We need to look at whole P3 story

Quite often, politicians offer sage advice to the masses ... although perhaps not always in the exact context intended.

Consider NDP MLA Trent Wotherspoon’s wisdom on public-private partnerships in the wake of Ontario Provincial Auditor Bonnie Lysyk’s examination of P3s in that province.

Lysyk, who was Saskatchewan’s auditor before moving east in 2013, said Tuesday that 74 P3 projects may have cost Ontario taxpayers $8 billion more than if they had been done through traditional public financing.

“Nothing is free,” she said. “What this shows is that if the public sector could manage projects successfully, on time and on budget, taxpayer money could be saved.”

One might hope that Premier Brad Wall’s Saskatchewan Party government — which is now applying the P3 model to everything from bypasses to schools — would also heed Lysyk’s concerns.

After all, the Sask. Party government does have a reputation of jumping in without looking. Consider the Smart Meter fiasco. Or how about the decision to pay $40 million to a U.S. consulting firm inexperienced in integrated Canadian public health to remake healthcare delivery.

“It’s only common sense to listen to a report (Lysyk’s) like that,” Wotherspoon said Wednesday.

This is true. But shouldn’t we examine the full scope of this debate? How would the Ontario experience apply here? And what problems might P3s actually solve?

Well, according to Infrastructure Ontario CEO Bert Clark, Lysyk’s “$8 billion number does not tell the whole story” because whether the public sector can manage such projects successfully is always a big “if”.

Clark said Ontario has actually saved $6 billion by using private builders contractually obligated to finish on time and on budget or not get paid. Certainly, the Conference Board of Canada agrees, arguing P3s are an average 13-per-cent cheaper and create a “competitive environment, shorter procurement times and effective risk transfer.”

Wall’s government said it will provide a value-for-money statement with each P3 project and is working with acting Saskatchewan Provincial Auditor Judy Ferguson’s office to ensure transparency is in place — something that hasn’t always been present in public builds, either.

Remember the 1990s mantra from then-health minister Eric Cline that the Regina General Hospital renovations were “on time and on budget”? Well, the cost overruns on the General would have been enough to pay for the removal of the asbestos in the Plains Health Centre — ostensibly, the excuse used for closing Regina’s third hospital.

However, Lysyk noted the failure of the Ontario Liberal government in the P3 process to hold developers to their contractual commitments. Her report cited the Ontario government bailing out Toronto’s MaRS biotech office tower via a $224-million loan after the U.S. developer and partner on the project failed to fill the mostly vacant building.

One might recall Saskatchewan Social Services Minister Donna Harpauer’s suggestion this summer it would have been unfair to hold Deveraux Developments to a $10 million, low-income housing contract after it incurred a $400,000 cost overrun.

Moreover, those supportive of P3s seem to have a far more vested interest in the issue than someone like a provincial auditor who is paid to be objective.

So, if Saskatchewan is going to learn anything from the Ontario auditor’s report, perhaps it’s best to directly talk to Lysyk herself because what she has to offer is actually neatly balanced.

“It all comes down to how much more you spend to get the private sector to deliver on time and on budget,” Lysyk said in an interview Thursday, adding that this generally comes down to private-sector borrowing costs. Lysyk said the “empirical evidence” of more-costly P3s builds is due to private sector interest charges ranging from 3.5 to 19 per cent.

Lysyk also raised concerns that five consortiums now do 80 per cent of the Ontario public-sector work, meaning less truly competitive bidding in that province. Saskatchewan has few developers to start with.

Also, P3s simply postpone debt on the books — less of a problem for Saskatchewan than Ontario, which has much higher per-capita debt, Lysak said. Nevertheless, less transparency is never better.

But, all this said, Lysyk believes P3s may be better in some situations — especially in unique building projects. However, in more common projects like schools, the public sector has already developed solid models she said.

The key for Saskatchewan Builds, Lysyk said, is to carefully study which P3 projects have worked as P3s and which haven’t.

That would seem the sagest advice of all.