The British Columbia government should consider dissolving the agency responsible for public-private partnerships, concludes the author of a new report.
“Demonstrably it’s a process that has failed us,” said Keith Reynolds, the researcher who wrote Public-Private Partnerships in British Columbia: Update 2018 for the Columbia Institute.
While the NDP in opposition criticized using public-private partnerships, or P3s, for public projects, there have been few signals since it won office a year ago of what it intends to do, Reynolds said in an interview.
“They’ve been there a year and they haven’t initiated anything new,” he said, noting the government hasn’t launched any new P3s, but it hasn’t ruled out doing so in the future. “They haven’t made a clear statement.”
Finance Minister Carole James, who is responsible for Partnerships BC, was unavailable for an interview Tuesday.
P3s are contracts between governments and the private sector that may include building, operating and financing roads, hospitals, schools or other public infrastructure, usually over a long period of time. Pioneered in the United Kingdom, they were popular with the former BC Liberal government, which initially required any public project valued at over $20 million to be considered for a P3. The threshold was later raised to $50 million, then to $100 million.
It took Reynolds years of freedom of information requests to get what he needed to compare the $18.2 billion cost of completing 17 projects in B.C. as P3s instead of as public projects. What he found is the province will spend $3.7 billion more on those projects than it needed to over the life of the contracts.
That is not, however, the full extent of the overspending since those 17 projects are only half of the 33 undertaken as P3s since 2003. “While $3.7 billion may seem like an enormous amount of money — approximately $1,800 for every B.C. household — the number underestimates the additional cost B.C. will pay as a result of the P3 projects currently on the books,” Reynolds wrote in the report.
Examples cited in the report include Abbotsford Hospital, which Reynolds’s report argues cost taxpayers $50 million more than it would as a public sector project, and the Canada Line transit line, which resulted in escalating costs and “a limited advantage for the public-private partnership over a public sector comparator.”
Partnerships BC was making assumptions that made P3 projects appear cheaper than public projects, he wrote. “In short, PBC methodology overstates the risk carried by the public sector project because it fails to consider how risk could be shed under traditional procurement. And it understates the risk associated with the P3 because it fails to address contract failure. The value of that assumed risk can be very high.”
Aside from dissolving Partnerships BC, Reynolds’s recommendations included no longer using long-term P3s where a private partner provides financing for a project and is responsible for its management, operations or rehabilitation. “At a minimum, there should be a moratorium on such projects, until the process has been fully reviewed by the auditor general.”
The government should also look at the costs and benefits of buying back existing P3s and should “more rigorously” police whether they are meeting their contract requirements, the report said.
Reynolds warned that even though the conditions under which a project would be considered for a P3 had already been tightened even before the provincial government changed, with the federal government’s interest in the model and the infrastructure bank it is creating, “new P3s remain a possibility in B.C.”
Jurisdictions including the U.K. are re-evaluating P3s and in B.C. the process was questionable from the beginning, Reynolds said on the phone. “If the government hasn’t made up their mind, I hope this [report] helps with their decision.”
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