Expensive P3 schools fail to make the grade

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

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.