Carillion failure makes the cost of P3s clear

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Last year the federal government's planned Canadian Infrastructure Bank started to take shape, and as Rosemary Frei pointed out fo rabble.ca, the plan seems to be to allow private sector domination of public sector projects.   The government seems convinced to continue public private partnerships despite so much evidence from provinces of cost overruns and sub-standard delivery. 

Now firms like Fitch and Associates and CD Howe are advocating that Canada unlock value by privatizing portsairports and other assets.  Even though the House of Commons Finance Committee has recommended not privatizing airports for now, the doors have been opened and there will be more and more efforts to privatize Canadian infrastructure.

Cost overruns: 

  • An Ontario Auditor General's report found that 74 P3 projects cost the province $8 billion more than if they had been procured publicly.  Another report showed that hospitals are being gouged by P3 contractors for maintenance work not covered under the original P3 contract. 
  • Carillion, a global privatization corporation, recently started collapsing.  Carillion is involved in 10 P3s across Canada, primarily in hospitals in Ontario, Saskatchewan and the Northwest Territories. Two hospitals are still in development.Carillion was the lead company in the consortium that built the P3 Brampton Civic Hospital, a project the Ontario Auditor General found to have cost $200 million more than if the province had borrowed to build it publicly. 

Efficiency: 

  • In this great article, JOC.com, a shipping industry journal, reports that shipping companies feel that the drive to privatize ports will not increase efficiency.  'It is more about purse strings and politics'

Changing ownership:

  • Ownership stakes in P3s can change hands resulting in a rotating door of corporate involvement that destabilizes public services. In this case, Carillion is going under and its equity stakes and facilities maintenance contracts will likely be auctioned off. In Canada, over 20 equity sales of P3s have taken place with at least seven ending up owned by corporations in tax havens. In one case, equity in the Vancouver General Hospital Diamond Centre P3 hospital has changed hands twice since 2007 and is now owned by an investment company located in Guernsey, a tax haven depriving the BC government of needed tax revenue.
  • Each time these equity stakes change hands, big profit is made from our public infrastructure. Research in Europe showed the average annual rate of return on P3 equity sales from 1998-2016 was a staggering 28.7 per cent. It’s clear who has the losing hand in this P3 equity poker game: the public.

Here is a great article critiquing the Canadian Infrastructre Bank and offering alternatives.

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