Tag Archives: Public Private Partnerships

Election 2014: Shocked… shocked to find there’s been privatization going on here

There is a scene in the movie Casablanca where café owner Rick is surprised to see his friend Captain Renault has sent the police to close down his backroom casino.

“I’m shocked… shocked to find that gambling is going on in there,” says Renault.

With impeccable timing, a young employee approaches Renault. “Your winnings sir,” the employee says. Renault quickly stuffs the proceeds in his pocket.

The beginning of the election has been a little like that.

The media appears to be jumping all over NDP leader Andrea Horwath for her suggestion that the Liberals would expand privatization, including at the TTC.

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Jim – it’s you who loves P3s, not us

The Honourable Jim Flaherty
Minister of Finance
House of Commons Centre Block Building – Room 435-S
Ottawa, Ontario K1A 0A6

Dear Jim  –

We get it. You love public-private partnerships, or as most like to call ‘em, P3s. The sound of big business rushing in and signing great big multi-million and multi-billion dollar contracts with governments to privately finance, build, maintain and sometimes operate hospitals, court houses, schools, bridges, transit systems – why it just makes your ol’ leprechaun heart sing.

Y’er getting all that “dead” corporate money moving, right?

We know these days that investors are nervous of even their own shadow, so governments need to give them sure-fire money makers at the public’s expense. It’ll buck ‘em up.

Paying it all back, well yeah, those are details best left for another day. What the heck – our children use this infrastructure too, so why shouldn’t they be prepared to pay for it over a generation or two? And if they can’t, there are always their children to pay after them. And their children’s children. Hold on, we’re getting a bit dizzy here.

With the over-inflated costs of these projects, we can hear the big profits clinking from here, even with our windows closed. And at the union we have good windows.

Here comes our beef:

On Tuesday you told a panel that the Royal Ottawa Mental Health Centre P3 was “incredibly successful” and that the “unions love it, the nurses love it, the physicians love it, the patients love it.”

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Short Takes: Hillier’s remarkable labour conversion, the battle of the inequality authors and more

It is somewhat astonishing to see PC Randy Hillier vote against a Tory private member’s bill that would free construction giant EllisDon from a 55-year-old obligation to hire only unionized labour. This is the same Randy Hillier who, as the opposition labour critic, drafted a White Paper that advocates opening the door to any individual bargaining unit worker to opt out from paying union dues, taking advantage of the collective agreement without actually contributing to the cost of negotiating it. Recently an Indiana judge overruled such a local State law recognizing that it was unconstitutional to force an entity to provide service without compensation. Before losing his critic portfolio, Hillier complained that the Tories were introducing the bill in the hopes of enhancing party donations from the Liberal-friendly construction giant. EllisDon makes considerable financial contributions to the Tories but even bigger ones to the Liberals. Hillier wrote in an e-mail: “Our opposition will cite this example at every opportunity to demonstrate that we are only fighting unions to make big business richer.” Does he not think the rest of the PC labour platform already reflects that reality? While Hillier may appear to be supporting labour today by voting against the EllisDon bill, keep in mind that such action also brings embarrassment to PC leader Tim Hudak who may be the real reason Hillier has chosen to become a dissident on this issue. TVOntario host Steve Paiken recently blogged that such disloyal behaviour is a case of “what comes around goes around.” Paiken noted Hudak’s own disloyalty to former leader John Tory at a time when the former Rogers executive was seeking a safe by-election seat after losing his chosen constituency in a general election to Kathleen Wynne. According to Paiken, Hudak was said to be quietly urging his fellow MPPs not to give up their seat to allow Tory into the legislature. Now several of Hudak’s MPPs are encouraging a new leadership vote, the PCs having only won one of seven byelections since 2011. One of the MPPs encouraging such a review is Randy Hillier. We don’t know who left the comment on Paiken’s BLOG, but one reader duly noted that Hudak is the proverbial dog that don’t hunt. We’re not sure about the rest of the provincial PCs and their policies either.

