Tag Archives: Metrolinx

P3s for Dummies: Part III — Fool us once, twice, fool us some more

Ontario has been leading the country in pursuing private deals to finance, develop and maintain public infrastructure projects, including a significant number of major hospital redevelopments.

Last week we looked at how public-private partnerships turn projects away from the public interest. In Part I we looked at what P3s are and how the concept of risk has been used to overcome project costs that have been much higher than traditional public procurement. And along the way we poked some fun at the arguments put forward by the business community looking to get rich at our expense.

This week we debunk the myth put forward by the Conference Board of Canada that all is now well in the P3 world.

The Conference Board of Canada has suggested that Canadian P3s fall into two categories – Phase I, which we could summarize as the “we didn’t know what the heck we were doing and made a real mess of things but continued to deny it until the evidence was overwhelming” phase, and Phase II, post 2004, in which provincial and federal governments set up P3 infrastructure offices that, according to the Conference Board, now know what they are doing. Phew! Nothing to see here! Everybody go back to watching hockey.

Of course, when post 2004 P3s go off the rails, they blame it on municipalities, which apparently still don’t know what they are doing. P3s are still a great idea, they say. They just need more, well… rules. After all, this whole idea is not complicated enough already.

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Expensive systems — privatization in other public sectors should be a warning for health care

Health care is not the only public service to experience reckless ventures into private delivery of key components.

The Auditor General of Ontario (AG) raises numerous questions about costly private delivery of public services in his recent review of Metrolinx, the regional transportation planning body in the Greater Toronto Area.

Among the findings in Jim McCarter’s 2012 annual report –

  • Metrolinx’s Presto Card is among the most expensive transit fare card systems in the world, yet it does little more than substitute as a fare purse.
  • The airport-downtown rail link was delayed after the private partner in the public-private partnership (P3) had to pull out due to questions raised by its financial backers over optimistic ridership projections. The projected high cost of fares is anticipated to weaken ridership. The P3 was eventually abandoned.
  • Cost have dramatically increased on the Union Station revitalization project – the construction being handled by Vanbots, a division of Carillion Construction, one of the consortium partners presently bidding on the new Kingston hospital to replace that city’s aging mental health facilities.
  • Metrolinx is using the P3 model for a three kilometre spur line that connects to the GO line from the airport. The auditor notes that the P3 option was $22 million more expensive, justified by the now familiar “risk” calculation of $42 million on a $128.6 million project. Like the William Osler Hospital, the auditor raises questions about the methodology used to calculate such risk and justify the more costly option.
  • The consulting firm used to evaluate the risk on the spur line project won the bid to provide engineering and technical advisory services to support planning and procurement for the project.

By now this mess is all beginning to sound very familiar.  

Dalton McGuinty initially ran an election in opposition to Tory plans to build two P3 hospitals in Brampton and Ottawa. In power, he not only signed off on those deals with only superficial changes, but he embarked on more than 30 more such projects in the hospital sector alone. Ontario now represents more than half of all P3 projects in Canada.

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