Public Values

Report supporting public private partnerships (P3s) "biased and superficial"

Privatizing schools in Nova Scotia, New Brunswick not proven cost effective.

Partnerships accused of being way to offload debt by provincesActivists in both Nova Scotia and New Brunswick are up in arms over findings in the Nova Scotia Auditor General's report that the 31 Public Private Partnership (P3) schools in the province have not shown to be cost effective, in fact costing taxpayers millions, while giving private sector partners windfall profits.

"The Auditor General's recent findings about our P3 schools has surely raised a red flag for the provincial government. Jacques Lapointe makes 21 recommendations in his report that speak to the fundamental flaws in the contracts that were signed," says Danny Cavanagh, president of the Canadian Union of Public Employees (CUPE) Nova Scotia.

Calling on the current provincial government to abandon P3s, Cavanagh is concerned that the province and Halifax Regional Municipality might be considering a P3 arrangement for the new Halifax Convention Centre through the federal government's Building Canada Fund. The fund requires that any project looking for more than $50 million in funding must explore the P3 option.

"We are also quite concerned that the Kate Carmichael Lecture scheduled for February 25 here in Halifax features Rod Cameron of Criterion Communications, a P3 advisor to the BC government on the Vancouver Convention Centre. That P3 project was eventually abandoned and built and financed in the traditional manner," he said.

"P3s are not really 'partnerships' at all. They're simply a way for governments to temporarily offload debt from their books. Taxpayers end up paying the real price tag for this as we’ve seen in the case of the P3 schools," Cavanagh added.

Meanwhile, at a recent rally next door in New Brunswick, CUPE members from locals 824 and 1253 burned fake money outside a Moncton school that is under construction to demonstrate how they feel the privatization of schools "sends public funds up in smoke". They too point to the Nova Scotia auditor general's report.

"We want schools that are owned by the taxpayers of New Brunswick, not schools that are owned by multinational corporations and are simply leased back over 30 years," said CUPE New Brunswick president Danny Legere.

Even though New Brunswick announced it was scrapping any future P3 school plans in 2000, the damage was already done. Original contracts rose by a further $32 million after they were signed and a 1998 auditor general report on Moncton's Evergreen Park P3 school cost almost $900,000 more than if it had been publicly financed and owned.

Now the province is saying that privatizing schools will save about $12 million though no numbers to back the claim have been made public.

  "The P3 parade provides excellent returns for investors today because future generations will pay the price through massive and growing liability payments. Somebody is going to have to pay for P3s—and somebody needs to be honest with the public about these growing costs and liabilities."

In January, the Conference Board of Canada published a report entitled Dispelling the Myths. The study supports claims that P3s deliver greater efficiency and "cost certainty". The national CUPE office has issued its own report to dispel many of the claims, called "The Conference Board on P3s: Biased and superficial".

EXCERPTS FROM "The Conference Board on P3s: Biased and superficial" (Full report download below)

The study purports to show Canadian public-private partnerships (P3s) have delivered efficiency gains for the public sector, a high degree of cost certainty, and greater transparency than conventional procurement.

However, this report is astoundingly biased and superficial in its analysis and should not be accorded any degree of credibility.

The report takes "value for money" reports produced by provincial P3 promotion agencies at face value, ignores recent critical reports by auditors general, sets up biased comparisons in its case studies, misinterprets evidence and includes no substantial analysis to support its claims.

Below are some of the problems with this report:

1. Relies on superficial "value for money" reports for efficiency and cost saving claims
The Conference Board claims about efficiency and cost savings rely entirely on value for money (VfM) reports produced by provincial P3 agencies. These VfM reports are highly superficial, and present only summary information that has been manipulated by the agencies.

In contrast, a 2008 KPMG survey of Canadian government executives reported:
"Although 53 percent of Canadian executives surveyed have already implemented some form of partnerships with private sector, and 18 percent intend to do so in the next two years, only two percent believe that greater private-sector involvement will actually help improve public service efficiency."

2. Ignores relevant auditor-general reports critical of P3s
One of Dispelling the Myth's most glaring omissions is that it ignores or dismisses major auditor-general criticisms issued recently in several provinces. This is inexcusable, because auditors general are established to be – and widely respected as – the foremost independent and objective reviewers of public finances. The report selectively profiles P3s that haven't been audited, and ignores relevant criticisms of P3s and the P3 process by auditors general.

3. Highly biased comparisons in its case studies
While the Conference Board study ignores auditors’ reports that criticize P3s, it selectively highlights conventional projects that drawn auditors' criticism. These represent a very small fraction of all conventionally-funded projects.

4. Misinterpretation of evidence
In many other instances, this Conference Board report misinterprets or twists evidence to suit its own biased conclusions. For example:

It would be easy for CUPE to go along with the P3 gravy train: ensure that our members are hired by the P3 through employee successor rights deals, accept the board of director seats that P3 agencies have offered us if we come on board, and encourage our pension funds to actively invest in P3s to obtain high rates of return.

But these high rates of return come at a price for the public and for future taxpayers. The P3 parade provides excellent returns for investors today because future generations will pay the price through massive and growing liability payments. Somebody is going to have to pay for P3s – and somebody needs to be honest with the public about these growing costs and liabilities. Unfortunately the Conference Board's latest report does nothing to shed light on this crucial issue.

Links and sources
  CUPE - The Conference Board on P3s: Biased and superficial

Posted: February 20, 2010

  Public services
  Front lines
  Voices of privatization

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