Infrastructure Ontario Approach to large infrastructure and real estate projects. Partnering to modernize Ontario s infrastructure

Transcription

1 Infrastructure Ontario Approach to large infrastructure and real estate projects

2 Long-term Infrastructure Plan (LTIP) Formal commitment every five years Bill 6, Infrastructure for Jobs and Prosperity Act, 2015 Community benefits/apprenticeships Legislation, mandate, and accountability for the Agency Mandate letter (annual) and Memorandum of Understanding (five year) Infrastructure and Realty Directives Annual Letter of Direction Business Plan and Annual Report Internal and external audits, and Auditor General audit annual reports

3

4 Project Delivery Division Major Projects Acts as procurement and commercial lead for all major public infrastructure projects in the province Real Estate & Lending Division Real Estate Modernizes and enhances the government real estate portfolio through asset planning, facilities contract management, and real estate advisory services Commercial Projects Provides advice and negotiation support to the government and public sector partners regarding commercial transactions, including major land developments Loan Program Supports the renewal of public sector infrastructure by delivering low-cost and low-risk loans to eligible clients

5 Upfront planning Empirical data and improved budgeting Proper people resourcing Integrating project elements Avoiding design risk and encouraging innovation Selecting good partners Alignment of interests, negotiating leverage and counterparty skin in the game Withholding payments in proportion to risk Taking externalities into account Taking a whole-life approach to projects

6 Since 2005, Infrastructure Ontario has been assigned nearly 90 Alternative Financing and Procurement (AFP) projects worth more than $40 billion All AFP projects Number Capital cost Completed 55 $18.34 billion Under construction 20 $15.07 billion Procurement/planning 14 $ 6.83 billion Total 89 $40.24 billion (as of June 30, 2016)

7 Number of AFP Projects Completed or in Construction AFP Projects Capital Cost ($ billions) $ $4.75 $ $10.07 $2.48 Health Care Justice Transit Transportation Other (Education, Sport, IT Delivery) Health Care Justice Transit Transportation Other (Education, Sport, IT Delivery) (as of June 30, 2016)

8 Third-party assessment of IO s performance for the first 45 AFP projects to reach substantial completion 45 AFP projects had reached substantial completion by March 31, 2015, with an approximate capital value of $12 billion 98% were completed on budget (within the contract award plus post-contract contingency) 73% were completed on time or within one month of their scheduled completion date

9 IO recognizes that projects have different characteristics and requirements and has developed several AFP models: Build Finance (BF) Design Build Finance (DBF) Design Build Finance Maintain (DBFM) Design Build Finance Operate Maintain (DBFOM) Flexibility ensures that all projects are successfully delivered Best suited to projects with opportunity for risk transfer Typically larger, more complex projects Projects are often systems; project bundling has been used in rare exceptions IO has committed to inform industry partners when co sponsors have approval to implement a project as a bundle

10 Shareholder (government) commitment to AFP Project assignment approach: clear commercial authority on transactions Develop output specifications to achieve optimal risk allocation Technical and financial due diligence is conducted in partnership with the AFP sponsor client, ensuring that the best team is selected Clear, consistent timing from RFQ release to financial close Continuity of IO involvement throughout procurement Standardized documents and processes

11 IO works with clients to drive high quality design innovation through use of performance based output specifications AFP balances design technical merit and cost; in 80% of our projects, the winning team has both the highest ranking financial submission and one of the top two design technical scores. Bidders can differentiate their bid proposals through innovative solutions that drive value, resulting in: Significant capital and life cycle cost savings A whole life-cycle approach to design facilitates collaboration in design, construction, and maintenance, increasing opportunities for innovation Design innovations are increasingly evidence-based, resulting in improved productivity, operating performance, and customer satisfaction

12 Project Agreement Design Design Contractor Build Authority Lender s Direct Agreement (LDA) Project Company Lender (s) Finance Facilities Management Provider Maintain Accelerated infrastructure spending Commitment to infrastructure at all levels of government is an exciting opportunity but will create challenges (financial capacity; project oversight capabilities; supply of skilled trades) Shift to linear infrastructure Projects through urban environments have significantly different public interaction and risk profile than other types of infrastructure AFP can be used to manage these risks Increasing project and partnering complexity Larger and more complex projects result in more complex structures for both owners (e.g., multiple funders) and project companies (e.g., multi-party DBJVs with asymmetric risks) Ongoing need to balance risk transfer and cost of financing Ongoing tension between creating fully aligned incentives and ensuring sufficient skinin-the-game, while minimizing the cost of private financing

