Ron Parks believes that, generally speaking, P3 deals are money losers.
A forensic accountant in B.C. since 1987, Parks has considerable experience in dealing with corporate and public sector issues. He is best know for his “Bingogate” investigation into the Nanaimo Commonwealth Holding Society in the mid-1990s, involving the skimming of charity funds in B.C. While never implicated, then Premier Mike Harcourt eventually resigned due to the scandal.
Parks is also the co-author of a report called Evaluation of Public Private Partnerships – Costing and Evaluation Methodology.
In that report, which was prepared for the Canadian Union of Public Employees (CUPE), Parks examined four P3 projects – The Canada Line, Sea-To-Sky Highway improvements, the Diamond Ambulatory Care Centre and the Abbotsford Regional Hospital. His findings indicated that overall, those P3 projects were substantially more expensive than the public option.
He also found that P3s can create a general “lack of transparency and public accountability,” because critical documentation and information can be withheld due to private business interests, despite Freedom of Information requests.
Critics of Abbotsford council’s proposed P3 water treatment plant project at Stave Lake have pointed to Parks’ report as evidence of the failings of P3s.
However, Parks discourages that kind of comparison.
“It’s not that applicable – it depends on the nature of the project.”
While he doesn’t want his report used as evidence for or against, he does believe some generalities can be made regarding P3s.
In short, he doesn’t like them.
Parks prefers the standard, design/build model, where governments send projects out to tender and then award a contract based on the bids.
“Government doesn’t build these things anyway. Government doesn’t have a shovel.”
The design/build system has the public sector financing the project and operating it, while the private sector merely designs and builds.
“The only problem with that process is the costs can go spiralling out of control,” he said.
But cost overruns could be written into that contract as well. “Builders can be penalized” if they go over budget, said Parks.
While supporters of P3s point to the benefits received for the money paid, Parks disagrees.
“They talk about the benefit of risk transfer, but it depends on the contract.”
And the higher the risks involved, the higher the amount of money expected by the private sector.
Taking the Abbotsford scenario as an example, Parks said there will be maintenance required, especially on a water project. But what will be considered maintenance in the deal the city signs?
“What happens if there is an earthquake? Who is responsible? Digging tunnels is risky.”
Creating the perfect contract is difficult and adds to the overall cost of P3s. He said there are hidden costs – lawyers and accountant fees – that can add up quickly.
“It’s an accountant’s dream … There is likely no real savings because of these hidden costs.”
Overall, the public system, in Parks’ opinion, is cheaper.
He used the twinning of the Port Mann Bridge as a recent example. Originally, the project started as a P3 endeavour. However, the contractor backed out because it became too expensive and the government was forced to take over.
“Lo and behold, it’s doing fine.”
Parks also takes umbrage with PPP Canada’s grant policies. He said the federal government has pushed for these kind of arrangements because they promote public and private investment. But he doesn’t believe it should be offering up to 25 per cent in funding only for P3s.
“If a grant is available, it should be made available under any arrangement … It’s very controlling.”
While he stressed this is not his personal opinion on the Abbotsford project, Parks said there is a popular philosophical stance that states “utilities projects of this nature should remain in the hands of the public.”