Leaky roof shows P3s have big problems, too

The roof is leaking at the Saskatchewan Hospital in North Battleford, yet both sides of the P3 debate are claiming victory.

Obviously, they can’t both be right.

This division isn’t surprising. Since the concept of public/private partnerships started to gain momentum under the Stephen Harper federal Conservative government and the Brad Wall Saskatchewan Party government more than a decade ago, there hasn’t been much rationality in P3 discussion.

It’s one of those debates that neatly parallels the political chasm in our country and province between the academic/union left who claim there is no way P3s can save taxpayers money, and the business/construction/ conservative right that claims there is nothing but money to be saved if taxpayers aren’t building and running buildings. Both sides have massive vested interests: The union/left trying to preserve good jobs in government maintenance of public buildings; and the business/right seeking lucrative building contracts where they control both construction and maintenance costs.

Complicating matters even further is the reality that large P3 deals means there is naturally going to be wide variation in each one, meaning that it may be impossible for either side to generalize on whether P3s always work or never work.

Also, some projects are just considerably more P3-friendly than others. For instance, the Regina bypass, which went from a $500-million cost to a $1.9-billion cost (partly due to expansion of the project but also due to the $700 million in maintenance fees), would seem a very good example of where the P3 approach may be highly questionable.

That said, mitigating any cost overruns is a big deal. We are sometimes too quick to forget problems of the past, like the renovations at the General Hospital in Regina that went $100 million over budget, notwithstanding former NDP health minister Eric Cline’s claims (33 times in one scrum) of that project being “on time and on budget.”

But while there was reason to be suspicious of the former NDP government, the roof is literally coming down on the Sask. Party’s P3 concept. And to suggest we won’t have to pay a price for it is nonsensical.

According to Sask. Party government Health Minister Jim Reiter, the entire roof of the $407-million Saskatchewan Hospital must now be replaced, because installed insulation panels shrunk and caused leakage this spring.

While “it’s not unusual to have some deficiencies in a project of this size ... this one is much more significant,” Reiter acknowledged.

However, Reiter was quick to point out, “If this was a traditional build ... this would be a huge problem, because you’d likely be into some kind of legal argument over who’s responsible for what cost ... Right now, it’s very clear: The taxpayers aren’t going to be on the hook for any of this.”

This sounds like a fair assessment, but it’s also a bit specious. Reiter acknowledged, “obviously, there will be some disruption,” yet the minister could not put a time frame or price tag on that disruption, nor could he give an assessment of the impact on patients.

The problem was a “manufactured product that failed

... an unforeseen problem,” said Kyle Toffan, CEO of Saskbuilds. But when asked why an untested product was allowed, Toffan explained “the risks of what products are chosen are the risks of the contractor themselves” and that it was seen as “an innovative solution to stay on-time and on-budget.”

Ah, there’s that catchphrase that so haunted the NDP government 20 years ago. And just how many other problems we may have on

P3s because of “products chosen” or other cost-cutting measures to maximize profits may not yet be evident.

Notwithstanding the “significant reconstruction” at North Battleford or previous delays at this facility that cost the contractor $1.25 million a month, Reiter insisted his government’s faith in P3s is not shaken.

However, when asked if construction companies might be “chilled” on future P3s if they find reparation costs too high, the health minister acknowledged: “I suppose that is possible.”

When it comes to avoiding expensive risks in government capital projects, there is no panacea.