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Blissful ignorance: Another Conference Board report on P3s

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The Conference Board of Canada has produced another report on P3s, funded by the federal and provincial P3 agencies and the Canadian Council for Public Private Partnerships (CCPPP). Unfortunately and sadly predictably, it's another exercise in largely blissful ignorance promoting P3s, while glossing over or ignoring their major problems.

For instance, there's no mention of the problems with the McGill University Health Centre (MUHC), which led to the CEO of SNC-Lavalin resigning and being charged with fraud, along with former Harper appointee Arthur Porter, the MUHC's director general. There's no mention of the extraordinary costs associated with the Ontario gas plant scandal, which was effectively a P3 and led to the resignation of former Premier Dalton McGuinty. There's no mention of fiascos with P3s in the U.K. (except very brief mention of Metronet) nor of the U.K. Conservative government's review of P3s that led to some reform of their approach.

I don't necessarily fault the authors. To their credit, they interviewed me as background for this report more than 18 months ago and seemed aware of many of the problems with P3s, but in the year and a half of editing since, many of the criticisms have been glossed over or fallen by the wayside as it was prepared for publication.

While the Conference Board is of course independent, I can't help but note that the author of their previous report promoting P3s (see my critique of it: The Conference Board on P3s: Biased and Superficial), which was also funded by the P3 agencies and CCPPP, subsequently went on to a job as director of economics with AECON, which is a major player in the Canadian P3 market. While the report bibliography lists some publications critical of P3s (including by me), there's no mention of the excellent studies critical of P3s by professors John Loxley at University of Manitoba, Matti Siemiatycki at U of T, or Aiden Vining and Anthony Boardman at UBC.

Irrespective of any potential bias, the problem is the Conference Board bases its analysis and conclusions on the highly superficial value-for money (VfM) reports prepared by P3 agencies -- and so it doesn't provide any additional objective information about whether P3s actual provide any real benefit (except to the private companies and financiers involved).

Canadian P3 agencies are notoriously secretive about the actual real costs of P3s and don't reveal any substantial details of their cost analyses or the numbers behind the value-for-money assessments. The only real objective evidence we get is when provincial auditors decide to review a P3 and when they do, they've invariably found they cost more than the publicly financed alternatives, as we found out with the Brampton Hospital, P3 schools in Nova Scotia and New Brunswick, the Confederation Bridge, etc.

As the value-for-money assessments are conducted by the P3 agencies, which have also been charged with promoting P3s, they are little more than superficial and biased window dressing that reaches foregone conclusions. This is nakedly demonstrated by some of the fill-in-the-blank templates that the P3 agencies provide for these value-for-money reports. Unfortunately the same largely applies to reports that uncritically base their analysis on these VfM reports, such as this one from the Conference Board.

In particular the figures for the value-of-risk transfer in value-for-money reports, which are invariably used to justify P3s and can amount to over a hundred million dollars for some projects, are simply not credible. The P3 agencies and the private firms refuse to release the details of these, claiming they are proprietary information, but the only thing they are protecting is the absurd degree of creative accounting they engage in to justify P3s.

Even Larry Blain, the dean of P3s in Canada (former president of Partnerships BC) admitted a decade ago:

"Public sector comparators won't do you much good anyways, because I can make the public sector comparator as bad as we want to, in order to make the private sector look good."

The Conference Board report does suggest that there should be some ex-post evaluations and that it might be helpful to have more detail on the calculations in the value-for-money reports, but these are mild suggestions in face of the lack of relevant information available.

After numerous fiascos with P3s in the U.K., the Conservative government there undertook an in-depth review of their P3s (or PFI Private Finance Initiative, called by some "Pretty Farcical Idea"), and as a result they've scaled back P3s, including restricting use of them for ongoing operations and maintenance. Unfortunately, this Conference Board report reflects the priorities of its funders and recommends going in the opposite direction -- expanding use of P3s for operations and maintenance and for municipal governments. This would be a dire mistake. Ongoing P3 liabilities in the U.K. now amount to £300 billion (almost C$500 billion or $20,000 per family). Canada is now following the U.K. down this path of creating a ticking P3 debt bomb.

P3s may conveniently serve the interests of the companies and investors who profit from them, as well as politicians who like to engage in projects they don't have to pay for, but the public will be stuck with the inflated costs and problems of P3s for decades, which will cut into the funding available for public services.

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