Nov 14, 2009

Public or private – how the choice for P3s gets made


Did you ever wonder how Partnerships BC justifies using 35 year contracts for public private partnerships rather than borrowing the money publicly and doing things like hospitals and roads as public projects?

Well now you can find out.  PBC has published its methodology on a website.  They have even asked for comments on the methodology, though not in a very public way.  And there is not much time left.  If you want to share your thoughts you have until November 24th.

It is a pretty useful document if for no other reason than it shows the degree to which the game is fixed in favour of P3s.  Let me give you an example.

Risk transfer is one of the big selling points for P3s.  BC’s government says with P3s they can transfer lots of risks on projects. 

This is then compared to traditional procurement where, Partnerships BC says,

Traditional procurement has typically involved construction management (CM) and design bid build (DBB), representing points along a continuum of possible procurement methods where there is very little or no transfer of project-related risk to a private partner.

In other words, PBC assumes it is impossible to transfer risk with traditional procurement even though this has been routinely accomplished in projects in the past.  When it is in its interest Partnerships BC will even admit they can get risk transfer without private investment and a 35 year contract. 

PBC was a consultant for and wrote the value for money report on the Charles Jago Northern Sports Centre.  This centre was built as a Design/Build project without private financing or operation.  Partnerships BC reported that the contractor on the project assumed:

the majority of the risks relating to construction cost overruns in this project, protecting B.C. taxpayers from these potential costs. The early partnering process proved effective in transferring risk to the private partner in this agreement.

Partnerships BC’s assumption in its published methodology that you can’t transfer risk with public procurement is just one of the ways a thumb gets placed on the scales when balancing the choice between public procurement and a P3 with private financing and long term contracts.

Writing in the British Newspaper the Guardian on Friday the 13th, Peter Dixon, the man in charge of England’s largest P3 hospital, raises some good points.  One of them was,

Let’s face it, if the public sector can’t be trusted to procure a sensible building contract, it certainly can’t be relied upon to procure a successful PFI (what the British call a P3) with a 35-year term.

Somehow, that doesn’t get mentioned in the Partnerships BC methodology.