“Provincial auditors general have already shown the flaws with P3 privatization schemes. Now one of the biggest supporters of P3s has released a report that raises serious questions about them, too." — James Clancy, NUPGE National President.
Ottawa (12 Jan. 2015) — After reports from provincial auditors general that expressed concerns about P3 privatization schemes, it appears that their defenders are getting nervous. A review of Partnerships BC by the British Columbia Ministry of Finance raised a number of questions about the methods used to justify using P3 privatization schemes.
Partnerships BC is a crown corporation responsible for overseeing the construction of major infrastructure projects. Its mandate is “to promote and implement P3s and other partnership solutions.”
While there have been a number of reports exposing problems with individual schemes, two recent reports raise questions about the whole P3 privatization model.
B.C. Auditor General finds P3 privatization scheme borrowing costs 88 per cent higher
In October, B.C.’s Auditor General reported that the average interest rate for P3 privatization schemes was 88 per cent higher than what the provincial government is paying. With B.C. facing a $2.3 billion debt from P3 privatization schemes, the higher interest rate pushes up the cost to the public.
Numbers manipulated to justify P3 privatization schemes
Then in December 2014, the Ontario Auditor General went much further. In her audit of Ontario P3 schemes, Bonnie Lysyk showed that cost estimates were being manipulated to justify the use of P3 privatization schemes.
She found “no empirical data supporting the key assumptions used by Infrastructure Ontario to assign costs to specific risks” in its value for money assessments. Instead, Lysyk found that some costs were counted twice to make public delivery appear more expensive than it really was. The result is that, instead of saving money, she concluded that P3 privatization schemes meant Ontarians were paying $8 billion more than they should.
BC government report raises serious concerns about P3 privatization schemes
Given the enthusiasm of the B.C. Liberals for P3 privatization schemes, no one would expect a provincial government report to identify serious flaws with them. But that is what has happened.
While the report attempts to put a positive spin on P3s — hardly surprising given the government’s strong support for them — the authors have been forced to acknowledge some serious problems. According to the report, “There is a concern that Partnerships BC is potentially biased towards certain procurement methodologies (P3s) because it is mandated to be both a self-sustaining organization and an advisor to government.”
Among the areas where questions were raised was that the public delivery method compared to P3 privatization schemes in value for money assessments was not one that was used frequently for building public infrastructure. Instead it appeared to have been chosen because it would make public procurement appear more expensive than it really was.
It also acknowledged that there is not a universally recognized process for selecting what discount rate to use in value for money assessments. As a forensic audit of P3 privatization projects in B.C. found, Partnerships BC was using an unrealistically high discount rate to make P3s appear cheaper than public delivery — this is a serious problem.
Privatization industry will continue to defend P3 privatization schemes
Many people will be asking how governments can continue using these schemes especially after one of the biggest supporters of P3 privatization schemes is raising questions.
“Provincial auditors general have already shown the flaws with P3 privatization schemes. Now one of the biggest supporters of P3s has released a report that raises serious questions about them,” said James Clancy, National President of the National Union of Public and General Employees (NUPGE).
The answer is that the companies that profit from P3 privatization schemes will continue to defend them and lobby aggressively for more of them. Together, these companies and their allies have come to form a privatization industry.
Following the release of the Ontario Auditor General’s report the privatization industry vehemently denounced the report.
Fighting privatization with facts
The more information people have about privatization, the harder it gets for the privatization industry to defend it. This is why NUPGE and its Components are pushing for a Five-Point Plan that would require the public be given the full facts about privatization proposals.
“The more people learn about privatization, the less they like it,” said Clancy.
The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 340,000 members. Our mission is to improve the lives of working families and to build a stronger Canada by ensuring our common wealth is used for the common good. NUPGE