AFP: Frequently Asked Questions

  1. What is Alternative Financing and Procurement (AFP)?
  2. What are the key principles governing AFP projects?
  3. What are some examples of Projects IO has delivered using AFP?  
  4. How does Infrastructure Ontario get involved in infrastructure projects?
  5. What are Infrastructure Ontario’s main responsibilities for delivering a project?
  6. Is AFP delivery the best way to build all projects?
  7. How often are AFPs delivered on time and on budget?
  8. Can’t governments borrow at a cheaper rate than the private sector?
  9. Do AFP projects cost more as a result of high financing rates charged by the private sector?
  10. What are some examples of project risks?
  11. Who owns the building when it is built using the AFP model?
  12. How do I find out who is bidding on Infrastructure Ontario projects?
  13. How do I get involved in an Infrastructure Ontario project?
  14. What is IO’s Local Knowledge requirement for bidders?
  15. What is a Request for Qualifications?
  16. How are shortlisted bidders selected?
  17. What is a Request for Proposals?
  18. How is a Winning Bidder selected?
  19. When does construction begin?
  20. When is construction considered (substantially) complete? 

 

 

Q 1. What is Alternative Financing and Procurement (AFP)?

AFP is an innovative way of financing and procuring large, complex public infrastructure projects. It makes the best use of private-sector resources and expertise to provide on time, on budget project delivery.  

 

Under AFP, provincial ministries and / or project owners establish the scope and purpose of a project while design and construction work is financed and carried out by the private sector. Only after a project is completed will the private sector company be repaid by the province. In some cases, the private sector will also be responsible for the maintenance of a physical building or operation and rehabilitation of a roadway.

 

AFP allows large, complex infrastructure projects to be delivered more efficiently and cost effectively than traditional procurement. AFP also protects taxpayers from cost overruns by transferring project risks to the party who has the expertise, experience and ability to handle that risk best.

 

Q 2. What are the key principles governing AFP projects? 

Projects are guided by five key principles: transparency, accountability, value for money, public ownership and public control, and public interest are paramount.

 

Q 3. What are some examples of Projects IO has delivered using AFP? 

A list of all past, current and proposed AFP projects can be found here.

 

 Q 4. How does Infrastructure Ontario get involved in infrastructure projects?
Infrastructure Ontario was created as a Crown agency to assist the Province in delivering its long-term infrastructure plan, on time and on budget.  The Ministry of Economic Development, Employment and Infrastructure in consultation with other government ministries, assesses, prioritizes and determines the overall infrastructure renewal budget. The ministry also identifies which projects will be assigned to Infrastructure Ontario.

 

Q 5. What are Infrastructure Ontario’s main responsibilities for delivering a project?

Infrastructure Ontario’s main responsibilities include:

  • leading and implementing the procurement process
  • assisting project owners with bid documents, including design and output specifications
  • receiving and evaluating submissions
  • negotiating and awarding contracts
  • project managing the construction of the project at the request of the project owner

Q 6. Is AFP delivery the best way to build all projects?

No.  AFP is only used on the largest, most complex projects in the province. Infrastructure Ontario also manages thousands of projects annually through traditional delivery and we believe there is room for both models.

 

Q 7. How often are AFPs delivered on time and on budget?

In 2014, Infrastructure Ontario (IO) retained Altus Group Limited to conduct an external review of the 37 Alternative Financing and Procurement (AFP) projects that had reached Substantial Completion by March 31, 2014.  They found that:

  • 97 percent of AFP projects (36 out of the 37 projects reviewed) were completed below budget estimates with one project going 0.01% over the budgeted IO-managed AFP contract costs.
  • 27 out of 37 AFP projects (73%) were completed on time or within one month of their scheduled completion date.

Q 8. Can’t governments borrow at a cheaper rate than the private sector?

Yes. The provincial government can borrow at a lower rate as its credit risk is very low.  However, having the private sector finance projects ensures that there is incentive to complete the project on time and on budget, and the value of transferring this responsibility to the private sector outweighs the additional cost of private sector borrowing.

 

Q 9. Do AFP projects cost more as a result of high financing rates charged by the private sector?

Costs of private sector borrowing are more than offset by the risks AFP developers assume for the project, including the risks of increased construction costs and/or schedule delays as the project develops.

Developers are not paid until the entire project is complete. They take out a loan to finance the construction of facilities and commit to the province and its lenders to have it finished by a fixed date for a fixed price. If the winning AFP bidders don’t complete construction by their target completion date, additional costs will accumulate – for which the builder, not the province, is responsible.

When you take into account all costs – including risks – AFP delivery costs less than the traditional way of delivering large, complex projects.

 

Q 10. What are some examples of project risks?

There are many potential risks for any complex project in terms of design errors and omissions, unforeseen site conditions, labour and material costs, as well as ongoing operating and financial risks.  In AFP contracts, many of these risks are transferred to the builder.

  

Q 11 . Who owns the building when it is built using the AFP model?

All buildings constructed using the AFP delivery model are publicly owned and publicly controlled.

 

Q 12. How do I find out who is bidding on Infrastructure Ontario projects?

Once a project enters into the procurement phase, a request for qualifications (RFQ) invites bidders to provide information and demonstrate proven abilities in a number of areas including their financial strength, past experience, capacity and more. Following the RFQ, a short list of prequalified bidders announcement is made.

 

The short list or prequalified bidders announcement will provide detailed information about the teams that have committed to participating in the request for proposals stage of a project.

 

Q 13. How do I get involved in an Infrastructure Ontario project?

A Request for Qualifications is issued for a project via www.merx.com to invite interested companies to submit their qualifications for a project.

Contractors and subcontractors of all sizes play critical roles in all AFP projects.  We encourage interested businesses to contact prequalified bidders directly to inquire about opportunities.

When possible, Infrastructure Ontario organizes networking sessions to provide opportunities for interested bidders to meet local subcontractors.   

 

Q 14. What is IO’s Local Knowledge requirement for bidders?

Infrastructure Ontario delivers some of Ontario’s largest, most complex infrastructure projects. For these projects to succeed, the firms delivering them must have a sound understanding of Ontario’s business and regulatory landscape.

Local knowledge includes familiarity with local building code requirements, health and safety regulations, and other regulatory measures applicable to a given procurement.

 

Q 15. What is a Request for Qualifications (RFQ)?

The RFQ process allows Infrastructure Ontario to identify project teams that have the required construction capability, experience and financial capacity (and in some cases design and maintenance experience) to undertake a large, complex project.

A request for qualifications is issued for a project via www.merx.com to invite interested companies to submit qualifications for a project.

 

Q 16. How are shortlisted bidders selected? 

Infrastructure Ontario works with the client (e.g. a government ministry or project owner) to evaluate request for qualifications (RFQ) submissions and to determine the highest ranking project teams.

Following the RFQ, a short list or prequalified bidders announcement will provide detailed information about the teams that have committed to participating in the request for proposals stage of a project.

  

Q 17. What is a Request for Proposals (RFP)?

A request for proposals is issued to prequalified or shortlisted project teams only. The RFP sets out the conditions and specifications required to undertake the project.

Q 18. How is a Winning Bidder selected?

Following evaluations, the highest ranking bidder is identified as the “preferred proponent.” Infrastructure Ontario and the client proceed to negotiate a final contract with this proponent.

 

Q 19. When does construction begin?

Construction can begin following the signing of the final project agreement.

 

Q 20. When is construction considered (substantially) complete?  

Substantial completion means construction on the project is complete in accordance with the project agreement and the facility is available for its intended use.