February 16, 2010

Conference Board public-private partnerships report is biased, flawed, labour says

RICHARD GILBERT

staff writer

A recent study by the Conference Board of Canada on public-private partnerships (P3s) is seriously flawed and biased, according to some critics of this procurement method.

“”When I started to read the study, I was hopeful there would be some questions on methodology, but the more I went through it I realized this would not be done,” said Canadian Union of Public Employees (CUPE) BC president Barry O’Neill.

“This study could have been dismissed out of hand by a first year research student, because it is so biased. I don’t understand why we can’t be more objective about this stuff.”

The agencies responsible for implementing P3s in Canada provided the funding for a study by The Conference Board of Canada on the P3 procurement method.

The main conclusion of the study is that P3s are delivering savings in costs and time compared to conventional procurement methods.

However, the study doesn’t undertake any critical analysis of the methodology used by P3 agencies across Canada.

“The report just parrots the statements in the value for money reports, which is ‘P3s cost more, but there are benefits’, ” said Rosanne Terhart, a forensic accountant and certified fraud examiner with Blair Mackay Mynett Valuations Inc.

“This study does not critique the value for money approach or run any numbers.”

The value for money test is the main tool used to determine whether a particular project is suitable for a P3.

According to Terhart, the value for money reports don’t address the cost of finance, which means the public sector is bearing an enormous cost by paying for the financing of P3s over a long period of time.

She argued that these projects could be financed at a much lower rate using the traditional procurement method.

O’Neill said another major flaw in the methodology used by economist Mario Iacobacci is that he doesn’t deal with any failures in using the approach.

The study doesn’t include the Ontario Auditor General’s reports in 2004 and 2008 and it ignores a report by Quebec’s Auditor General in 2009, which were critical of P3s.

“The report has been cherry picked and they have chosen what projects they want to review,” said Peter Marsden, president of CUPE Local 38 in Alberta.

“There would have been a different conclusion if they didn’t do this.”

The 2008 Ontario Auditor General’s report said that Brampton Civic Hospital could have cost the government at least $50 million less if it was not built by using the P3 approach.

He said the province could have saved $200 million if it had financed the building at a rate in line with available borrowing rates.

Construction cost $512 million, but after the 25-year contract, those costs increase to $1.2 billion.

Iacobacci also doesn’t consider a report by forensic accountants Terhart and coworker Ron Parks.

The report, funded by the B.C. division of CUPE, undertakes a cost analysis of the Abbotsford Regional Hospital and Cancer Centre, the Sea-to-Sky Highway Improvement, the Academic Ambulatory Care Centre (Diamond Centre) and the Canada Line.

Using material accessed by CUPE under Freedom of Information provisions, the authors concluded the cost of P3s is substantially more than the traditional procurement method.

Marsden said the study should have looked at P3 school construction in Alberta.

He said part of the reason that four high schools were excluded from the second round of P3s was that they were not being built on time and saving money.

“This completely contradicts the findings of The Conference Board of Canada study,” said Marsden.

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