Sunday, June 27, 2010

Public Private Partnerships: "More costly, less accessible to the public, and of poorer quality than their traditional public sector counterparts."

Economist condemns P3 projects

Loxley sheds light on murky world of public/private partnerships


The Halifax Herald
Copyright 2010

The acronym P3 has almost become a dirty word in some circles. It stands for public-private partnerships but many see this as code for "privatization" of our public services. Michael Moore’s 2007 hard-hitting feature film Sicko, the startling Nova Scotia auditor general revelations about shoddy P3 financing deals, and a spate of Canadian Union of Public Employees studies have all alerted us to the potential dangers such deals pose to our life, health and pocketbook.

The public debate around P3s is so politically radioactive that few have attempted a thorough, research-based analysis of the topic, until now. That is why John Loxley’s new book, Public Service, Private Profits, is such a welcome contribution. Written by one of Canada’s leading critical economists, assisted by Salim Loxley and a team of researchers, it delves deeply into P3s as a mode of delivering services through 11 different case studies.

It’s a detailed, heavily documented book where few stones are left unturned.

Today, it’s hard to imagine that P3s were once all the rage, favoured by governments at every level across Canada. Beginning in the 1990s, governments jumped on the bandwagon looking to proceed with major capital projects at a time of severe budget restraint by entering into ingenious long-term financing schemes and buying into private sector promises of greater cost efficiencies. Promoters of P3s and a new breed of private developers seized upon the idea as a panacea and vocal critics denounced the schemes as essentially "deals with the devil."

Partnership deals popped up in Atlantic Canada virtually everywhere — from schools, bridges, and water treatment plants to social services and hospital catering. In the case of schools, social and hospital services, New Brunswick led the way with its first P3 project, the Evergreen Park School, Moncton, initiated in 1994 and opened in September 1996. While Nova Scotia was slower off the mark, the John Savage Liberal government embarked on P3 school projects with tremendous zeal, initiating or proposing the joint construction and management of some 38 otherwise publicly funded schools.

Most of the joint projects or service agreements initiated are now coming under much closer public scrutiny. Loxley and his research team succeed in amassing a mountain of evidence to prove their essential thesis that P3s are generally a bad deal — more costly to build, less accessible to the public, and of poorer quality than their traditional public sector counterparts.

Loxley provides a tremendously valuable, detailed analysis of the nature of public private partnerships and identified the seven most common types from service operations and maintenance contracts to various forms of design-build-operate schemes. The murky world of P3 economics and financing, as well as all of the potential risks, is rendered understandable. We are also treated to a comprehensive review of federal and provincial policies since the 1990s aimed at advancing such projects.

Those seeking a serious analysis of P3 contracts and schemes will not be disappointed. Loxley and company do provide a debatable comparative analysis of whether "value for money" was achieved, using public sector comparators. The book also offers fascinating detailed studies of 11 case studies drawn from a cross-section of areas: schools, social services, hospitals, hospital services, bridges, roads, water, and waste treatment. The book ends, predictably, with an overview of the case studies arguing that the risks far outweigh any advantages.

Loxley’s book identifies the Frank McKenna’s New Brunswick government as an early champion. The province’s largest P3, the Fredericton-Moncton Toll Highway, is recognized as the model P3, but Loxley blames the tolls for the successor government’s 1999 election defeat.

Nova Scotia’s foray into the construction of P3 schools comes in for scathing criticism. "Nova Scotia," the book states, "actively pursued P3 arrangements without developing a well-articulated policy toward them," and the "hasty approach" led to "a number of questionable deals." Prince Edward Island, the most cautious Maritime province about P3s, gets off lightly.

The senior author, a respected University of Winnipeg economist, has produced a book written from a politically engaged, explicitly left perspective. He and his researchers do not care for P3s in any way, shape or form, and that it is clear on every page.

Yet the author team avoids, for the most part, the overheated rhetoric found in the CUPE studies. Thankfully, we are spared, for once, a repeat of that overworked Greg Malone quotation lambasting P3s as "P12s" dedicated to "plundering our planet." On the other hand, one might have wished that Loxley had paid more attention to Finn Poschmann’s 2003 C.D. Howe Institute study, since it would have demonstrated more openness to conflicting research findings.

Setting aside those mild reservations, Loxley’s Public Service, Private Profits lives up to its publisher’s advance notice. It’s truly a "critical book for critical thinkers."

When it comes to such a hot button issue, it remains virtually impossible to find safe middle ground, especially here in the Maritimes. It is one book that will appeal to both critical readers and public service zealots alike, and that’s a rare accomplishment.

Paul W. Bennett is director of Schoolhouse Consulting, author of The Grammar School (Formac 2009), and operates EduBlog and Eduwatch at

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