Jan. 04, 2012 - Issue #846: Year in review

Building schools the P3 way

Private partnerships provide process problems

To P3 or not P3 may no longer be the question when it comes to building schools in Alberta, but that doesn't mean there aren't a lot of questions remaining about the way we do it. Last month the province announced it had short-listed three proponents for the third phase of the Alberta Schools Alternative Procurement initiative, known as ASAP.  Unveiled in 2007, ASAP was described as a made-in-Alberta P3 model. Traditionally, schools are built by school boards with funding provided by the province. With ASAP, a private consortium designs, constructs and finances a bundle of schools, providing structural maintenance and major repairs for 30 years following construction. Day-to-day operations and janitorial functions remain with the school boards as the owners, with full responsibility for the schools transferred at the end of the 30 years.
While the province moves full speed ahead on its private-public partnership model for building schools, concerns continue to be raised about the initiative. Marle Roberts, president of the Canadian Union of Public Employees Alberta region explains that  international experiences show P3 initiatives do not work. "It's clear the government is overestimating the cost-savings," Roberts contended, pointing to a 2007 report commissioned by her organization which, she says, shows that the government's numbers just don't add up.
Authored by Hugh Mackenzie, an economist with the Canadian Centre for Policy Alternatives, "Doing the Math," concedes that the Alberta government's proposal to use a standardized design will result in some cost savings, but argues that these savings do nothing to prove the P3 model is more efficient as the savings would also be realized through a conventional financing model. Moreover, Mackenzie found that financing costs would be 51 percent higher through a P3 structure than if projects were developed by the public sector conventionally. Edmonton Public, for example, would have been able to fund all of the 18 new schools in its capital plan instead of the 13 schools it is getting through ASAP. Similarly, Edmonton Catholic would be able to build six new schools, while P3 financing would allow for just four.

Roberts also questioned the wisdom of partnering with large multinational corporations to build schools while the world remains in a constant state of economic flux. "What risk is the government taking with taxpayers' dollars?” she asks. "What happens if one of these consortiums go under?"
Her question is more than rhetorical. Six months after a September 2008 provincial news release announcing the 18-school package, one of the partners in the P3, Babcock and Brown, the project's banker, collapsed under the weight of $3.8 billion of debt, and in August 2009, Deloitte was appointed liquidator.
In an interview, Alberta Education spokesman Tim Chamberlin called the Brown and Babcock situation an "anamoly" and said that the Alberta school deal was not affected by their financial woes. "The company was able to fulfill our expectations on the build," he stressed. While he declined to "speculate on what might happen in the future" if a P3 partner becomes insolvent, Chamberlin says that the contracts have language that protects Albertans.
In April 2010, the provincial auditor general Merwan Saher scolded the province for a lack of transparency around the project and said the government did a poor job of proving that P3 schools were a good value for taxpayers. "A value-for-money report was not published in accordance with the procurement framework guidance," Saher wrote. "The departments did not demonstrate, in a transparent manner, how value for money was obtained."
While Saher stated the project likely saved taxpayers' dollars (although  he noted the government overstated cost savings of the first phase to the tune of $20 million) and the process used to award the project was fair, he recommended that Alberta Infrastructure and Treasury Board follow their own guidelines and publish a value-for-money report when they sign a P3 contract, as well as clearly outlining to the public where cost savings are found. 
Chamberlin says his department is confident that any deficiencies in the program have been addressed and that Albertans are being well-served. The second phase's 10 schools, three of which are located in Edmonton, are scheduled to open in September 2012. The successful proponent for the third phase of ASAP is also expected to be named at that time. vueweekly.com comments: powered by Disqus