Peeps will be schooled as everyone’s fave public policy controversy returns
by Paul Dechene
Wow. Regina just finished tearing its hair out over a public-private partnership (P3) infrastructure project — its wastewater treatment plant expansion — and now the Saskatchewan Party says in their throne speech they want to stir up another P3 controversy.
But this time it’s one the whole province can enjoy. Lucky, lucky us!
Seems the provincial government wants to build nine new schools across Saskatchewan. Three of these will go to Regina, four to Saskatoon, one for Martensville and one for Warman — all communities that have seen dramatic growth in recent years. Their schools are full to bursting so the idea of getting some new buildings should make everybody happy.
And then the government has to go and complicate matters by saying that they want to partner with the private sector to get them built.
Great! Here I was hoping with the wastewater P3 referendum over I’d have some time to heal the repetitive strain injury my hands acquired from typing “public-private partnership” over and over this summer. But no! Here we go again!
On the upside, I won’t have to go hunting for Canadian P3 experts because I’ve already got all of them on speed-dial.
Take, for instance, Hugh Mackenzie. He’s an economics and business consultant, a research associate with the Canadian Centre for Policy Alternatives, and in 2007 he wrote a report for the Canadian Union of Public Employees (CUPE) on the Alberta Government’s plan to build schools using the P3 model.
He disagrees with Brad Wall’s claim that the P3 is a way to get these schools built more quickly and for less money.
“It’s generally acknowledged by even the advocates of P3s that the financing costs more for a P3 than it does if the government does it itself.”
The NDP’s education critic, Regina Rosmont MLA Trent Wotherspoon, agrees, saying the NDP has done their homework on P3s and the math just doesn’t check out.
“It’s pretty clear that in almost all cases, P3s cost more, that there’s risk [of] loss of control for communities. And that there’s unneeded delays because of complex negotiations with private sector consortia that are often international,” says Wotherspoon.
But as we saw with the wastewater P3 debate in Regina, the arguments in favour of the P3 will revolve around how much cheaper and more efficient these projects are reported to be. Of course, those arguments hinge on the idea of “risk transfer” — that is, how responsibility for risks like the project coming in over-budget or late is shifted to the private partner, while the public partner only has to pay for the project upon successful completion.
Mackenzie is skeptical that risk transfer works as well as P3 proponents will claim.
“This idea of risk transfer was developed in Britain when people figured out that the government was getting completely screwed by paying a lot more to borrow the money than it could if it borrowed it itself,” says Mackenzie. “This innovation was developed in Britain in the late 1990s. And there’s actually been some really good work done criticizing the idea of risk transfer by a well-known, left-wing organization called ‘the chartered accountants.’
“The [Association of Chartered Certified Accountants] in Britain did an analysis of risk transfer and they came to the conclusion that there was little if any risk actually transferred in these deals. And in fact, P3s create a new risk that didn’t exist before, which is the risk that the operator will simply walk away.”
Mackenzie says that this new risk puts the public sector at a distinct disadvantage.
“You have a negotiation between two parties where one of them has a walk-away option and the other doesn’t,” he says. “And that’s a pretty fundamental issue because what it basically does is it leaves the cost disadvantage standing there naked.”
Of course, in the case of Regina’s wastewater P3, tipping the scales in favour of going with the P3 regardless of its financial merits was a $58 million privatization bribe from the federal government.
There doesn’t seem to be any federal windfall coming in this case.
“None of those federal dollars are on the table for these schools. These are provincial tax dollars,” says Wotherspoon.
What’s more, Wotherspoon argues that possible higher costs may not be the only P3 peril lying in wait for Saskatchewan’s schools. He’s not convinced the Saskatchewan Party government can handle a deal like this, and points to the recent school portables disaster as evidence.
“The government that is saying that they’re going to deliver all these private sector schools is the same government that last year told school boards that they’re going to take over the bundling and bulk purchasing of portable classrooms,” Wotherspoon says. “School boards had always done that themselves and had done a great job of it. And the result of this isn’t good. Not only did the portables come late, they also were the wrong product when they arrived. The recent example of this government bulk buying isn’t a good one.
“You think about the potential long-term ramifications of not getting right the building of the schools that we need; it’s a bit of a risk passing that off to this government to deal with the private sector,” he says.
We attempted to set up an interview with provincial education minister, Don Morgan, but weren’t able to pull that off before going to press. The timing just didn’t work out. We promise to speak to someone with the Province as the P3 schools project goes forward.
THE ALBERTA EXAMPLE
Over the last six years, Alberta has built nearly 30 schools using a P3 procurement model and 12 more should be completed in 2014. And while that province’s government touts P3s as the most cost-effective way to build schools, CCPA researcher Hugh Mackenzie argues they’re overlooking a few things when they make that claim — such as: the way a P3 can inadvertently tie a government’s hands over the course of the project.
“One of the things touted as an advantage by P3 proponents is the government can’t change its mind about what it wants in the middle of the project,” says Mackenzie. “So what happened in Calgary is the government announced these P3 projects and they awarded the contracts, and before the construction was finished the Calgary school board decided they wanted to provide after-school child-care in every junior school in Calgary, including the six P3 schools. Well, the provincial regulation says that child-care centres have to have a self-contained bathroom. There was no way they could add a bathroom to these schools because that would have been an extra.
“So here’s a government perfectly legitimately changing its mind, and they can’t do it.” /Paul Dechene