[mr.x]

P3 'success' just a big hoax
BILL TIELEMAN | 24 HRS

I congratulate Governor Schwarzenegger on his commitment to public-private partnership. In B.C., public-private partnerships ... have driven millions in taxpayer benefits.

- Premier Gordon Campbell

California governor Arnold Schwarzenegger may also be Hollywood's fearsome Terminator but when it comes to politics, he's met his match in British Columbia's Gordon Campbell - the Premier Fabricator!

Last week, Schwarzenegger told Californians that, thanks to Campbell, he had the solution to their massive $14-billion budget deficit and $500-billion infrastructure needs - public-private partnerships or P3s like those used in B.C.

But there's only one problem - the Premier Fabricator has pulled the wool over the Terminator's eyes about the alleged success of P3s.

And if Arnie follows Gordo's advice, California voters may say "hasta la vista, baby" on Judgment Day, the next state election.

Here's why: Despite Campbell's boasts, public-private partnerships don't work.

In the vast majority of examples here in B.C. and elsewhere, the costs are higher as the public gets hosed to provide private corporations with substantial profits.

Look at some of B.C.'s own bad examples.

The Abbotsford Hospital and Cancer Centre was to cost $211 million under the original P3 budget and open in 2005 - the current estimated cost is $355 million, a 68 per cent jump, and it will open this year instead.

The William Bennett Bridge in Kelowna - priced at $100 million, now estimated at $170 million, up 70 per cent.

The rapid transit Canada Line to the airport was budgeted at $1.55 billion but will now cost $2 billion, or 29 per cent more.

Or look to Brampton, Ont., which was promised a new P3 hospital with 608 beds for $350 million. It now has a hospital with just 479 beds for $550 million.

The higher costs only makes sense because can any corporation, even the world's largest, borrow money at lower interest rates than a government? Of course not, but these enormous capital projects require significant loans to be completed.

The real reason governments use P3s is to take public infrastructure costs off their books and falsely claim they are balancing budgets and reducing debt. In reality they are borrowing money at higher rates over longer periods of time than if they had done them as public projects.

Schwarzenegger admits P3s could be a problem in California.

"Right now, it's such a new concept for our legislators that they're not there yet 100 per cent," the governor said Nov. 27. "They're concerned about it, they're suspicious about it, what it means, and so I think it will take a bit of time."

Watch out, Terminator! The Premier Fabricator may not be a muscle-bound cyborg, but when it comes to using P3s to separate taxpayers from their money, he knows no equal.



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I think there is a place for P3, if done properly.....but with regards to this article's assessment, it seems as if he's completely ignoring the fact that BC is under a major construction boom. every project in the province is going over budget due to rising costs in materials and diminishing labour as a result of so many projects being built at the same time. even the most efficient P3 can't do anything about that.

[clooless]

All of the budget over-runs would still exist if those projects were completed as public sector projects. Materials costs and labor shortages have driven construction costs through the roof, so arguing that cost over-runs are a characteristic of P3 projects is untenable. While I am not a fan of P3s, I would argue that there appears to be a level of transparency that doesn't exist for government contracts considering that corporations cannot conceal or obscure their balance sheets without incurring criminal charges, something government pencil pushers never seem too concerned about.

There is a good argument to be made that P3s do come at the cost of providing a level of profit for those companies involved in the project. Of course, that has to be balanced with the reality of borrowing costs or deficit spending the government would incur with a strictly public sector project. It seems to be a lot of six of one, half dozen of another with P3s. Either we borrow now and pay interest on that spending over time, or dole out projects to the private sector and buy them back over time with the knowledge that a certain amount of the cost is going to have to include profit.

I think the jury is still out of P3s at the moment.

[officedweller]

P3 'success' just a big hoax
BILL TIELEMAN | 24 HRS

Look at some of B.C.'s own bad examples.

The Abbotsford Hospital and Cancer Centre was to cost $211 million under the original P3 budget and open in 2005 - the current estimated cost is $355 million, a 68 per cent jump, and it will open this year instead.

The William Bennett Bridge in Kelowna - priced at $100 million, now estimated at $170 million, up 70 per cent.

The rapid transit Canada Line to the airport was budgeted at $1.55 billion but will now cost $2 billion, or 29 per cent more.

Or look to Brampton, Ont., which was promised a new P3 hospital with 608 beds for $350 million. It now has a hospital with just 479 beds for $550 million.


The question to ask is:

Did the price increase between contract signing for the P3 contract and completion of the project? For a fixed price contract it would not increase.

Comparing a "budget" or "projection" to a final cost is unrealistic - anyone knows that even without a P3 you can budget for a project, send it out to tender and get back bids that are all over budget - i.e. BEFORE signing a contract in any form.

The question is whether costs were controlled AFTER P3 contract signing (i.e. whether risk of price increases were transferred to the P3 contractor.)

[zivan56]

Fixed price/performance guarantees take care of this.

[Rusty Gull]

Ironically, Miro Cernetig had a different take on P3s in today's Vancouver Sun:

"So, will any of these transit dreams actually happen? After all, we've seen these ambitious master plans before and they've mostly gathered dust. Usually they fail for three reasons: a lack of money, a change in provincial governments and political squabbling among the various municipalities.

