BURNABY— The BC Liberal government has been relying on seriously flawed methodology to choose public-private partnerships (P3s) over traditional financing and procurement for major capital projects, a renowned economist says in a damning review of the government’s case for P3s released today.
In August of this year, Partnerships BC—the government agency set up to promote P3s—posted on its website a document titled “Draft Discussion Paper: Methodology for Quantitative Procurement Options Analysis.” Its purpose was to provide an overview of the methodology PBC uses on behalf of its clients to analyze the comparative benefits of P3s and traditional procurement options. PBC has invited public feedback on its methodology until November 24.
The B.C. division of the Canadian Union of Public Employees commissioned Simon Fraser University professor and consulting economist Marvin Shaffer to review the PBC methodology. Dr. Shaffer’s review finds that it completely fails to justify the use of P3s.
“PBC’s methodology ignores the extra costs of P3s as opposed to traditional government financing of new projects—it looks at the benefits but not the cost of P3s,” Shaffer concludes.
“Its methodology is fundamentally flawed, providing no justification for selecting P3s over more traditionally procured, publicly-financed projects.”
Among Shaffer’s key findings were that PBC’s methodology ignores the lower cost of public financing, does not give appropriate consideration to the long-term lease obligations in P3 projects (while overly discounting future costs), and ignores the fact that substantial risk can be transferred in public procurement. It also ignores the fact that the higher cost of projects is pushed on to future generations.
“This methodology—completely biased in favour of the government’s ideological support of public-private partnerships—shortchanges taxpayers with its unfairness,” said CUPE BC president Barry O’Neill.
“If the Campbell government would only release cash flow information on all its P3s, rather than treating this information as a cabinet secret, then perhaps we would know the extent to which our grandchildren will be left on the hook.”
Read the full text of Shaffer’s review.