In today’s Globe and Mail article, The hidden price of public-private partnerships, Barrie McKenna highlights the risks of Public-private partnerships (P3s): As McKenna notes, “Disturbing new research highlights some serious flaws in how governments tally the benefits of public-private partnerships versus conventional projects. Too little is known about how these contracts work, who benefits and who pays.”
The new research was a study of 28 Ontario P3 projects worth more than $7-billion. The article that highlights that “University of Toronto assistant professor Matti Siemiatycki and researcher Naeem Farooqi found that public-private partnerships cost an average of 16 per cent more than conventional tendered contracts. That's mainly because private borrowers typically pay higher interest rates than governments. Transaction costs for lawyers and consultants also add about 3 per cent to the final bill.”
McKenna warns P3s are just too risky: “Without putting a fair price on risk, taxpayers will never know whether P3s are any cheaper than building things the conventional way. Set the value too high, and P3s become vehicles for governments to subsidize inflated profits of powerful and well-connected contractors and financial institutions.
He concludes that “Notwithstanding these red flags, Ottawa and the provinces continue to embrace the public-private model. P3 Canada Inc., Ottawa's $1.24-billion P3 fund, has sunk more than $300-million into various projects since the summer.”
PPP Canada became operational in February 2009 and has a total of $1.24 billion to allocate under the P3 Canada Fund. PPP Canada explicitly promotes privatization of public services by only providing funding to P3s in water and wastewater, transportation and communications. In water and wastewater services, PPP Canada has approved funding for the Lac La Biche Biological Nutrient Removal (BNR) Wastewater Treatment Facility in Alberta ($3.8 milllion) and the Evan Thomas Water and Wastewater Plant in Kananaskis Country, Alberta ($9.95 million).
PPP Canada states that the P3 fund was created “to improve the delivery of public infrastructure and provide better value, timeliness and accountability by increasing the effective use of P3.” However, P3s in Canada have been found to be more costly and as the Canadian Centre for Policy Alternatives notes “a string of failures, delays, little transparency, and secretive deals proved these claims wrong.”
This week the House of Commons operations committee will continue hearings on P3s and as McKenna puts it is “stacked with witnesses who like them.”
This week is also the week of final negotiations of the Canada-Europe Comprehensive and Economic Trade Agreement (CETA) this week which could open municipalities in Canada up to European water corporations and put our public water services at risk to privatization.