Jan 15, 2012

New Brunswick Auditor General latest to blast public private partnerships


One more provincial Auditor General has come out swinging at public private partnerships (P3s).  Last week New Brunswick’s AG released a report on two P3 schools that had been announced by the NB government in 2008. 

New Brunswick Auditor General Kim MacPherson joins public auditors in Nova Scotia, Quebec, Ontario, and British Columbia who have previously issued reports critical of P3 projects.  With P3 private partners put in all or part of the money for construction and in return get multi decade contracts to manage the projects with guaranteed inflation protection.

MacPherson’s report was critical of the process undertaken by the previous Liberal government.  She declared that a Value for Money report that had claimed the province would save money on the schools was in error.

The project involved schools in the communities of Moncton and Rexton.  The government committed to pay a private partner $5.1 million annually for 30 years to construct the schools and to manage operations, maintenance and rehabilitation.

The New Brunswick auditor found that the province had decided to proceed with a P3 despite the fact there had been no analysis justifying the decision. MacPherson said:

Neither the Department of Supply and Services, which executed the design, nor the Department of Education, which manages the Agreement after the schools open, were officially involved in the decision making process.

The transfer of risk is one of the reasons traditionally given to use public private partnerships.  MacPherson said,

We did not find evidence that the Department compared the total amount of quantified risk with the actual experience from prior school construction projects to assess the reasonableness. In our view, historical cost information is an important tool to validate project costs including estimated risks.

For the bottom line the Auditor General found that instead of saving the province $12.5 million by using a P3, it had actually spent $1.7 more than it would have with traditional procurement.

In British Columbia public private partnerships remain the default model for large provincial projects.  All new hospital projects in particular have been subjected to P3s with their multi-decade contracts.