Alternative Financing and Procurement

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

Alternative Financing and Procurement is an innovative way for the government to deliver on its commitment to maintaining and expanding public infrastructure.  Infrastructure Ontario’s AFP model uses private financing to strategically rebuild vital infrastructure, on time and on budget, while ensuring appropriate public control and ownership.

Q. What are the benefits to AFP?

We believe this model — with the inherent private-sector efficiencies — will create an overall lower cost for taxpayers than if the government financed projects directly.

This approach allows the government to bring in private-sector expertise, ingenuity and rigour to the process of managing and renewing Ontario’s public infrastructure. It will also work towards:

“Without question, the Province of Ontario has delivered on its commitment to address the infrastructure deficit.”

Jane Peatch, Executive Director
Canadian Council for Public-Private Partnerships

• Eliminating cost and schedule overruns;
• Better coordination between design, construction and long-term maintenance and building services;
• More accountability throughout the planning, construction and maintenance phases of each project;
• Building infrastructure that will last for years to come and support a strong Ontario economy and enhance the quality of life for everyone.

Q. What is the private sector’s role under AFP?

Governments have always relied on the private sector’s expertise to design and build public infrastructure.  Depending on the specific project, private sector organizations may be asked to provide proposals to design, build, finance or even maintain the building. 

Q. How does the Ontario government plan to preserve public ownership where AFP models are selected for public infrastructure financing and delivery?

All AFP projects will be guided by the five principles set out in the government’s Building a Better Tomorrow framework. These are:

• Public interest is paramount
• Value for money must be demonstrable
• Appropriate public control and ownership must be preserved
• Accountability must be maintained
• All processes must be fair, transparent and efficient.

AFP does not affect public ownership of core public assets such as hospitals, schools and water and wastewater infrastructure. These public sector assets will continue to be publicly owned, publicly controlled and publicly accountable.

Q. Isn’t this the slippery slope to privatization of healthcare? 

All hospitals will be public hospitals under the Public Hospitals Act and will operate in accordance with the Canada Health Act and the Commitment to the Future of Medicare Act, 2004.

AFP transactions are strictly governed by the Building a Better Tomorrow Framework, which outlines a made-in-Ontario approach to engaging the private sector in the financing and procurement of public infrastructure.

This is not about privatization.

Q. Don’t privately financed projects cost more?

           
The province can borrow money at lower rates than the private sector can.
The total cost of a project needs to be considered here, not just one element.  The costs of private sector borrowing are offset by the risk that the private sector assumes including construction costs and time delays.             

AFP projects will undergo a value-for-money analysis to ensure the public interest is maintained.   As well, AFP projects will be open for review by the office of the Auditor General.

Q. How does an AFP project get assigned to Infrastructure Ontario?

AFP projects are generally large complex projects where the benefits to the public sector of transferring risks to the private sector exceed the costs charged by the private sector in order to compensate for assuming the increased risk.  The Ministry of Energy and Infrastructure analyzes all delivery options in the context of the following principles:

• The public interest is paramount;
• Value for money must be demonstrable;
• Appropriate public control/ownership must be preserved;
• Accountability must be maintained, and
• All processes must be fair, transparent and efficient.

Should the case point to reduced construction costs, reduced construction times, more efficient designs from a maintenance and operating perspective and the generation and capture of additional sources of revenue, the Ministry may assign the project to Infrastructure Ontario.