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?
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