This time, though, I'd bet on it being different.

Barring major scandal, the Liberal government seems assured of another term in power and it has been awash in multi-billion-dollar surpluses. The government has essentially tamed TransLink by recreating it in its own image; it's P3 friendly. And the P3 model has worked. Just compare the two latest government megaprojects: the Vancouver convention centre, built by the government and massively over budget, and the Canada Line, run as a P3 that -- so far -- is being built on time and on budget.

[mr.x]

And the P3 model has worked. Just compare the two latest government megaprojects: the Vancouver convention centre, built by the government and massively over budget, and the Canada Line, run as a P3 that -- so far -- is being built on time and on budget.

We'll see about that in 2009....40-metre platforms. -_- if only the Liberal gov't had give the same attitude to the Canada Line as they had to this $14 billion, mostly publicly funded announcement.

Personally, i quite like what we've done with the convention centre. Sure, it cost a lot more than what was originally budgeted...but it's right on our central waterfront for the world to see, and it's going to be there for quite awhile. Hand it over to the private sector to build, and we would be lucky to get a warehouse box...rather than the gleaming glass, grass roof building that is rising up today. The private sector would've made all sorts of cuts to the design of the convention centre....as has InTransitBC done with the Canada Line.

[clooless]

The question to ask is:

Did the price increase between contract signing for the P3 contract and completion of the project? For a fixed price contract it would not increase.

Comparing a "budget" or "projection" to a final cost is unrealistic - anyone knows that even without a P3 you can budget for a project, send it out to tender and get back bids that are all over budget - i.e. BEFORE signing a contract in any form.

The question is whether costs were controlled AFTER P3 contract signing (i.e. whether risk of price increases were transferred to the P3 contractor.)

The question I have is: Are P3s necessarily fixed price? Is that a defining feature of a P3 project? Most public sector projects appear to be of the "cost plus" variety, with bonuses for on-time and under-budget performance to the contracted party. I think any private contractor would have been crazy to go P3 on the convention centre, and I honestly don't know how InTransit has managed to stay under budget with the Canada Line, but they have.

[officedweller]

The question I have is: Are P3s necessarily fixed price? Is that a defining feature of a P3 project? Most public sector projects appear to be of the "cost plus" variety, with bonuses for on-time and under-budget performance to the contracted party. I think any private contractor would have been crazy to go P3 on the convention centre, and I honestly don't know how InTransit has managed to stay under budget with the Canada Line, but they have.

It would depend on what you negotiate into the contract, so they don't need to be fixed price contracts. Ultimately it would depend on the negotiations between the parties. But the biggest benefits of P3s are the certainty of knowing costs up front and offloading risk.

Remember that both the InTransit BC and the RAVExpress bids for the Canada Line came in over budget (RAVExpress much moreso). The final price and scope of the project was negotiated down to a reasonable figure that both parties could agree to in line with available government funding sources (that resulted in the single track termini at Richmond and YVR, deletion of Westminster Station, moving the Richmond terminus north a block, deleting the cruise ship connector walkway, and some other things (but NOT platform length). InTransitBC then bore the brunt of cost increases ($400M) after the negotiations/signed contract (not actually sure if the contract was signed at that point) by bringing in funding from two big pension funds - the Investment Management Corporation of BC (IMBC) and the Caisse de Depot et Placements de Quebec. i.e. InTransitBC's share of the cost ballooned from $300M to $700M. If it wasn't a P3 - that $400M would have been borne by the Province or the project would have been cancelled. So there is a strong enough business case for the Canada Line that investors came on board.

As for the Convention Centre, remember that Concert Properties was slated to build the convention centre at the current Seabus site a number of years ago, but the project failed when the parties could not agree on a P3 style contract. When the project moved to the other side of Canada Place, I don't think there were any takers on a P3 style contract either. Convention Centres are probably too much of a money loser to make it work - the benefits are to the community, not to one particular owner/operator.

[clooless]

Thanks. A very informative post.

I was aware of a lot of the cost reduction decisions on the Canada Line, but I had not heard of the cruise ship connector walkway. What was that about? And I think that Translink came back and requested a reduction in the single tracking through Richmond, which they paid for, whatever their reasons.

[Stingray2004]

P3 'success' just a big hoax
BILL TIELEMAN | 24 HRS

One must also bear in mind that this article was written by Bill Tieleman, who is a well known backroom and hard core New Democrat who was involved as an adviser to the NDP provincial governments during the '90's!

[officedweller]

I was aware of a lot of the cost reduction decisions on the Canada Line, but I had not heard of the cruise ship connector walkway. What was that about? And I think that Translink came back and requested a reduction in the single tracking through Richmond, which they paid for, whatever their reasons.

