Thursday, July 05, 2007

What Lessons Will BC Learn from Alberta's New P3 Schools?

"While*public-private*partnerships are often said to promise "thebest of both worlds," for taxpayers they have come to mean public risk for private profit." ---Andrew Coyne

When Alberta Education Minister Ron Liepert announced on June 14, 2007 that Calgary and Edmonton would be getting 18 new schools between now and 2010 through a public-private partnership (P3) model that will consolidate design, construction and contractors to save on money, he reportedly enthused that it was "like taking a trip to Costco and buying groceries in bulk" (Edmonton Metro News, June 15).

To be fair, there are undoubtedly cost efficiencies to be had from hiring a few architectural firms to come up with designs that can be replicated in a cookie-cutter manner, and the sheer scale of the project is bound to generate some competitive bidding from contractors. The government's model is based upon school projects designed in Australia and Scotland over the past decade , and not the highly criticized P3 schools in Nova Scotia. And not a few parents and school board officials are delighted to hear that badly-needed schools are now going to be built for Alberta's burgeoning cities and (comparatively) youthful population.

This will be a system in which public school boards will own the buildings but will contract with a private company or consortium to build and maintain the schools for an extended period of time (usually about 25 years). This would be congenial to BC Liberals, who have taken a broadly similar approach to the ("non") privatization of BC Rail and BC Hydro. How high will maintenance fees be, once anticipated inflation, supply costs, and profit margins have been factored in? And if the fees are too low, what will the implications be for the quality of the maintenance? On the financial side, higher borrowing costs for private firms will have to passed on in one way or another. One suspects that large savings may be realized in the public accounts up front and in the short term from "buying in bulk", but the potential always exists for those benefits to be outweighed in the longer term. The devil is indeed in the details.

This fits into the larger discussion about P3s. At the CPSA meetings in Saskatoon this past May, I attended a presentation by Dr. Christian Rouillard, the Canada Research Chair in Governance and Public Management at the University of Ottawa, which pointed out that P3s in Canada have all too often resulted in government playing a "risk underwriting" role, allowing private companies to plan, finance , build and/or operate public facilities, often with less transparency and democratic accountability than normally exists in the public sector. "It's public money that’s building it, and yet we can't analyze the contracts. It's a bit outrageous. If we can't get the details, how can we know if the public is getting a good deal?" This kind of research would appear to confirm social theorist Jane Jacobs's assessment that P3s are "monstrous hybrids".

On the other hand, P3s in British Columbia have been getting a good press lately and for a pretty good reason: at least 21 of 23 P3 projects sponsored by Partnerships BC are "on time and on budget", as finance minister Carole Taylor has said. And one reason construction on these projects is going well ( and conspicuously better that the Vancouver Convention Centre, for example) may be that contractors have a stake in them after they are finished. But such an apparent vindication of competition and the profit motive in the short run may simply be a reflection of that fact that P3s are designed to show that sort of success in the short run. The monopoly characteristics and attenuated public accountability don't typically manifest themselves as problems until years down the road. Premier Campbell's announcement in 2006 that all new projects worth over $20 million will be P3s "unless there is compelling reason to do otherwise" may appear to be a reasonable presumption, but actually carries considerable risk of policy failure.

A few concluding observations:

  • It is more than a little ironic that private sector involvement in K-12 education is almost always touted as a much-needed source of diversity in public schools--but here the P3 "cookie cutter" model serves as a potentially mind-numbing source of uniformity. Whatever one school lacks--in terms of materials, gym or library facilities, and so on--they will all lack. And the design and operation of these schools will not reflect the unique characteristics of the local communities in which they are built.

  • It is noteworthy that the BC Liberals stand formally and philosophically opposed to business subsidies, yet uncritically embrace P3s as a policy instrument. Is that a wholly consistent position? The P3 movement has been described as a "capital security" program, creating de facto maintenance monopolies for up to 30 years in exchange for lower short-term costs for government. Is that just business subsidization by another name?

  • A formal system of review and policy evaluation needs to be put in place that will fully take into account the hidden and long-term costs of P3s. Since I take the view that P3s are not essentially good or bad, but are presumptively prone to certain failings, I believe that mechanisms of review which are attentive to those concerns are crucial.

  • Such a sober and balanced review could lead to recommendations to ensure that true competition continues beyond the initial awarding of contracts--and possibly a movement towards a more standard choice between either public provision and/or "contracting out".

  • More hopefully, it could also lead to a redefinition of what genuine public-private partnership ought to mean: continuing openness, competition and public accountability for all facilities and services paid for substantially by the taxpayer.

No comments: