Warning comes as government designs a new arm's-length infrastructure bank
May 29, 2017
by Andy Blatchford
OTTAWA—An internal federal document is raising red flags for Ottawa over unsolicited, non-government proposals for infrastructure projects.
The warning comes as the Trudeau government designs a new arm’s-length infrastructure bank that will seek to lift the country’s economy by using billions in public dollars to attract billions more in private investment.
The Finance Department briefing note describes unsolicited infrastructure proposals as the kinds of offers presented to governments from outside public authorities, typically from the private sector.
And it says that from a public-interest perspective, such bids can create a number of real and perceived concerns.
While unsolicited proposals are generally designed to mesh with a government’s long-term infrastructure goals, the note warns they are often driven by private-sector interests.
The memo also says proponents usually seek government approval for construction as well as the access to the project’s revenue streams, such as tolls.
It listed potential “key areas of concern” related to unsolicited bids: a lack of transparency in the selection and implementation of projects, avoidance of competitive and due-diligence processes and the acceptance of poor quality projects—either in design or execution.
“Unsolicited bids have become common internationally,” reads the “secret” September briefing addressed to deputy finance minister Paul Rochon. It was obtained by The Canadian Press under the Access to Information Act.
“The federal government currently lacks a clear policy on unsolicited bids for federal projects.”
The caution comes as the government prepares to launch the infrastructure bank.
The Crown corporation will seek to leverage $35 billion of public funds that the Liberals hope can lure three or four times that much in private capital for new projects in three key areas: trade corridors, green infrastructure and public transit.
It will play a key role in the Trudeau government’s strategy to boost big-ticket infrastructure investments as a way to amplify Canada’s long-term economic growth.
The new bank will have to grapple with how best to assess unsolicited proposals and navigate the concerns.
A spokesman for Infrastructure Minister Amarjeet Sohi said that, should legislation for Canada Infrastructure Bank pass, its CEO and board of directors will be tasked with guiding the government “on how best to set up a framework for receiving and managing these unsolicited proposals.”
Brook Simpson wrote in an email that unsolicited proposals also present upsides for governments.
Several examples of the potential benefits are also outlined in the federal document.
The positives include the use of private-sector resources to make up for shortages of financial and human capacity within governments. Those private resources can help the public sector identify, prioritize and procure infrastructure projects, the memo said.
It said user fees that stem from unsolicited proposals can also have a positive effect, such as improving the fiscal sustainability of public infrastructure.
The document also says governments can benefit from the private sector’s innovative ideas.
“We want to encourage the innovation that comes with these types of proposals while ensuring that we get the best price for taxpayers,” Simpson said. “There are many models from around the world that could be used to guide this work that the government and CIB would look at closely.”
The document highlighted how some countries, including Chile and the United States, have developed successful approaches to dealing with unsolicited proposals.
As a case study, the briefing note also examined the funding deal announced in January 2015 between the Quebec government and the province’s massive public pension fund manager. The parties agreed to build a $5-billion electric light-rail network connecting Montreal to its suburbs and its international airport.
While the agreement may present a commercial interest for the pension-fund manager, the document said the deal also establishes the parties’ roles, responsibilities as well as cost- and revenue-sharing rules.News from © Canadian Press Enterprises Inc. 2016