins when a government issues a RFQ. However, governments occasionally issue a request for expressions of interest (REOI) prior to an RFQ to gauge market demand for a project. In these circumstances, the REOI stage can reasonably be considered the start of the tendering process. The vast majority of tendering periods for PPP projects in our sample began with an RFQ. REOIs were issued in just 12 cases. Taking the REOI as the start date for these projects instead of the RFQ marginally raises our average tendering period. We thus focus on the RFQ date as the start of the tendering period in the interest of consistency.

4 Another factor reducing the complexity of Canadian PPP tendering periods relates to contractual provisions in relation to third-party income (income generated by charging third parties for the use of the asset procured—for example, renting a school building after school hours). While these can be a driver of value for money in PPP contracts, they can also increase the complexity and duration of PPP tendering periods. In Canada, there is relatively lower emphasis on third-party income, which has been identified as a factor that contributes to more efficient procurement of Canadian PPPs (CCPPP, 2015).

Additional information

Notes on contributors

Carter Casady

Carter Casady is a doctoral candidate in Civil and Environmental Engineering at Stanford University, Stanford, CA.

Darragh Flannery

Darragh Flannery is a Lecturer in Economics at the Kemmy Business School, University of Limerick, Limerick, Ireland.

R. Richard Geddes

R. Richard Geddes is a Professor in the Department of Policy Analysis and Management at Cornell University, Ithaca, NY.

Dónal Palcic

Dónal Palcic is a Lecturer in Economics at the Kemmy Business School, University of Limerick, Limerick, Ireland.

Eoin Reeves

Eoin Reeves is an Associate Professor in Economics at the Kemmy Business School, University of Limerick, Limerick, Ireland.