Conservatives rearranging the deck chairs at Public-Private Partnership office
Feds fill top jobs at new P3 crown corporation, but don't expect speedy funding of infrastructure projects to follow.
January 20, 2009 — The federal Conservatives have filled the top jobs at their privatization office, but don't expect speedy funding of infrastructure projects to follow.
While the Canadian economy waits for a much-needed boost from fast-tracked infrastructure projects, the federal government continues to promote 'public private partnerships' through a new crown corporation, PPP Canada Inc.
P3s weren't the quickest or most cost-effective way to deliver public infrastructure and services before the global financial meltdown. Now, with the private sector in the grips of a world-wide credit crunch, the schemes have even less credibility.
SNC-Lavalin chief executive Jacques Lamarre recently said P3s aren't the first choice for stimulating the economy because of their complexity and the private sector's inability to raise cash quickly or cheaply. The head of New Zealand's largest construction firm shares Lamarre's concerns.
Even Partnerships BC has tacitly acknowledged the delay that comes with P3s. The privatization agency has raised the threshold for projects to undergo a mandatory P3 review from $20 million to $50 million, calling the move "part of the government's commitment to accelerate capital infrastructure projects". (The federal government is imposing a lengthy and complex P3 review on any project getting more than $50 million in federal funding).
Delays aren't the only problems with BC P3s. Several high-profile P3s in the province have found themselves on shaky financial footing in recent months, including bridge, highway, rapid transit and hospital projects.
The European banks behind several troubled BC P3s are only afloat because of public bailouts from their home governments. Those same banks face deepening problems with the European P3 market at home.
The chilly financial climate is affecting other Canadian P3s, including several in Winnipeg. The head of the city's construction lobby says difficulty borrowing could mean fewer bidder — which in turn drives up costs.
In New Brunswick, the financial fallout means P3 plans are also being called into question. In neighbouring Quebec, Australian investment firm Babcock & Brown's financial troubles could leave a Montreal P3 hospital with only one consortium bidding on the project, removing competition from the list of private sector 'advantages'. An arm of Babcock & Brown is also involved in building 18 P3 schools in Alberta.
Yet the federal government is resolutely ignoring the writing on the wall for the P3 industry. The announcement of PPP Canada Inc.'s chairperson and CEO comes a week before a federal budget that must get money out the door and shovels in the ground as quickly as possible to kick-start the economy and create new jobs.
The financial industry is hard at work reinventing itself and its role in privatization. An executive from troubled Dexia bank has mused that the federal government should become the lender for infrastructure projects.
This approach leaves the public to shoulder the risk while corporations reap the rewards. A recent article in a business journal predicts that "P3s will increase as more private players seek the protection of government-backed ventures".
Stephen Harper's wrong-headed economic update and parliamentary shutdown have delayed the stimulus Canada's economy desperately needs. Next week's federal budget must not waste any more time. The Conservative government must shelve its P3 plans in favour of streamlined and secure public infrastructure projects.
Links and sources
PPP Canada won't boost economy, by CUPE, January 20 2009
Posted: January 25, 2009
Voices of privatization
Feedback and dialogue
Public Values (PublicValues.ca) is a project of the Golden Lake Institute and the online publication StraightGoods.ca