Rising borrowing costs could hike cost of Alberta's P3 school projects
Economic consultant: will cost at least 50 percent more to build schools than through public sector.
by Richard Gilbert
The cost of building 18 Alberta schools under a public-private partnership (P3) contract could be 50 per cent higher than traditional methods.
An Australian-based investment group was awarded a massive contract by the Alberta government to build schools under a public-private partnership.
Babcock & Brown Public Partnerships Ltd. (BBPP) is an international public infrastructure fund specializing in the development and operations of P3 projects.
The company won a 32-year contract to design, construct, finance and maintain the schools in Calgary and Edmonton with a low bid of $634 million.
The cost of doing the same work through traditional delivery methods was pegged at $752 million.
However, some people disagree with those figures.
An economic consultant hired by the Canadian Union of Public Employees said it will cost at least 50 percent more to build schools through a public-private partnership than through the traditional public sector model.
"The basic underlying reason the cost is greater is because the private operator will pay more to borrow the money to build the project," said Hugh Mackenzie, principal with Toronto-based Hugh Mackenzie and Associates. "The differential between public and private sector borrowing is 200 basis points or two per cent, which translates to a 40 per cent difference in price."
This is considered a conservative estimate . . .
To read further . . .
Privatization vs. Public Values Frame
Efficiency and competition keep costs down / Cost of financing actually lower for government
Links and sources
Rising borrowing costs could hike cost of Alberta's P3 school projects, by Richard Gilbert, Daily Commercial News, October 2, 2008
Posted: October 29, 2008
Voices of privatization
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