That was supposed to be a walkway from the Canada Line Waterfront Station directly to Canada Place - presumably slung under the viaduct and then directly into the Cruise Ship Terminal level of Canada Place. I guess it could have just connected to the existing Howe Street exit from Waterfront Station, but that would probably leave tourists lost as the Cruise Ship Terminal would be hard to find from there. Ditto for a connection to Waterfront Centre, as its connection to Canada Place doesn't really lead to the Cruise Ship Terminal either. Anyway, the purposes was to facilitate the movement of the 1000s of cruise passengers from YVR to Canada Place - in theory, deleting it could cost the line 1000s of passengers - but I think cruise lines usually herd passengers into waiting buses anyways.

WRT single tracking, one of the single track sections was near Capstan station - but it was reinstated as double track through a change in the work (or exercise of an option) later in the process (i.e. some funding was found or hindsight kicked in).

[EastVanMark]

One must also bear in mind that this article was written by Bill Tieleman, who is a well known backroom and hard core New Democrat who was involved as an adviser to the NDP provincial governments during the '90's!

Thank you! Finally someone who points out this snake in the grass. (Tieleman is a socialist moron!) People have been crying about this for generations. Decades ago when Premier Bennett sold of electrical rights to American companies in exchange for enormous cash infusions to help construct hydro dams up north, people were all up in arms back then too. However they all changed their tune when the million$ the province made off of them (not to mention the thousands of jobs ands settlements that were created as a result) started flowing in.

As for the Convention Center, can only shake my head when I think back to when Steve Wynn offered to build a way nicer convention center than the current "interesting" design we have now. Lets see; a nicer convention center, world class destination casino, and a 1000 room luxury landmark hotel on the waterfront all for the cost of $1 to the taxpayer. OR, the current monstrosity with a price tag approaching a billion dollars.

[SpongeG]

yeah most people who go on cruises are paying for transfers which would include bus transport to the terminal

i have seen the cruise ships set up check ins in the airport before awaiting the US arrivals

[officedweller]

Like when you fly to Mexico and there are hoards of people waving signs for your transfer to the resort.

[quobobo]

As for the Convention Center, can only shake my head when I think back to when Steve Wynn offered to build a way nicer convention center than the current "interesting" design we have now. Lets see; a nicer convention center, world class destination casino, and a 1000 room luxury landmark hotel on the waterfront all for the cost of $1 to the taxpayer. OR, the current monstrosity with a price tag approaching a billion dollars.

I just looked that up, and it's the most depressing thing I've heard for quite a while. Sad to know that a party running on solid economic principles thinks that the government should be in the business of running convention centres.

[officedweller]

Wasn't it the City of Vancouver that said NO to any form of casino in the City - which killed the project?

https://dspace.ucalgary.ca/bitstream/1880/518/1/agy.pdf

Side note: Remember when the 3rd floor of Infinity (where Chapters is located at Howe & Robson) was to be a casino with slot machines (escalators were installed from the street (next to the alley) directly to the 3rd floor)? But the City prohibited it, the space sat empty for a few years and then Chapters took over the space?

[mr.x]

As for the Convention Center, can only shake my head when I think back to when Steve Wynn offered to build a way nicer convention center than the current "interesting" design we have now. Lets see; a nicer convention center, world class destination casino, and a 1000 room luxury landmark hotel on the waterfront all for the cost of $1 to the taxpayer. OR, the current monstrosity with a price tag approaching a billion dollars.

I heard about that proposal but i never knew it was going to be a WYNN. Holy crap, how the hell did we give that one up???:hell:

I want to cry now.

I've been thinking, the Plaza of Nations site is a pretty good location for a world-class casino and large luxury hotel (MGM? WYNN?). And it would definitely liven up that area.

[mr.x]

Wasn't it the City of Vancouver that said NO to any form of casino in the City - which killed the project?

https://dspace.ucalgary.ca/bitstream/1880/518/1/agy.pdf

Side note: Remember when the 3rd floor of Infinity (where Chapters is located at Howe & Robson) was to be a casino with slot machines (escalators were installed from the street (next to the alley) directly to the 3rd floor)? But the City prohibited it, the space sat empty for a few years and then Chapters took over the space?

O_O it was killed by the same people that think we're still some small quaint fishing village in the middle of nowhere.

[Stingray2004]

As for the Convention Center, can only shake my head when I think back to when Steve Wynn offered to build a way nicer convention center than the current "interesting" design we have now. Lets see; a nicer convention center, world class destination casino, and a 1000 room luxury landmark hotel on the waterfront all for the cost of $1 to the taxpayer. OR, the current monstrosity with a price tag approaching a billion dollars.

Yeah, that was one joint provincial government/private proposal that was very unfortunate to have been defeated by Van City council.

I believe that was during a period when new provincial gaming laws were still in their infancy and local gambling casinos were somehow still frowned upon. Of course, since then, they have proliferated all over Metro Vancouver, including the city itself.

Very unfortunate, as Wynn would have created a high-quality facility in conjunction with a relatively cost-free convention centre expansion.

As for P3's, I believe Province newspaper columnist Mike Smyth summed it up succinctly over a week ago:

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"Still, no one can deny P3s have been a mostly successful business model for the Gordon Campbell government."
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[bugsy]

P3 'success' just a big hoax
BILL TIELEMAN | 24 HRS


LOL. Bill Tieleman needs to put a little more effort into his shilling. It's not up to his regular standards.