Debating and Assessing P3s

1
Debating and Assessing P3s

• Week 5

2
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 labourwas generally negative
  (174).

3
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).

4
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).

5
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).

6
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 futurethat some of the more
  outlandish problems of past P3s will be avoided
  as much as possible (180).

7
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.

8
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).

9
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).

10
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

11
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).

12
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 QuebecPartnerships British
  ColumbiaPPP Canada, and The Canadian Council for
  Public Private Partnerships (2).

13
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 projectswe refer to as the second wave of
  P3 projects (5).

14
Iacobacci, Dispelling the Myths

• We excluded the first wave of Canadian P3
  projectssuch as Confederation Bridge, Highway
  407 ETR, and the Brampton Civic Hospitalfor
  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).

15
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).

16
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).

17
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.

18
The debate continues

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