Ex­pen­sive P3 schools fail to make the grade

Ev­i­dence shows they cost more than tra­di­tional mod­els, Tom Gra­ham sAys.

Regina Leader-Post - - CITY+REGION - Tom Gra­ham is pres­i­dent of CUPE Saskatchewan. CUPE rep­re­sents 30,000 pub­lic sec­tor work­ers in the prov­ince, in­clud­ing sup­port staff at the new P3 schools.

If we could build five schools for the cost of four, any re­spon­si­ble govern­ment would do it.

That is ex­actly what the Man­i­toba govern­ment de­cided in its 2018 bud­get, which re­jected the pub­licpri­vate part­ner­ship (P3) model to build schools. Man­i­toba re­viewed the ev­i­dence and found that for the price of $100 mil­lion, it could build five schools the tra­di­tional way, in­stead of four P3 schools.

It makes one won­der why our fi­nan­cially chal­lenged Saskatchewan Party govern­ment chose the more ex­pen­sive P3 model to build and main­tain 18 schools and other P3 projects.

Our govern­ment keeps say­ing that P3 schools save money, but where is the ev­i­dence? We are pay­ing $635 mil­lion for 18 P3 schools, or an av­er­age $35.3 mil­lion per school. There are, on av­er­age, 616.7 stu­dents per P3 school.

Man­i­toba will build five schools for $100 mil­lion, or an av­er­age of $20 mil­lion per school. The five schools will have the ca­pac­ity for 3,300 stu­dents, or an av­er­age of 660 stu­dents per school.

Our govern­ment will re­tort that the com­par­i­son above is not ac­cu­rate be­cause the $100 mil­lion for Man­i­toba schools only in­cludes con­struc­tion costs and not the 30-year main­te­nance costs of the P3 schools in Saskatchewan. We would in­clude the main­te­nance costs, but the govern­ment has not dis­closed them: all the fi­nan­cial de­tails of the life cy­cle sched­ule and ser­vice pay­ments to the pri­vate com­pa­nies are redacted in the P3 school con­tracts.

What we do know is that we are pay­ing a hefty pre­mium for main­te­nance con­tracts for brand-new schools which, if built prop­erly, should not need that much main­te­nance or re­pair. Let’s hope the pri­vate main­te­nance com­pa­nies do not charge $409 to re­place a soap dis­penser as hap­pened at a P3 hos­pi­tal in Mon­treal.

There are a few other costs spe­cific to P3 schools that we should men­tion: the higher in­ter­est pay­ments for the pri­vate fi­nanc­ing of the school con­struc­tion, the higher con­sul­tant costs for re­ports, and the $500,000 given to each of the com­pa­nies that bid but did not get the con­tract.

Even the KPMG Value for Money re­port on the Saskatchewan P3 schools shows the tra­di­tional build model is less ex­pen­sive on all ac­counts (con­struc­tion, pro­cure­ment, fi­nanc­ing). The one ex­cep­tion is KPMG’s ad­di­tion of $150.4 mil­lion in “re­tained risks” slapped onto the cost of the tra­di­tional build model. Th­ese “risks” are not ac­tual costs in­curred, but rather an imag­i­nary num­ber pulled out of the air. It is only be­cause of th­ese the­o­ret­i­cal risks the govern­ment claims the P3 model is cheaper.

We can look to other prov­inces for more ev­i­dence P3s are costlier. In 2014, the Con­ser­va­tive govern­ment of Al­berta can­celled plans to build 14 schools with the P3 model to save $14 mil­lion. The New Brunswick au­di­tor gen­eral found two P3 schools cost $1.7 mil­lion more than pub­licly de­liv­ered and main­tained schools. In 2014, On­tario’s au­di­tor gen­eral re­viewed 74 P3 projects and found there was “no em­pir­i­cal data” to sup­port the P3 model, and that they cost $8 bil­lion more than if they had been pub­licly fi­nanced and op­er­ated.

All ev­i­dence shows P3s are more ex­pen­sive, less ac­count­able and trans­par­ent than tra­di­tional ways of build­ing pub­lic in­fra­struc­ture. In fact, our govern­ment is on the hook for about $5 bil­lion in pay­ments to P3 com­pa­nies over the next 30 years. Pri­vate com­pa­nies’ prof­its are guar­an­teed, but there is less money for im­por­tant pub­lic ser­vices.

The Sask. Party would be wise to aban­don this model, save money in the long run and in­vest more in pub­lic ser­vices.


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