Mar 16, 2010

Victoria’s billion dollar P3 decision


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.

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