1. Infrastructure Ontario Expanding Ontario’s public infrastructure by delivering innovation, transparency, accountability and results – building a better tomorrow APTA-CUTA International Practicum on Innovative Transit Funding & Financing Derrick Toigo Senior Vice President, Civil Infrastructure June 12 2014

2. A decade ago, Ontario was nearing a crisis point in its infrastructure investment program. Ontario’s hospitals were, on average, 40 years old, equalling the industry-standard “useful life” of a hospital. Annual infrastructure investment levels were 75% lower than today’s. The estimated the cost of modernizing Ontario’s hospitals was $8 billion. Large, traditionally delivered projects were plagued by poor budgets, inadequate project management and unsophisticated commercial negotiating expertise. Governments did not have the confidence to properly address the large infrastructure deficit. November 18, 2004 Hospital construction was ‘poorly planned’ A report on the “poorly planned” new Thunder Bay hospital contains valuable lessons about how not to build or redevelop Ontario health-care centres, Health Minister George Smitherman said Tuesday. Sault Ste. Marie Star September 2, 2006 “The new Sudbury hospital was originally approved at $143 million but was suspended when the cost reached $316 million.” “The new Thunder Bay hospital was approved at $126 million and came in at $283 million.”

3. Ontario’s Long-Term Infrastructure Plan Building a Better Tomorrow Framework (2004) Guided by five principles meant to address lessons learned in Ontario and in other jurisdictions when it comes to P3: The public interest is paramount Value for money is demonstrable Appropriate public control/ownership must be preserved Accountability must be maintained All processes must be fair, transparent, efficient ReNew Ontario (2005-2010) Ontario’s five-year infrastructure plan invested $30 billion in health care, justice, post-secondary education and transportation projects. 3Infrastructure Ontario ONTARIO’S LONG-TERM INFRASTRUCTURE PLAN In 2004, the Ontario Government sought an alternative to traditional methods of infrastructure project delivery. ̶examined the delivery methods that had been used by other jurisdictions to address infrastructure deficit. 1 23 Publically committed to the first ever long-term infrastructure plan ̶Signaled to the market provision of a steady pipeline of infrastructure projects. Formulated a made-in- Ontario approach to financing and managing large, complex infrastructure projects. ̶In 2005, established INFRASTRUCTURE ONTARIO

4. AFP – A Made-in-Ontario Solution Ontario’s P3 model was adapted using the model from the UK and Australia where both labour and conservative governments have used P3s. IO carefully reviewed issues and problems realized in other jurisdictions and intentionally designed non-ideological procurement practices and contractual provisions; hence the name Alternative Financing and Procurement (AFP). What makes Infrastructure Ontario’s AFP model different? Infrastructure Ontario: ̶Protects the rights of unionized workers; ̶Puts in no more private finance that is necessary to transfer risk; ̶Does not include core public services; services relate to assets (e.g., HVAC and elevator repair and cleaning); ̶Does not outsource any service to the private sector that is new – only difference is we have combined them and the private sector has integrated them; and ̶Always reserves the right to terminate contract. Why does Infrastructure Ontario continue to be successful? IO continues to carefully monitor local and international issues so as to proactively modify the model as appropriate. IO maintains an active dialogue with stakeholders in other jurisdictions in an effort to share and benefit from best practices, and analyzes and modifies current practices so as to increase overall value for money on projects.

5. Using taxpayers’ money responsibly Value for money (VFM) analysis is a process of comparing project costs using two delivery models − the traditional project delivery model (the public sector comparator) and the Alternative Financing and Procurement (AFP) model − to determine which is the better value proposition. VFM reviews are conducted by third- party accounting firms based on real project data. Only where a VFM review demonstrates that the value of the AFP model outweighs the traditional model and provides value for money will the province proceed with an AFP project. Infrastructure Ontario5 Protecting the Public Interest: Achieving Value for Money Risk Retained Ancillary Cost Financing Cost Risk Premium Base Cost Value For Money Public Sector Comparator AFP Cost Primary Risks Transferred to Private Sector in AFP Model: Design Risks Financing Risks Maintenance Risks Construction Risks Scheduling Risks Value for money savings on Alternative Financing and Procurement projects average over 11% per project.

6. Protecting the Public Interest: Maintaining Accountability External Mechanisms Annual Report prepared in accordance with Management Board of Cabinet directives Freedom of Information and Protection of Privacy Act (FIPPA) prevails with allowance for commercially sensitive information Auditor General can review directives from the Minister 6Infrastructure Ontario Internal Mechanisms Client Ministries define project scope. Projects are assigned to IO by way of Ministerial letter of direction. Project budgets must be approved by Treasury Board Investment and Risk Committee of IO Senior Management reviews all major transactions at critical milestones IO’s private-sector Board of Directors appointed by the Lieutenant Governor-in-Council approves all major transactions.

7. Protecting the Public Interest: Delivering Transparency Clear disclosure guidelines to the public with information posted on www.infrastructureontario.ca Key commitments include: Competitive tendering Use of electronic systems for all bids (MERX) Proactively releasing relevant information in press releases and on website Disclosing key project documents on website, including RFPs, final project agreements, and value for money reports. Information deemed commercially sensitive (determined with reference to principles under FIPPA) may be redacted All major procurement processes are supervised by a Fairness Monitor All projects are open to examination by the independent office of the Auditor General 7Infrastructure Ontario

8. IO’s Major Projects Benefit all Regions of the Province 8Infrastructure Ontario 93 AFP projects have been assigned to IO 36 AFP projects have reached substantial completion of construction Total construction cost value: $6.5 billion

9. What we’ve done so far… 37 Projects have reached Substantial Completion – 27 health care – 5 courthouses – 3 detention centres – 1 forensics complex – OPP Modernization (16 sites) 18 Projects currently under construction – 8 health care – 5 transit/transportation – 4 Pan Am Games Venues – 1 college 18 Projects in procurement 11 health care 6 transit/transportation 1 college Total Construction Value: $8.3 billion 9Infrastructure Ontario Total Construction Value: $6.5 billion Total Construction Value: $6.9 billion

10. IO’s Major Projects Attract Market Leaders PARTICIPANT FINANCIAL INSTITUTIONS CONTRACTORS, EQUITY PROVIDERS & OTHER NON-FINANCIAL MEMBERS

11. On-time On-budget - 3rd Party Review completed in 2013 11Infrastructure Ontario On-budget Schedule Analysis On-Time Schedule Analysis 29 of 30 projects analyzed were completed below the established contract and contingency budgets. On average across the 30 projects, 51% of contingency budgets are not utilized by the time projects are complete 22 projects (73%) were completed on or ahead of schedule, with two projects delayed by more than five months.

12. 12 www.infrastructureontario.ca Contact Information Derrick Toigo Senior Vice President, Civil Infrastructure derrick.toigo@infrastructureontario.ca