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April 20, 2009

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Time to come clean on the real costs of P3s

Gordon Campbell’s privatization enforcer, Larry Blain, seems to be getting a little defensive about public private partnerships (P3s). And well he should.

The simple fact that basic financial information about P3s is kept secret from the public should be enough to raise serious questions. But before I deal with that, let me touch on some of Mr. Blain’s points.

First, Mr. Blain should stop trying to sell people on the idea that P3s are not privatization. That ship sailed the day the Premier signed a 900-year contract for BC Rail and tried to tell people it wasn’t being privatized. Most P3s are for 35 years, but the point is the same: when you hand a public service to a company for 35 years, it is privatization.

Second, Mr. Blain tells us that P3s are on time and on budget. Remember the Port Mann Bridge P3? It was “on budget” at $600 million. Then it was “on budget” for $1.5 billion. Then it was “on budget” for $3 billion. We’ve seen the same thing with virtually every other P3. Funny how those goal posts keep moving.

Oh and by the way, when the government finally abandoned the Port Mann Bridge as a P3, Larry Blain admitted that it would save the public $200 million.

As for “on time”, that only happens if you don’t count the time it takes to negotiate the P3 contract. P3s are one of the most complex arrangements a government can undertake. They take years to negotiate.

Mr. Blain also says that, with a P3, risk is transferred to the private sector. Almost all the risk transferred is at the construction stage, and you can do the same thing with traditional procurement. It’s called a contract.

Mr. Blain says that BC’s Auditor General supports P3s, a claim that can charitably be described as inaccurate. One of the first steps this government took was to cut funding for the Auditor General’s Office. One of the results, the AG reported, was that he was unable to do the work he wanted on P3s.

Government members on a Legislative committee specifically refused to fund an independent review of the Canada Line P3 by the Auditor General. Instead, Partnerships BC paid the Auditor General to review evaluations that Partnerships BC had done itself. It wasn’t an audit, it was a review—and yes, the Auditor General said that Partnerships BC’s numbers were plausible. He also said it was “plausible” that the Olympics would break even, so we know how much that is worth.

Interestingly, the AG quit reviewing Partnerships BC’s evaluations after this practice was criticized by B.C.’s best-known forensic accountant, Ron Parks. Mr. Parks called for the Auditor General’s Office to get more funding so that it could be directly involved in these projects. That never happened.

Mr. Blain talks about the work these partnerships bring to B.C. firms, but he ignores the fact that overwhelmingly the contracts go to giant foreign corporations with deep, deep pockets. Yes, B.C. firms get sub-contracts. But as John Knappett of Victoria’s Knappett Projects Inc. has said, “This is my bread and butter. I've built these plants here and on the mainland. But I only do $80 million in business a year. I don't have the staff to do this and nobody else around here does either. We're being dealt out of the major projects."

Finally, there is the issue of secrecy. For two years, CUPE tried through Freedom of Information to get basic financial information about P3s. What are the annual costs of a P3 compared with a traditional project? We asked for the Business Case document Partnerships BC uses to justify using a P3.

We got the information on four projects and asked auditors Ron Parks and Roseanne Terhart to review it. They said P3s cost more than traditional procurement.

But Partnerships BC and the provincial government won’t give us this information on any other projects. They say it is a “Cabinet Secret.”

Readers should ask themselves this: if Larry Blain and the government are so desperate to keep basic financial information about P3s secret, shouldn’t we be worried?

Shouldn’t British Columbians have a right to see how their money is being spent and how it is justified?

Barry O’Neill is president of CUPE BC.

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