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Privately-developed London area mental health hospitals justified by massive “risk” calculations

Evaluating value-for-money on a privatized public infrastructure project has always been a bit of a mugs game. A value-for-money (VFM) assessment is produced every time the province engages the private sector in the building of public infrastructure such as hospitals, court houses, or recreation facilities.

The problem with these assessments is they are always done by an organization that has everything to gain by making the assessment support the privatized option. Given these value for money calculations are usually done after the deals are signed, it would be very embarrassing for government to show otherwise.

These assessments were formerly done directly by Infrastructure Ontario (IO), but given IO’s mandate to engage the private sector in such projects, it was felt they failed the test of unbiased independence. A look at the Auditor General of Ontario’s review of one of their earlier projects – the William Osler Health Centre – would suggest IO got quite creative in justifying a project that looks to have cost taxpayers at least $400 million more than had the government taken a more conventional approach to financing and operating the hospital.

After it was acknowledged that perhaps IO wasn’t independent enough, business consultants like KPMG were asked to do this work. Unfortunately these business consultants were also members of the Canadian Council for Public Private Partnerships, and therefore, also subject to criticism of bias. Now a third-party is engaged to evaluate the “fairness” of these evaluations prepared by KPMG and others. These “fairness monitors” are often themselves involved in the world of public-private partnerships, and therefore far from impartial.

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Kingston votes 96 per cent against hospital privatization

Kingston City Council's Jim Neill urges residents to vote on Princess Street.

Kingston City Council’s Jim Neill urges residents to vote on Princess Street.

It had all the trappings of an election. There were lawn signs, TV commercials, and door-to-door campaigners. The local media solicited the views of both politicians and citizens as everyone scrambled to become informed before the vote.

Saturday Kingston residents got the opportunity to express their preference on whether a proposed new hospital facility in their community was going to be entirely public or be under a 30-year finance and maintenance contract with a private for-profit consortium.

While this election wasn’t conducted by Elections Ontario or Elections Canada, it had the feeling of being the real deal. Citizens were given the opportunity by the Ontario Health Coalition to consider a private or public option even if the result will be non-binding.

After five weeks of public debate, the answer was clear. 96% of the 9,885 votes cast at more than 50 polling stations said yes to keep the new hospital entirely public.

We have had one “official” election on this issue before. In the 2003 provincial election Dalton McGuinty opposed privatizing public infrastructure, campaigning against two “public-private partnership” (P3) hospital deals set up by then Premier Ernie Eves.

Like the results in Kingston, in 2003 the public instinctively bridled against the idea of privatizing key elements of Ontario’s public infrastructure. It helped give McGuinty the first of his two back-to-back majorities. Ontarians were already aware of what a bad deal the province got from privatizing Highway 407. They were worried about the impact of deregulation and privatization of electric power, particularly after a devastating outage in August of that year that took out much of the continental northeast.

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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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Report identifies cost of Ontario P3s: 16 per cent more

Ontario has moved much faster than other provinces in establishing private contracts to design, build, finance, maintain and sometimes operate public infrastructure projects. Despite many warnings, the province appears to have dismissed evidence that shows these kinds of arrangements can be poor value for the public purse.

Now researchers at the University of Toronto have put a price on what the average public-private partnership (P3) costs compared to traditional public procurement – 16 per cent more.

The new research, highlighted in Sunday’s Globe and Mail Report on Business (ROB), looks specifically at 28 Ontario P3 projects worth more than $7 billion. At a 16 per cent premium, that means the projects in the study would have been about $1.12 billion less had the government tendered these contracts under traditional procurement rules. Or about what it would cost to build three Peterborough hospitals.

Most of this additional expense is based on the higher cost of borrowing for the private sector, although about 3 per cent is additional transaction costs, one of the reasons why so many law firms belong to the Canadian Council for Public Private Partnerships.

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