Global Vantage: Update on Infrastructure Procurement in Canada

February 2025

Antony Smith, Andrés Durán, Nadir Hasan and Cameron Baker

The procurement landscape for major infrastructure projects is in a dynamic era currently.

The public-private partnership (P3) delivery model has become much less common due to the rise of major project delays and cost overruns, particularly for civil projects (rail, roads, bridges, highways). New models that have been used internationally in some jurisdictions are becoming used more across Canada. These models include progressive procurement models, and some alliance contracting. P3s have not disappeared entirely, and at least one Province still uses P3s for social infrastructure projects. “Social infrastructure” means public building projects: hospitals, courthouses, schools, etc.

The Province of British Columbia, for example, has procured three projects (one road, and two hospital projects) under alliance contracts in the past 4 years

Another important factor for change has been the desire of procuring authorities to see increased competition in the market, which largely means firms from outside of Canada.

It will be very interesting to see if any trade war, or tensions between Canada and US related to the threat of tariff action, will push governments in Canada to restrict the ability of US firms to bid for construction and other infrastructure services work procured by municipalities, Provinces and / or the Federal Government – among other potential “Buy Canadian” procurement measures to retaliate against US trade actions.

Focussing on Ontario as an example of certain of these trends, at the end of last year, the Office of the Auditor General of Ontario released its Annual Report regarding the Performance Audit of the Procurement and Delivery of Selected Infrastructure Projects (the “Audit Report” – linked below).

Since 2021, Infrastructure Ontario (a provincial Crown Corporation under the Ontario Ministry of Infrastructure) has made changes to its large capital project delivery models to encourage participation and competition from the market in tendering for infrastructure projects. These changes have included a higher transfer of risk to the public side of the projects, enticing heightened involvement in the bidding process and in early contractor and consultant involvement and collaboration in project and design development prior to shovels going into the ground.

The Audit Report focussed on three procurements of infrastructure projects by Infrastructure Ontario, namely: the Trillium Health Partners Mississauga Hospital, the Lakeridge Gardens Long-Term Care Home and the Highway 427 Expansion. The Audit Report found that despite the changes made to encourage and increase market participation, project bidding averages dropped, with the projects reviewed experiencing both delays to completion and having gone over budget.

As a result, the Audit Report set out 16 recommendations to achieve the intention of the changes made to the Infrastructure Ontario P3 delivery model. We highlight certain recommendations below:

Assess new strategies to increase market competition for projects based on feedback received from market participants while maintaining incentives for contractors to complete projects on time and on budget.
Update the Delivery Options Analysis Template to require (a) known project-specific risks and mitigation solutions, and possible delivery options; and (b) an updated analysis when a delivery model is changed, including the rationale for the change.
Explore options in relation to risk sharing, including for cost overruns and optimising risk allocation.
Update the Infrastructure Ontario proforma Development Phase contract so that updates as to quantities and pricing from the private development partner are provided as soon as possible.
Infrastructure Ontario work with private development partners to explore options to minimise contingencies and risk premiums included in project costs.
Infrastructure Ontario: (a) invite all (or at a minimum, three) prequalified vendors to submit a proposal in a manner similar to the standard process, being a Request for Proposal, even when modified procurement processes are used; and (b) when a contractor is selected for multiple similar projects whose schedules overlap, identify risks to the project schedule and implement strategies to mitigate the risks.
Infrastructure Ontario review the initial work schedule before construction commences so that necessary information required in the contracts is reported, including cost assigned to all activities in the construction schedule.

The recommendations have focussed on mitigating and sharing risk, including cost overruns and delays to projects. Infrastructure Ontario and the ministries identified in the recommendations have accepted all 16 of the recommendations.

Will Buckby and Andrés Durán of Beale & Co have previously provided commentary on the P3 delivery model in Canada: 2659-Beale-Co-Collaborative-Contracting-Canada-Article_MAY24.pdf

A full copy of the Audit Report can be found here: Procurement and Delivery of Selected Infrastructure Projects.

If you have any queries on the above, and how this might relate to future contract opportunities or projects, please contact the following: