Audit of the Academic Ambulatory Care Centre Public Private Partnership: Vancouver Coastal Health Authority

Audited Entity

• Vancouver Coastal Health Authority

Audit Scope and Objectives

To assess whether the Academic Ambulatory Care Centre P3 project achieved its key value-for-money assertions based on the first five years of the Project Agreement.

The Project Report identified a number of value-for-money assertions. The audit assessed the following ones as key measures of success in achieving value for money:

• The facility will have an estimated capital cost of $95 million.
• Payments will be performance-based and subject to reduction.
• Risks will be allocated to the partner best equipped to manage them.

Audit Criteria

• The P3 partner delivered on the design/construction expectations
• VCHA has effective procedures to monitor the progress of the P3 contract
• Key stakeholders are satisfied with the outcomes to date from the P3 contract
• The P3 contract allows for flexibility and learning in order to improve future outcomes

Main Audit Findings

• Overall, the audit found that not all of the key value-for-money goals were met. While the facility was completed on time, the final capitalized value was $123 million – 29% greater than the estimated $95 million capital cost in government’s Project Report.
• Increased costs were incurred for a number of reasons. VCHA did not have a clear understanding of the scope and user requirements of the project, which resulted in numerous variations in the project and prevented the effective transfer of design and scope change risk to AHV. This added an additional $11 million to the estimated cost.
• VCHA used a number of mechanisms to monitor AHV’s performance in managing the completed facility’s operations. However, the audit found that although the project agreement provides VCHA with a mechanism to address non-performance, payments under the agreement are not subject to reduction for non-performance as asserted in the Project Report.
• A lack of public reporting since the Project Report prevents external stakeholders such as government or taxpayers from assessing the results of the project against their expectations.
• While the agreement does include provisions for flexibility in managing the contract, VCHA was unable to provide documentation to support the evaluation for two financially significant contract amendments.

Selected Audit Recommendations

• All documents related to key changes in a P3 Project Agreement should be retained.
• P3 project budgets should include explicit contingency budgets for variations.
• A project implementation plan should be prepared and approved at the outset of a P3 project.
• Project Reports should be reviewed independently before they are publicly released to ensure that key assumptions and disclosures are supported.
• Formal requirements for public reporting should be established after the completion of the capital construction phase and for set times throughout the operational contract. These reports should assess how well the project has achieved its value-for-money/risk transfer objectives in the respective areas.

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