P3 Pitfalls Aren’t Hard to Find ― So What’s Their Appeal?
May 12, 2017
If you don’t know what a P3 is yet, or why they’re proving to be such a bad idea, now’s the time to acquaint yourself.
The Provincial government recently announced that they’ll be exploring ways to partner with private companies to design, build, finance and maintain three new schools in Winnipeg and one in Brandon. These kinds of public/private partnerships, or P3s, may not be common here in Manitoba, but they’re hardly a new idea. Nova Scotia went down that road nearly twenty years ago. Since then, most other provinces have given P3s a shot ― usually to find the long term results either damning or disappointing or both.
In 1999, Nova Scotia signed a contract to build more than two dozen schools using P3s, and after more than a decade of mismanagement and poor maintenance, their auditor general found the province could’ve saved $52 million if they hadn’t partnered with a private company. The problematic long term leases of these schools continue to plague government decision-makers to this day.
Ten years ago, Alberta built 18 P3 schools, but it didn’t go well and the Conservative government had to scrap the plan. In 2010, their auditor general revealed the government “overstated” the cost savings of using P3 contracts by about $20 million. Meanwhile, a few years ago, Ontario’s auditor general reported that after a decade of P3 projects, from hospitals to light rail lines, provincial taxpayers paid $8 billion more for infrastructure than if the government had successfully built the projects itself. Auditor generals’ reports in Quebec and BC have identified similar questionable cost-savings and other problems with P3 hospitals.
A good homegrown example of the extra costs associated with P3s is the Winnipeg Charleswood Bridge project, which cost tax payers an extra $1.4 million on an $11.6 million contract.
It turns out P3s usually end up costing taxpayers more, and it’s not only because the partnering companies must earn a profit. With P3s, the cost of borrowing is also higher, similar to leasing a car instead of paying for it up front. This can result in poorer quality of construction and materials, and downward pressure on wages. In Nova Scotia, for instance, they found that staff contracted to work on the schools by private developers had not cleared criminal or child abuse checks.
There are other problems, too. Long term P3 contracts lock a project in, often leading to escalating costs and trouble adapting to changing communities. In some instances, Alberta kids are being bused to other neighbourhoods because their school is full and under the P3 contract, they can’t add on. Or the cost of renting the school gym just keeps going up.
In a nutshell, P3s have received failing grades from pretty much every provincial watchdog in the country. Yet some governments are still trying very, very hard to make them work. Why?
I’d say it’s no coincidence that Premier Pallister made his big announcement to an audience of mostly company heads who stand to benefit from P3s. Or that it’s Saskatchewan’s Brad Wall who’s leading the P3 charge these days. Both Premiers are business-friendly leaders who tend to believe the private sector is always more efficient than government, despite the evidence.
So next time P3s come up in conversation, ask the question: Given how much we count on our public infrastructure and supports, shouldn’t experience and evidence trump ideology?