Infrastructure Ontario, the arms-length development agency established by the provincial government, has been busy since its creation in 2006.
In its five-year existence the agency has brought to market more than $21-billion worth of real estate assets. More than one-half of that activity has been in the health care realm in the form of hospital redevelopment, which an agency spokeswoman describes as ‘the largest healthcare capital investment in Ontario in more than a generation.”
In healthcare, Infrastructure Ontario has completed 15 hospital projects over the past five years and, of those, 14% are under budget. The rest of those hospital projects are on budget, said Paulette Den Elzen, manager of project communications with Infrastructure Ontario. Because of the development agency’s mandate to deliver large, complex infrastructure projects using a model dubbed “alternative financing and procurement” or AFP, going over budget is pretty much impossible.
What differentiates the AFP from the older public-private partnership (P3) model is that the assets are owned by the government after they are built or redeveloped, rather than the developer. Besides owning the asset at the end of the process, she said that the main benefit of the AFP model are the ability to pass on risks (design, financing, construction and maintenance) to private sector partners.
The AFP model was first adopted in British Columbia and has since spread to most of the provinces in Canada, Den Elzen said.
Under the AFP model, bidders typically form a consortium that will include the architect, the financier, the contractor and the company that in the end will maintain the property. “That requires them to take ownership of any thing that has been left out of design,” said Den Elzen. “Whereas in the past a builder could point a finger at the architect and say, `I wasn’t aware of it and so now there is a scope change so I now need to charge for it.’ On an AFP project, that doesn’t happen. If they didn’t coordinate design, they are responsible for any additional cost.”
Infrastructure Ontario’s early work has focused on healthcare – all but three of the 18 projects on the “substantial completion” list on the agency’s website are some sort of healthcare facility – but it recently began to branch into different areas.
“The projects that we have been working on to date since our creation are mostly hospitals but we have been involved with roads as well and courthouse projects and most recently the government assigned us some transit projects,” said Den Elzen.
The expanded scope of the agency can be seen in its current list of open RFP requests: an air rail link spur, a Highway 407 east extension, and a Sheppard East Maintenance and Storage Facility, in addition to a RFP related to the Humber River Regional Hospital.
An example of a current project that the agency is stick handling for the government is the design and construction of the Quinte Consolidated Courthouse in downtown Belleville (Video about the project made for WZMH Architects). It will bring together the Quinte region’s Court of Justice and Superior Court of Justice, which currently operate in four separate locations.
The Quinte courthouse project got its start in the summer of 2009 when the agency issued a request for qualification from potential development partners. In May 2010 it issued a request for proposals on the project and last month announced that it had selected its preferred proponent.
Working with the Ministry of the Attorney General, the infrastructure agency identified Brookfield Partnerships Quinte are the preferred proponent selected to design, build, finance and maintain a new consolidated courthouse in Belleville.
The Brookfield consortium is a joint venture between Brookfield Financial Corp. and Morguard Corp., with PCL Constructors Canada providing construction services. The facility was designed by WZMH Architects, with Morguard also providing facilities management. Brookfield Financial Corp. acted as the financial advisor to the consortium.
The next several months will be spent finalizing contract details and, after a financing rate has been set, project costs will be announced publicly following financial close.
“When construction is substantially completed, then the government will begin to pay back the consortium,” said Den Elzen. “The reason for that is if you have a lender involved in the consortium, they are providing added due diligence to ensure that the project is being completed on time.”