Don’t be too easily sold on P3s

In a recent letter to the editor, two provincial ministers, Steve Crocker (Transportation and Works) and Dr. John Haggie (Health and Community Services), weighed in on why public-private partnerships (P3s) are “necessary to ensure people access appropriate services in the current fiscal climate.”

Their joint letter indicates that the value for money (VFM) assessment for both the longterm care facility and acute care hospital in Corner Brook “have been publicly released and are available online” at http://ow.ly/p6c030ecwia. I suspect this is the only opportunity we’ll get to have a say in how these and future projects are awarded and handled.

P3s are what we get when governments get financially desperate; when they totally lack the vision, creativity, commitment and perseverance required to make difficult decisions.

The ministers reference two P3s as examples of successful projects. Two out of countless thousands of P3s projects! And these two projects are, comparatively speaking, relatively small ($108.5 million and $95 million) to be putting forward as prime examples of successful public-private partnerships.

Maybe the ministers could explain to us how these two P3s are seen as “successful” at this early stage in their operation, when one was just completed and opened in April 2016 and the other in March 2015. Both are referred to as design-build-finance-maintain (DBFM), and each has approximately 32 years of project duration remaining. Is there nothing that could negatively impact overall project costs or viability, and hence “success,” over the next 32 years?

These projects are also referred to as award-winning, which sounds great until you find out that the awards have come from the governments who awarded the contracts, as well as the Canadian Council for Public-private Partnerships (of which the consultants and contractors for these projects are members).

A recent letter to the editor indicated that the Saskatchewan auditor general investigated four P3s, including one of the aforementioned “successful projects,” and found that the VFM assessments were “rigged by consultants to favour the P3 model.”

This is most disturbing, particularly in light of online information which casts a harsh light on certain consultants worldwide who have apparently used this model for years to line their pockets and those of their clients, at the expense of the governments involved. Do any of these consultants have a duty of care and accountability to the public? If so, where are the governing bodies that provide their oversight?

The VFM assessment suggested there is a seven per cent reduction in costs that government could realize by following the public-private partnership route. Given the imprecise and judgmental commentary regarding the overall development of this VFM assessment, how comfortable are we in concluding that a P3 is truly providing greater value for money? As comfortable as we were with Muskrat Falls?

The VFM assessment indicates, in section 1.3.3 under “Government Funding,” that “an appropriately sized contribution by (the Government of Newfoundland and Labrador) towards the capital development costs during construction or at substantial completion of the (Corner Brook hospital) project provides significant financial savings for (government) in the project without materially impacting risk transfer.” This contribution turns out to be “50 per cent of capital and development costs.”

Given that the overwhelming attraction of P3s for government is to keep such up-front asset capital costs and related indebtedness (frequently re- flected on the books of the private partner, not government) out of government’s financial accounts, and thereby not negatively impact our credit rating, why should we have to pay half of such capital costs up front? We seem to be getting the worst of both worlds. Are we that easy a sell? Is it because the figures in the VFM assessment do not work out in favour of the P3s unless done this way? If so, this is highly troubling.

It would be advisable to demand that the province’s auditor general become involved in this and any future P3s prior to the awarding of contracts, as opposed to after completion, when it is too late to do anything. Any concerns arising out of the VFM assessment or any other documentation should be open to critical discussion and review. The AG is likely one of a select few equipped to direct such public oversight.

Dave Randell Mount Pearl and Harbour Grace