The Livable Blog

In case you missed the Guy Gentner's community meeting on the South Fraser Perimeter Freeway, this is basically what I presented. Because this is for the SFPR, additional info on P3 toll freeways is missing - but maybe that is better left for a separate post.

P3 Freeway Projects - Six Things You Should Know

1) There is No Free Lunch – So-called public private partnerships (P3s) largely exist so that governments can pretend that they are not going into debt to finance the projects, when in fact they are. All bond rating agencies and other financial experts count P3 contract obligations as government debt; the debt may be hidden from the public but it is still debt. The private consortium's ‘contribution’ is basically an expensive loan to the government; it is not a gift.

2) They Cost More – P3s cost more because the private company has to pay more for financing, support a whole separate bureaucracy, and because they need to make a profit. Whole teams of lawyers are needed just to write the convoluted contracts, some of which are as thick as a telephone book. This is a wonderful thing if you are a corporate lawyer, not so good otherwise.

3) The Public Takes the Risks - Privatization proponents claim that P3s transfer risk from the public to the private companies, but if anything goes seriously wrong the companies can allow the P3 to go bankrupt and leave the government to pay to complete the project. In other cases, governments have had to buy out disastrous P3s, as in the case of the Isle of Mann Bridge that cost about £25m to build but ended up costing the public £93m. The public is already taking on one of the riskiest parts of the SFPR, the preload work.

4) Lack of Transparency – The details of P3 privatisation negotiations are usually hidden from the public. Often the public gets swindled with bait-and-switch techniques where the public is told one thing but the real decisions are made behind closed doors. In the case of the Canada line subway, the public and elected representatives were promised a deep-bored tunnel to minimise disruption but disruptive cut and cover construction is being used to save money.

5) Corruption Grows in the Dark - Because there are often only a few bidders in P3s (sometimes only one) and because the negotiations take place in secret, there is a great potential for corruption but it is hard to detect. The BC Rail corruption trial is just one of many examples of alleged corrupt practices related to privatization. Transparency is the best way to avoid corruption, as we are discovering too late with the financial meltdown.

6) They Often Collapse – P3s usually take much longer to negotiate and plan than similar public projects, because the contracts are so complex. P3s often collapse well after the final contracts are signed unless governments are willing to pay more or reduce the scope to keep the corporations happy. Some P3 corporations specialise in underbidding on contracts, and then ‘re-negotiating’ the terms after the fact.

The good side of this is that the next provincial government may be able to cancel Gateway contracts if the consortium cannot fulfill the conditions. Sometimes getting out of a P3 is very expensive for governments. But sometimes they can basically just tell the consortium to piss up a rope, as when BC Hydro canceled the Duke Point gas fired power P3. No politician can honestly say they are locked into a P3 contract unless they have a written legal opinion analysing the contract.

Bonus Information:

The BC Government has Privatized Privatization - Because the provincial government laid off workers in the public sector, they don’t have the staff to do much of the work on the Gateway P3s. Therefore they hired CH2M Hill, the corporation that was so successful in managing Iraqi Reconstruction, to do much of the work for Gateway and manage subcontractors. This same corporation is likely getting paid very well to help write the convoluted P3 contracts for the Port Mann / Highway 1 freeway expansion. In the US, contracted ‘experts’ firms “have proven far more willing to than their counterparts in government to massage and manipulate information to meet the political goals of the administration - after all, their next contract depends on it” (Naomi Klein - The Shock Doctrine p 366). CH2M Hill is one of the companies described as cashing in on disaster capitalism in Naomi Klein's The Shock Doctrine, it is well worth a read.

Resources:

Flawed, Failed Abandoned
http://www.p3watch.ca/pdf%20-%20news/Flawed,%20Failed,%20Abandoned%20-%20Final.pdf

Mexico's Privately Run Highways Prove a Costly Failure – NY Times http://query.nytimes.com/gst/fullpage.html?res=950DE3D8133EF930A1575BC0A961958260&sec=&spon=&pagewanted=all

A scandal of secrecy and profligacy: The Skye bridge contract allowed private firms to fleece the taxpayer - George Monbiot
http://www.guardian.co.uk/politics/2004/dec/28/freedomofinformation.uk

The ABC's of Stopping P3's: A BCHC Campaign Action Kit http://www.bchealthcoalition.ca/content/view/160/30/

P3 Watch http://www.p3watch.ca/

The Real Cost of the Sea-to-Sky P3, Marvin Shaffer, 2006 http://www.policyalternatives.ca/documents/BC_Office_Pubs/bc_2006/sea_to_sky_p3_btn.pdf

Value for Money? Cautionary lessons about P3s from British Columbia, Stuart Murray, 2006, http://www.policyalternatives.ca/documents/BC_Office_Pubs/bc_2006/P3_value_for_money.pdf

High Risk: An Analysis of the Proposed Public-Private Partnership for the Richmond/Airport-Vancouver Rapid Transit Project, Blair Redlin, 2003, http://www.policyalternatives.ca/documents/BC_Office_Pubs/rav.pdf

Secret and Illegal http://www.cupe.bc.ca/files/Secretandillegal.pdf