The county of Prince Edward, Ontario has quietly abandoned plans to privatize a new wastewater treatment plant.
In late March, county council voted to reject bids from both Corix and EPCOR, because of “high capital costs” and “proposed operating costs far exceeding the known operating costs” of public operation.
The decision reinforces CUPE’s argument that privatizing the plant operation would be like flushing money down the toilet.
When the losing P3 bids are unpacked, it becomes clear both Corix and EPCOR saw the long-term operating contract as the money maker, and used the construction part of their bid as the loss-leader. In fact, members of a county committee overseeing the project acknowledged the construction price was less than what was needed – and what that meant – in a public meeting.
Both corporations bid with vastly inflated yearly operating costs. Corix was seeking $1.45 million a year and EPCOR $1.2 million – twice the price of Prince Edward County’s estimated $625,468 for direct public operation.
Now, the plant will be designed and built by the private sector, but will remain in public hands. Tangling with a P3 has cost the county time and money. Each corporation is eligible to receive up to $75,000 just for bidding – an unnecessary transaction cost that adds up when the cost of consultants, field trips and other professional services (which aren’t part of the public record) are factored in.
The plant is now a year behind schedule – a warning county council failed to heed from its own engineer last summer.
The case is further evidence that:
- Privatization through a P3 is significantly more expensive
- Bidders often low-ball, and then hike prices
- P3s create unnecessary delays
- P3s have high transaction costs
- Secrecy prevents a full public analysis of P3s
The county needs a new plant to meet the growing needs of the region, which is a popular tourist and retirement destination. In April 2008, county council opened the door to privatization through a P3, after bids to design and build a new plant came in over the county’s estimated $24 million cost.
The push to privatize quickly ramped up, fuelled by claims that hiring a corporation to design, build and operate the new plant could cut costs in half.
The same group selling the idea that P3s save money convinced the county to hire Vancouver-based P3 consultant Jonathan Huggett. The mayor and two councilors then attended a pro-P3 conference in Canmore, AB, where Huggett was one of the speakers. EPCOR, one of the companies planning to bid on the project, also took the officials on a tour of several Alberta wastewater plants the corporation operates.
CUPE Ontario led a campaign to stop the P3 plans and keep the new plant public.
CUPE pointed to Hamilton’s experience with privatized wastewater operation - and the millions the city has saved by bringing the work back in house – as one of the many reasons the county should stay public.
Several councilors visited Hamilton and learned about the risks of wastewater privatization. (Hamilton’s 2008 report on in-house operations shows high performance and cost savings for the fourth year in a row).
CUPE and its allies made presentations to councilors, and the engineer working for the county warned that a P3 would create delays that could jeopardize federal and provincial funding. Area resident Irene Harris, who represents CUPE on the Ontario Federation of Labour and is the federation’s secretary-treasurer, was very active in the community and made a strong presentation to council.
But in the fall of 2008, the county pushed ahead and asked three pre-selected firms to bid on privatizing the plant. In the end, one firm was disqualified and the other two bids were rejected for being far more expensive than public operation.
Construction on the new plant is expected to begin in June.