Sprinting to the Triathlon

Victor Li

Corporate Counsel

01-01-2013

Infrastructure Ontario's Eric Tilley says he always wanted to use his legal skills in a way that would allow him to drive down the road and point to something tangible, like a building, that he helped create. During his nearly three years at IO, a crown agency based in Toronto that uses public-private partnerships (P3s) to finance infrastructure within the province, Tilley has risen rapidly from legal counsel, to senior legal counsel, to his current position as vice president. Along the way, Tilley, whose background is in commercial real estate, has helped create some pretty tangible things to point to: hospitals, courthouses, railways, even one of the roads he might use to drive to one of his projects. Not bad for someone who had never worked on a P3 project prior to his arrival at IO in 2010.

As the world's eyes turn to Toronto and the 2015 Pan American Games, the 35-year-old Tilley and IO will be under the gun to deliver a rarity: a major international sporting event that comes in on budget and on time. And, in the process, he hopes they can demonstrate quiet Canadian efficiency. Tilley, who worked at the now-defunct firm of Goodman and Carr from 2005 to 2007 before joining McMillan for two years, is confident that the P3 model and IO's track record will ensure that the city and province stay in the black as they build athletic facilities, an athletes' village, and sports stadiums.

The University of Western Ontario graduate, who earned his law degree from the University of Ottawa, also has a chance to put his own stamp on the province where he was born and raised. Staff reporter Victor Li spoke to Tilley about his job and the pressure of those big deadlines. An edited version of their conversation follows.

Corporate Counsel: Why were you drawn to the P3 area? Why not stay in commercial real estate?

Eric Tilley: What attracted me to P3s is that they are a novel, cutting-edge area of law. The idea of helping to develop a field was very interesting to me. Additionally, P3s gave me the chance to work on some really large infrastructure projects that provided a lot of social benefits to the public.

CC: Have there been any previous P3 projects that have helped you prepare for the Pan Am Games projects?

ET: IO does many different types of projects, but the three general categories are civil infrastructure, social infrastructure, and hospitals. My first project with IO was the big Windsor-Essex Parkway [a $1.4 billion project that closed in 2010 and is one of the biggest P3 deals of all time]. I didn't want to stick with one specific type of project, so I've worked on the Markham Stouffville Hospital [a $200 million project that also closed in 2010], and the Air Rail Link Spur [a $129 million extension connecting the existing Air Rail Link to a new passenger station in Pearson Airport], among others. Each of those projects brings specific requirements, although we try to incorporate similar terms from previous deals.

It's fair to say that many of the issues we faced on those different asset classes got wrapped in Pan Am deals. On the village, a lot of time was spent on what the terms would look like before we went to market, especially the schedule. That conversation continued internally with our financial, legal, and technical advisers and centered on how to best derive value from the project.

CC: What mechanisms are in place to ensure that the venues will be ready?

ET: Look, no one wants to be late on this, and we have a great track record. All of our projects have come in on time and on budget. A big reason why is because of our templates. They allow bidders to develop their bids appropriately because they know what we're looking for and what they have to do. It makes the whole process smooth and predictable.

The lenders have a strong role and are a large driver in terms of how we ensure we reach the goals we need to. The lenders' technical adviser will have various opportunities to conduct look-ins to see how everything is proceeding and to make sure there's no chance for default. After all, that would put the lenders at risk. That's a fundamental aspect to P3 projects—the lenders are at the table and have to make sure that, at the end of the day, they're made whole. Effective project management will also be fundamental to making sure things are done correctly. In this case, we've beefed up the province's remedial rights. For instance, there is more oversight and more ability for IO to direct that certain areas of work be accelerated, if necessary. We also have more chances to look in and check on the status of construction. If all else fails, we can step in and take control, subject to the lenders' rights to step in.

CC: Could you describe how IO staffs its projects on the legal side? What is your role now as vice president and how is it different from when you were senior counsel?

ET: Typically, when we staff a project, there is one transaction lawyer handling each procurement [project]. In the case of the Pan Am, one project was the village, one project was the aquatics center package, and so on. Each project has an outside counsel as well. That's the basic structure.

My job, as vice president, is to oversee the legal department and ensure that our client's needs will be met, and that the level of service and advice provided is appropriate. I assist the staff when things come up, like if there's a tricky area of a particular deal or if some of the requirements in our templates need to be changed for a specific deal. I'm no longer in the trenches on a day-to-day basis, but I'll still get my hands dirty.

CC: What kinds of matters are assigned to outside counsel?

ET: We always have outside counsel. After all, we're not staffed appropriately in-house to handle all the work. We have a list of prequalified firms that we do business with—right now the list is approximately 16 law firms—and whenever we call for a procurement, we'll ask those firms if they're interested. The firms have to provide a financial and technical submission that speaks to staffing, previous experience, and pricing. We go through the evaluation process and come out with a ranking.

CC: What's the bidding process, and what's the role of in-house lawyers?

ET: Bidders are subjected to a strict scoring system. There's an open period following the request for proposals [RFP], and the bidders know what we want. Our requirements are laid out in the RFP and bidders are told how many points will be allotted and what categories we score in. At the end of the day, the score is a combination of technical and financial considerations, and the weighting system is stated in the document.

During the open period, we hold a series of confidential meetings where prospective bidders can sit with us and discuss terms, and risk allocation is of obvious importance as it affects pricing. Our role as in-house counsel is to ensure that what the province wants is maintained and is not eroded during the open period. The main risk is schedule risk—completing a project on a specific schedule. That was obviously a factor here, since there's a pretty big date coming up in 2015 [laughs]. Our goal is to make the whole process open and transparent. That's fundamental to what we do.

CC: How important are legal fees in choosing outside counsel?

ET: Legal fees are obviously important to us, as they are to everyone, but they're not the basis by which we choose outside counsel. We're not going to always pick the lowest fee. We need to be satisfied that lawyers are staffed correctly, and their level of expertise will meet the standards we require. We look at experience, technical ability, how deals are staffed, and how services will be provided, in addition to price. As an agent of the crown, we don't want to be seen as if we're overspending. As to fee arrangements, it depends on the project. We often ask for a guaranteed maximum fee. The firms we've dealt with have all been through the process before and will generally know how much it'll cost.

CC: Did you look to what the country did on other big sports events, like the 2010 Olympics, to help guide the planning for the Toronto games?

ET: We looked to previous IO transactions to see what was done. Given our track record, we were in a great position already, so we took IO's previous deals and used them as a base, changing what we needed to in order to fit the deal. Sure, there were lessons learned from other sporting events. However, given that many of those projects use different models, we decided to focus on our own successful model.

Going over-budget and past the deadline have certainly been things that have plagued some other sporting events around the world. Then again, none of them used the IO model.