Karl Moore: This is Karl Moore of the Desautels Faculty of Management at McGill University, Talking Management for The Globe and Mail. Today I'm delighted to speak to the chief executive officer of SNC-Lavalin, Pierre Duhaime. Good afternoon, Pierre.
Pierre Duhaime: Good afternoon, Karl.
KM: A big issue here in Quebec is public-private partnerships (PPPs). When should they be used, and when should business do it by itself, or government by itself?
PD: The beauty of a PPP is you give the full responsibilities to someone to deliver a project and also to maintain it and operate it as well [as]to finance it. So, in that regard, let's say, if an organization, like the government, doesn't want to get involved too much with a project, PPP is one way. Also, it makes sure you finance off-balance-sheets to a point.
But the project itself needs to be also at that for PPP, and it needs to be a project that is well-defined; the boundaries, the limits of it are well-defined; there is no doubt of the scope of work; there is, also, a good definition of what the operation mandate is all about. So, there [are]some very important criteria to meet to be a PPP - a successful PPP.
KM: There is what's called the Turcot Interchange here in Montreal (near our house, as a matter of fact), a huge highway project. Why would that not be a good PPP from your viewpoint?
PD: First of all, it's not that huge. It's a small section of a highway. So, it's built between two existing sections of a highway. You need to demolish some things. We don't know yet - because the design is not really ready; we know the population, there is some resistance with the population. It will last forever. I mean, you cannot stop the traffic while you build these things so there will be a lot of adjustment to come during the implementation of the project. So I believe that project, because of its own complexity, and [because it is ]hard-to-define, both in terms of scope and in terms of timing, doesn't adapt well to PPP.
KM: When we look at the two super hospitals that are being put forward in Montreal, do both make sense as a PPP, or do you see one that would be better suited for that?
PD: For us, we decided that we will bid only on the McGill University [hospital] which is on a new site - a very, very well-defined scope, good schedules; while the other one is done in downtown - you need to demolish existing buildings, you need to rebuild it, you need to modify. It will be more difficult for the Centre hospitalier de l'Université de Montréal [CHUM - the university's Hospital Centre] So part of the CHUM could be done in the PPP, but the entire CHUM project will be a difficult one to be a PPP.
KM: It seems that risk is a central question here. With a lot of risk, it's better for government because they have, not infinite resources, but they have more resources and they're going to be around for a long time and they have the voter very much firmly in their sights. Is that a central thing to worry about?
PD: Yes, that's one way to look at it because we, as entrepreneurs, if we see a risk, we need to price it and, no matter what, it will add to the cost. Maybe the risk will materialize, maybe it will not materialize. But if it [doesn't] this will be excess money to be paid by the government or the owner. So, in that case, yes, the risk is better managed by the one [who]has the control over it. And in a case like a PPP, in many cases, government is better placed for managing its own risk.
KM: So, the thought is it's almost entrepreneurial. You take on more risk than other people than yourself and, if it pays off, that's great but you're criticized; and if it doesn't pay off no one criticizes you, you just lose a lot of money.
PD: Yes, but we should be philosophical about criticism and accept it. But on the other hand, I must say, I think the market is performing and the price out there, right now, today, is quite competitive.,
KM: This has been Karl Moore of the Desautels Faculty of Management at McGill University, Talking Management for The Globe and Mail.
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