Key Facts About Contractual Obligations

July 20, 2007
Ministry of Finance

Disclosure in British Columbia

  • Incurring contractual obligations is not new or unusual. What is new is that the disclosure of contractual obligations was first required under Generally Accepted Accounting Principles (GAAP) for the year ended March 31, 2006.
  • In full compliance with GAAP, the Province discloses significant contractual obligations with an initial value of $50 million or more.
  • Expenses are incurred when goods or services are delivered, which would be the same regardless of whether the work was done internally or externally, or if different forms of contracts or agreements are used.
  • Total contractual obligations in 2006/07 were $55,232 million.

Public Private Partnerships (P3s)

  • Contractual obligations related to P3s make up 4.4 per cent of the Province’s total contractual obligations.
  • In P3s, the Province retains ownership of the asset, the private partner delivers the asset and/or services according to a fixed budget and schedule, and the taxpayer benefits from a performance-based contract.
  • In 2006/07, six P3 projects met the criteria for disclosure as contractual obligations. The remaining obligations under these agreements are valued at:
    • Abbotsford Regional Hospital and Cancer Centre $812 million
    • Sierra Yoyo Desan Road $43 million
    • Kicking Horse Canyon (Phase 2) $120 million
    • William R. Bennett Bridge $383 million
    • Gordon and Leslie Diamond Health Care Centre $40 million
    • Sea-to-Sky Highway Improvement Project $1,036 million

  • Some of the benefits of acquiring goods and services under long term contracts, including P3 arrangements, are:
    • Access to capacity and resources over a defined period for one time projects;
    • Expertise and innovation that is not available internally;
    • Lifecycle management through the design, construction, and operation phases;
    • Transfer of risks through fixed price agreements, guaranteed delivery date, long term warranties or guarantees of performance.
  • For every P3, the cost of building and operating the public facility and the benefits to taxpayers over the life of the agreement are detailed by Partnerships BC in a Value for Money Report.
  • In regard to the projects listed above, the Value for Money Reports estimate $480 million in additional benefits to taxpayers from proceeding as P3s.