Canada has prided itself on innovative use of public-private partnerships to build major infrastructure projects. But critics, including public employee unions, argue in new analyses that P3s cost taxpayers more than government procurement methods.
Canada’s Auditor General (AG) contends that for one of the country’s most prominent P3 projects, the $3.2-billion Champlain Bridge in Montreal, government owner Infrastructure Canada was overly hasty in agreeing to use the approach, making the decision two years before it finished its procurement analysis.
That analysis contained “many flaws favoring the P3 model,” says the AG report, noting that the bridge construction cost was overestimated, which, in turn, allowed the P3 proposal to claim it would generate significant savings. The report says government planning delays added more than $374 million in new costs. More than $229 million went to repairs to the existing bridge, which began deteriorating faster than originally estimated. Another $176 million went to the SNC-Lavalin-led consortium to cover added transportation and other costs from significant load restrictions imposed on the old bridge.
The consortium has said the project will complete by year end, but the report says that target “appears very challenging” even with additional construction resources or different methods. Recent crane operators' strikes may add to the potential of missed completion by Dec. 21, said a June 30 Canadian Press report.
The AG also questions whether the bridge cost will remain “within the original budget.” The consortium filed suit last year, claiming Infrastructure Canada did not give it a heads-up about bridge load limits until well into 2016, more than one year after construction, say Canadian press reports.
In British Columbia, a study of 17 P3 projects found they collectively cost $2.7 billion more than public procurement, according to a report in June by Vancouver think tank Columbia Institute, which says analysis was based on government records for just half of the province’s P3s. “The number underestimates the additional cost BC will pay as a result of P3 projects currently on the books,” says the report.
P3s have also come under fire in Ontario, a major hub for infrastructure projects, with the province’s New Democratic Party pushing to roll back their use. Ontario Auditor General Bonnie Lysyk has released three critical reports on P3s since 2014. “Generally, auditors general have found that, if the numbers hadn’t been manipulated, public procurement would have been cheaper than using P3 privatization schemes,” according to a recent critique by the National Union of Public and General Employees. It cites “questionable assumptions used in value-for-money reports.”
P3 proponents counter by saying critics miss the main point. If government-run infrastructure projects were built on time and on budget, they could very well cost less than P3s, according to Mark Romoff, president and CEO of the Canadian Council for Public-Private Partnerships. That inability to deliver results has been a major factor driving growth of the approach, he notes, citing council statistics that P3 projects finish one year earlier, on average, than those that are government run.
Romoff also defends the process to create the Champlain Bridge P3. While the AG report questions whether its projected costs were too high, he says P3s typically use sophisticated cost-projection modeling systems. There are 237 P3 projects in Canada, he told a Canadian business journal, with those that have reached financial close valued at $128 billion.