Debating and Assessing P3s

Week 5

Loxley: Public Services, Private Profits Summarizing his case studies:Three “were planned to be off-book but for one

reason or another have had to be put on the books as capital leases” (173).

“The use of public sector comparators (PSCs) in these projects was erratic at best” (173).

“The impact on labour…was generally negative” (174).

Loxley: Public Services, Private Profits “Transaction costs of the P3 route are often

not accurately or fully recorded” (174). “One of the most disturbing aspects of P3s is

the uniformly abysmal record of accountability and transparency” (175).

Loxley: Public Services, Private Profits “The question of risk transfer is more difficult

to deal with. Most of the projects that involved capital construction came in on time and within budget, the exception among the large projects being Brampton Hospital. The Confederation Bridge and the Moncton Water Treatment Plant appear to have been the most successful in shifting risk onto the private sector” (175).

Loxley: Public Services, Private Profits “Risk transfer in several of the projects was

either insignificant or unsubstantiated. The additional cost of finance of privately funded P3s, which was often very significant, could not, therefore, be justified by risk transfer” (176).

“Our research suggests that the case for P3s is extremely weak” (176).

Loxley: Public Services, Private Profits “At the very least it suggests a need for great

caution, for more careful case studies and for greater transparency in the assumptions and arrangements underlying P3 agreements” (177).

“This is an argument for pressuring governments to abandon P3s altogether, but in the current context this is unlikely to be successful” (177).

“One can expect in future…that some of the more outlandish problems of past P3s will be avoided as much as possible” (180).

Loxley: Public Services, Private Profits Global Economic Crisis Uncertainty surrounding private partners Tight credit markets and rising cost of private debt “growing consensus that infrastructure spending by

governments will increase strongly in the coming years” (181). That may lead to push for more P3s.

However, P3s may be too slow and too complex particularly in this economic context.

Global Economic Crisis

“The global credit crisis led to a major contraction in the availability of private financing, which is a key element of P3 projects. And the financing that remains available is also more costly relative to government bonds. However, the global economic downturn has also led governments in Canada and worldwide to look to infrastructure projects as a source of economic stimulus” (Iacobacci, 2010: 2).

Loxley: Public Services, Private Profits “If P3 financing of infrastructure is to

continue, then there must be clear rules put in place to protect the interests of both workers and other citizens” (183).

Conference Board of Canada

Iacobacci, Mario. 2010. Dispelling the Myths: A Pan-Canadian Assessment of Public-Private Partnerships for Infrastructure Investments.

Report published by the Conference Board of Canada

Conference Board – “About Us”

Board of Directors

Conference Board of Canada

In their article, “Consolidating a Neoliberal Policy Bloc in Canada, 1976 to 1996,” published in Canadian Public Policy, William K. Carroll and Murray Shaw, examine the Conference Board as one of “five Canadian policy groups on the neoliberal right” (196).

“At the heart of the Board's prescription for the Canadian political economy is restructuring organizational, social, and economic policy to enhance the competitiveness and profitability of capital” (Carroll and Shaw, 2001: 198).

Iacobacci, Dispelling the Myths “several P3 agencies and procurement authorities

asked The Conference Board of Canada to undertake an assessment of the benefits and drawbacks of P3s for Canadian infrastructure investments” (2).

“The project funders consist of the Alberta Treasury Board, Infrastructure Ontario, Infrastructure Quebec…Partnerships British Columbia…PPP Canada, and The Canadian Council for Public Private Partnerships” (2).

Iacobacci, Dispelling the Myths “This report focuses on assessing Canadian P3

projects that reached financial close under the direction or guidance of the P3 agencies or the P3 offices located within central agencies or line departments of provincial governments” (5).

“These projects…we refer to as the second wave of P3 projects” (5).

Iacobacci, Dispelling the Myths “We excluded the first wave of Canadian P3 projects—such as

Confederation Bridge, Highway 407 ETR, and the Brampton Civic Hospital—for several reasons” (5).

“First, many of the P3 procurements chosen in the first wave

were initiated at least in part by governments seeking to achieve off-balance-sheet accounting treatment for their infrastructure investments (e.g., Confederation Bridge, Highway 104 Western Alignment), although these accounting treatments have been largely discredited and are now no longer feasible” (5).

Iacobacci, Dispelling the Myths “Second, the P3 transactions concluded during the first

wave were quite different from those undertaken during the second wave of P3s” (5).

“Third, the procurement process for the first wave of Canadian P3s was relatively ad hoc compared with that for the P3 procurements undertaken in the second wave” (5).

Iacobacci, Dispelling the Myths “The procurement environment for the second wave

of P3s has been markedly different: Most of these P3 projects have been managed, co-managed, or guided through the procurement process by a dedicated public sector P3 agency that has experience with multiple P3 transactions and the benefit of a relatively standardized procurement process, both within jurisdictions and increasingly across jurisdictions as well” (6).

The debate continues…

After the release of the report Dispelling the Myths by the Conference Board of Canada, CUPE responded:

The Conference Board on P3s: Biased and Superficial by Toby Sanger, February 2010.

The debate continues…

Background paper published by Library of Parliament on P3s, May 2010.