Friday, February 2, 2018

P3s and privatization not what they seem

The collapse of British company Carillion - a major contractor in public-private-partnerships (P3s) - could cost thousands their jobs and casts even more doubt on the value of P3s, outsourcing and privatization.
The company crumbled under the weight of about $2.6 billion in debt. While the majority of its workers are in the United Kingdom, Carillion employs 6,000 people in Canada in sectors including oil and gas, health care, aviation, and roads maintenance services for nearly 40,000 kilometres of highways in Ontario and Alberta.
While the company's collapse has put 40,000 jobs at risk worldwide, it has renewed the debate regarding the value, or lack thereof, of P3s. As the New York Times reported, "More broadly, the company’s failure encapsulates a long-brewing debate in Britain over whether outsourcing public services to private enterprises is as effective as it has often been touted, and whether some contractors, like certain banks, have become too big to fail. After all, the government has had to step back in to keep public services that had been managed by Carillion running."
New Brunswick is no stranger to P3s, outsourcing and privatization with governments touting the value of the projects for a number of years. The construction of schools and nursing homes has been done through P3s as well as hiring private companies to administer public services with the most recent example being management of the Extra-Mural program handed over to Medavie.
One of the arguments for proponents of these deals is they will save the public money. However, more often than not, the opposite is true. For example, in 2014 the Ontario Auditor General (AG) found the province spent up to 14 times more outsourcing than if it had just managed its own projects.
Another fallacy is P3s protect governments from risk. In a 2015 report from the Canadian Centre for Policy Alternatives (CCPA) these claims were often found to be exaggerated or not based on much calculation. In relation to Saskatchewan, the report states, "The most recent Saskatchewan Auditor General’s report on P3s shows the Saskatchewan government repeating many of the same mistakes that have been called out by other provincial auditors - such as the use of biased public comparators and the lack of empirical evidence used in risk assessments.”
Throughout the years, New Brunswick's AG has found numerous problems with P3s. Go back to the 1998 audit of Evergreen P3 School and Wackenhut’s Miramichi Youth Facility. In the report, the Department of Finance claimed P3s would provide 15 per cent savings in terms of design and construction and major capital repair and replacement risk would be eliminated. Both those claims were not true.
The report on AG concerns from the CCPA also states, "the Auditor General concluded that the capital cost of the Evergreen School would have been $774,576 less had the province done the work itself and that the Youth Facility cost the Province $700,000 more because of higher financing costs through the private corporation Wackenhut."
The trend continued in 2012, "In her 2012 report, the New Brunswick Auditor General found significant problems with the decision to build two P3 schools in Moncton and Rexton. She pointed to deficiencies in the value for money analysis used and reported that the decision to use a P3 had been made without any rationale. In fact, she found that the government spent $1.7 million more with a P3 than it would have using public procurement."
It seems politicians have wholeheartedly bought into the myths of P3s. A recent AG report detailed how looking to the private sector is being done with little or no analysis. In her report regarding issues surrounding property taxes, a portion focused on Premier Brian Gallant's statement that government would set up an independent agency in the wake of the scandal.
"One would expect the decision to be well supported with comprehensive analysis regarding the impacts, risks, costs, etc.," the report states.
"AGNB found no business case to support the government's intention to create this "independent agency." Although they were informed prior to the announcement, SNB board, CEO and the Executive Director of PAS (Property Assessment Services) were not consulted in the decision making process. There was very little analysis performed prior to the announcement by the Premier."
Given its taxpayers' money being funnelled into P3s and other forms of privatization, the hope is government is doing its due diligence. However, as seen above, when a closer look is taken, the results are often troubling.