On March 24th the Victoria area’s Capital Regional District (CRD) is going to make a billion dollar decision.
The province has ordered the CRD to end its controversial practice of pumping raw sewage into the ocean. But it has also ordered the CRD to consider using a public private partnership (P3) for the project.
Regardless of what decision the CRD finally makes, they have done a couple of things right. First, they insisted that much more information be made public than we have ever seen at this point in a P3. Second, they made a serious effort to engage the public.
The CRD made the Business Case for the project public. The Business Case looks at the value of the project itself but it also compares the cost of a P3 with traditional public procurement. Normally, the provincial government and its agencies have declared this information to be a Cabinet Secret. That is what happened in the case of the Vancouver Island Health Authority and the Royal Jubilee Hospital P3.
It is not hard to figure out why the province, with its enthusiasm for P3s, would have liked to have seen this business case kept secret too. First of all the Business Case reported that even using Partnerships BC’s skewed methodology for looking at these things it would be cheaper to do this project publicly than to use a P3.
But the Business Case went much further than that and actually released the raw numbers used. These raw numbers compare the total payments over the 30 years of the contract for both the P3 and traditional procurement. They showed with a public project taxpayers would pay roughly $1.65 billion. Using a P3 would cost $2.36 billion – an additional $700 million. A hybrid project, using a P3 for some of the work would cost about $2.03 billion – still $350 million more than public procurement.
Public consultations have gone much further than other P3s. Hundreds of people have been involved and, as the Victoria Times Colonist reports, they overwhelmingly support the public option. Most interesting has been the response from local businesses who say P3s have the potential to ruin them. Don Cameron, president of the Island Equipment Owners Association, said a P3 model “could very well mean the end of this local industry as we know it.”
Despite all this the CRD Directors are still facing pressure from the province to use a P3. P3 promoters have found a fallback position. If it is just too expensive to have the project financed with a P3, why not just give a private company a contract to manage the operation for 35 years without requiring any investment? This isn’t selling the family silver, it is giving it away.
In the last year three provincial auditors have raised serious concerns about P3s. Hopefully, armed with some real numbers and understanding what the public wants, the CRD Directors will make the right decision. The CRD made two great decisions for transparency and public involvement. They can make it a hat trick if they decide to keep their sewage project public.
Iglika Ivanova // Mar 17, 2010 at 1:59 pm
Thanks for the excellent summary of the case, Keith.
I participated in one of the stakeholder consultations in Victoria and I have to say that I was really encouraged by the level of public engagement sought and the openness of the project. What struck me was that the “hybrid” option, which is sold as the middle ground, seemed to be designed not based on cost or efficiency considerations but based on political expediency. The way the consultant explained it, some municipality mayors were keen on the P3 idea, so the facilities in their area were proposed as P3s, while the facilities in the other areas were left to traditional procurement because of less “entrepreneurial” mayors (that’s the word the consultant used). Hmmm.
Keith Reynolds // Mar 27, 2010 at 7:50 am
Last Wednesday the CRD Committee responsible for the project voted to procure the large part of the project publicly. Staff recommended two smaller parts be procured with a P3. This was amended to allow the possibility of traditional procurement for these two smaller parts. The CRD will vote on the Committee recommendation next Wednesday.
Bernadette Keenan // Mar 28, 2010 at 8:56 pm
$700 million that they need the HST to pay for, as well as the Olympics and all those pavement projects.
Keith Reynolds // Apr 1, 2010 at 9:45 am
The Capital Regional District made its decision on procurement options for the sewage project on March 31. From their press release:
“The business case includes procurement for facilities at McLoughlin Point, Clover Point, Saanich East, an energy centre, conveyance, pumps and outfalls using a traditional approach (design-bid-build, design-build or construction management at risk). The West Shore plant and resource recovery components of the energy centre will be procured using either traditional or an alternative service delivery (design-build-finance-operate or design-build-operate), otherwise known as a P3 approach.”
Is that the end of it? Not really. Minister of Community and Rural Development Bill Bennett wrote the Times Colonist this week saying, “I’m waiting for the final report from the Capital Regional District board and, once we have it, Partnerships B.C. will take a look at the procurement options and decide if a P3 makes sense, as part of the province’s capital standard requirements.”
It is possible the province will ignore the CRD decision and try to force them to use a P3. No surprise here.