COVID-19: Economic Stimulus Through Infrastructure Investment – A New Deal?

At a press conference on March 20, 2020, Quebec’s Premier, François Legault, announced that the completion of infrastructure projects would be accelerated in order to stimulate economic recovery. Details regarding this announcement should be made public shortly. Since this announcement, events have accelerated, leading ultimately, with respect to infrastructures, to the adoption on March 24, 2020, of an order declaring the minimization of non-priority activities and the closure of businesses deemed to be non-essential. Only emergency construction work or work for security purposes, as well as the maintenance and operation of strategic infrastructure, have been deemed a priority in Quebec.

Whether it was the New Deal put in place in the 1930s by President Roosevelt (providing for the creation of the Public Works Administration), the Obama plan of 2009 (i.e., the adoption of the American Recovery and Reinvestment Act of 2009), Quebec’s infrastructure investment plan following the 2007–2008 crisis, or, more recently, the accelerated investment plan announced in March by several Chinese cities following the improvement of the health situation there, the implementation of ambitious infrastructure investment programs has demonstrated positive effects on economic recovery.

The acceleration of infrastructure investment aims to produce positive and lasting effects in the economy as soon as possible. In order to achieve such results, a stimulus package requires the adoption of specific measures, as well as rapid implementation. Such measures taken in the national interest must, however, take into account the universally recognized principles of due diligence, transparency and accountability. The following are examples of measures that may be considered by the competent authorities:

INSTITUTIONAL AND ORGANIZATIONAL MEASURES

• Establishing a dedicated structure under the supervision of Quebec’s Conseil du trésor for the accelerated implementation of projects identified by public bodies in collaboration with the Société québécoise des infrastructures, Investissement Québec, relevant ministries and municipal authorities, and with the support of the Autorité des marchés publics;

• Expanding the number of priority sectors considered by the Canada Infrastructure Bank (currently, these are public transit, trade and transportation, green infrastructure and high-speed internet).

ACCELERATION MEASURES FOR ALLOCATION PURPOSES

• Amending the legal framework applicable to public procurement in order to (i) allow for the submission and consideration of efficient alternative proposals or spontaneous and innovative proposals (including elements covering due diligence and accountability); (ii) give preference to the best-value-for-investment rule, rather than to the default rule of the lowest compliant tenderer; (iii) as soon as the specific needs and technical requirements of the identified projects are determined, allow for procedures based on those established in Europe, such as public-private innovation partnerships; and (iv) leverage technology in initiating or pursuing the selection of contractors;

• Adopting legislative and executive measures to exclude identified projects from the application of some or all of the steps and procedures set out in the Public Infrastructure Act and the Directive sur la gestion des projets majeurs d’infrastructures publiques, or to limit the application thereof, and to allow the implementation of projects in collaboration with various levels of government;

• Applying the concept of public interest as provided in the Act respecting contracting by public bodies, as well as the concept of public order as provided in free trade agreements, to give priority to local economic benefits and accelerate the process of awarding of contracts according to universally recognized principles.

ACCELERATION MEASURES FOR THE PURPOSES OF CARRYING OUT PROJECTS

• Reducing contract negotiation periods by rebalancing risk allocation currently provided for in public contracts, allowing for some flexibility in the submission of performance guarantees, and integrating performance criteria so as to enable the achievement of adapted objectives;

• Establishing acceleration measures for the environmental analysis of infrastructure projects, while ensuring compliance with sustainable development provisions in current laws. This could be achieved, for example, by creating dedicated teams that would ensure the development of expertise with respect to the environmental challenges of such projects, and by gaining an understanding of these prior to their execution. Public consultations could also be conducted prior to the execution of projects to identify public concerns. Bidders could then take these concerns into account in developing their environmental assessments. In addition, the best available technological capabilities could be used to ensure that public consultations are carried out as efficiently as possible, such as by virtual public hearings. Furthermore, predictability could be ensured by establishing guidelines or policies to frame certain discretionary powers of authorization.

• Through upstream planning and coordination between relevant public authorities, ensuring that permits and authorizations are in place when contracts are signed; also ensuring that protection measures for construction workers are developed and communicated in a timely manner;

• Establishing measures to allow for the prompt payment of suppliers and subcontractors, and even advance payment, with appropriate monitoring and control measures in place. The Procurement Policy Note 02/20: Supplier relief due to COVID-19 issued by British authorities on March 20, 2020, could be used as an example. Preliminary results of the pilot project aiming to facilitate payment to companies involved in public construction contracts and related public subcontracts should also be reviewed, as well as results of similar legislation in Ontario and elsewhere in Canada;

• Providing for the payment of retainers to finance mobilization costs during the selection process to encourage bidder participation.

PRIVATE SECTOR’S ROLE:

• Taking into consideration the concept of public interest, state-regulated private infrastructure provided by the private sector—at its own risk—to meet public service objectives (European-style concession rather than privatization).

• Leveraging public financing and financing provided by the Canada Infrastructure Bank for the private financing of certain infrastructure projects.

Over the coming weeks, we will see where the Quebec government is going with respect to infrastructure investments. One thing is clear: an infrastructure investment plan will have to be adopted to stimulate the economy.

The author wishes to thank Anne Drost, Partner, and Anne-Catherine Boucher, Associate, of the Blakes Environment group, as well as Clémentine Sallée, Partner of the Blakes Infrastructure group, for their collaboration on this article.

For further information, please contact:

Alain Massicotte                        514-982-4007
Anne Drost                                 514-982-4033
Clémentine Sallée                     514-982-4077

or any other member of our Infrastructure and Environmental groups.

Please visit our COVID-19 Resource Centre to learn more about how COVID-19 may impact your business.