13 Local knowledge Safety Balancing the costs of financing with risk transfer Vendor performance (such as improving on-time performance) Ethical bidding practices / conflict of interest Managing public disruption and community benefits

14 Nearly 5,000 buildings under management in 383 communities, Canada s second largest real estate portfolio 44 million rentable square feet of owned and leased space $13.7 billion replacement value $652 million annual operation/maintenance expenditure $278 million annual capital reinvestment 130,000 acres of land under management $25 million in annual gross revenue from land and building sales transactions

15 The Macdonald Block complex in downtown Toronto is the administrative centre of the Ontario government, accommodating 3,600 staff in 15 Ontario government ministries The initiative involves the extensive reconstruction of the Macdonald Block complex, which includes the Macdonald Block podium, and the Hearst, Hepburn, Mowat, and Ferguson towers This long-term project will take approximately eight years to complete 1.22 million 3, Total rentable area in square feet; the complex is used as government offices Approximate number of OPS employees in the Macdonald Block complex Number of ministries located within the Macdonald Block complex Number of Ministers offices located within the Macdonald Block complex

16 The Realty Transformation Strategy is a 10-year commitment to transform the way government manages its real estate holdings. Office footprint reduction targets includes: reduction of 1 million square feet of office space in Toronto reduction of 300,000 square feet of office space outside of Toronto Inside Toronto Achieved In Progress Outside Toronto Achieved In Progress (as of March 31, 2016)

17 Mandate and governance matter Political will, policy direction, and centralized government expertise are essential Project delivery capacity levels the playing field for government Government/ProjectCos should hire construction/operations subject matter experts At IO, 75% of employees have private sector experience in architecture, engineering, law, finance, procurement, facility management, or communications Public ownership and public interest Financing is not funding; confidence in budget commitments must be firm Standardized approaches can drive competition and excellence Technical, financial and budget due diligence must be done up front Templates for procurements and contracts, and project pipeline matter to the market Develop a project financing and delivery model that can be adapted Flexible model can address different asset types and client needs

18

19 35 new or expanded health care facilities completed 13 health care projects under construction Over 1,000,000 m 2 of new health care space Humber River Regional Hospital, Toronto in-patient beds Receiving 450,000 ambulatory visits and 100,000 emergency visits in its first year North America s first fully digital hospital with 75% of supplies delivered via automation Project Type: Design-Build-Finance-Maintain Contract Price: $1.75 billion

20 10 justice projects completed, including courthouses and detention centres 18 Ontario Provincial Police facilities constructed across Ontario 300,000 m 2 of new justice and public safety space Waterloo Region Courthouse Space for 30 courtrooms, including a multipleaccused high security courtroom Eight judicial conference rooms ProjectType: Design-Build-Finance-Maintain Contract Price: $379 million

21 One educational project completed; one project in construction; one project in transaction 63,000 m 2 of teaching, study, and administrative space Humber College Learning Resource Commons Six-storey, 24,000 m 2 academic support and student services facility Features a new library, group and independent study spaces, a centralized hub for student services, and a student gallery ProjectType: Design-Build-Finance Contract Price: $84 million

22 Two major highway projects completed; one project in construction; one project in pre-tender 20 provincial highway service centres redeveloped on Ontario s principal highways Rt. Hon. Herb Gray Parkway, Windsor 11 km six-lane highway and four-lane service road 34,000 m 2 of retaining walls; 14 bridge structures 11 covered tunnels from 120 m to 240 m long Use of proven techniques to reduce noise levels Project Type: Design-Build-Finance-Maintain Contract Price: $1.4 billion

23 Air Rail Link completed linking Toronto s Pearson Airport to Union Station Two major Toronto Light Rapid Transit projects entering procurement or construction Eglinton Crosstown LRT, Toronto IO is managing procurement; Metrolinx will oversee detailed design/construction 19 km corridor will include 25 stations and stops and a 10 km tunnel Project Type: Design-Build-Finance-Maintain Contract Price: $9.1 billion Scheduled completion: 2021

24 IO was TO2015 s partner in delivering the largest, most complex facilities for the Pan/Parapan Am Games IO partnered to build the Athletes Village and six sports facilities with a total value of $959 million: York University Stadium Hamilton Stadium Milton Velodrome Toronto Pan Am Sports Centre Markham Pan Am Centre University of Toronto Field Hockey Centre