Date: Thu, 10 Aug 2006 13:19:00 -0700 (PDT)
Subject: [KCUTS] P3s: Fun with figures: Liberals come clean on true cost of
From: meadow@netidea.com
Fun with figures: Liberals come clean on true cost of contracts
The Vancouver Sun Wed 09 Aug 2006
Page: A3
Section:
News Byline: Vaughn Palmer
Column: Vaughn Palmer
Dateline:
VICTORIA
Source: Vancouver Sun
VICTORIA -- The B.C. Liberals have committed the province to a payout of
almost $4
billion as part of their controversial experiment with public-private
partnerships.
The payments, to private companies like SNC-Lavalin and others, are spread
over
about 30 years depending on the duration of specific contracts to build
and manage
the projects. They apply to four largest of the so-called P3s: the new
hospital in
Abbotsford, the Bill Bennett bridge across Lake Okanagan, the upgraded Sea
to Sky
Highway and the Canada (or RAV) transit line.
The Liberals have promoted these partnerships as a way of minimizing cost to
government and spreading the risk to the private sector. They also
provided a way to
make projects look cheaper. The government usually quotes the cost to the
public in
discounted current dollars, not the cumulative payments for project
management,
spread over many years. For example, the Bill Bennett bridge, named after
the former
premier, was announced as a $100-million project on the eve of the 2005
provincial
election. After the Liberals won reelection, they revised the cost upward
to $144
million, then awarded the project, via a P3, to SNC-Lavalin. The actual
contract
with the Quebec-based multinational binds the province to pay $526 million
in total
over 30 years.
The Abbotsford Regional Hospital and Cancer Centre is usually described as a
$355-million undertaking. The 33-year deal with a private consortium actually
compels the province to make payments of $1,093 million, $1.1 billion in
round
numbers. The project to upgrade the Sea to Sky Highway, often cited at a
"fixed
price" of $600 million, comes with a price tag of almost $1.5 billion in
the longer
view. And the provincial contribution to the Canada (or RAV) transit line,
$235
million in the oft-cited estimate from government, actually works out to $715
million.
Comparative totals: $1.334 billion versus $3.83 billion.
The B.C. Liberals prefer the smaller-by-two-thirds reckoning for obvious
reasons.
But the difference is more than a matter of optics. The cumulative tally
underscores
how the Liberals are signing commitments that extend well beyond their
current term
of office and well beyond any reliable estimate of the province's
financial health
or ability to pay. The independent auditor-general has been pressuring
government to
set out the mounting burden of long-term contracts undertaken on behalf of
the
taxpaying public. It began to do so with the most recent set of financial
statements, released last month by Finance Minister Carole Taylor. For the
first
time, the accounts included a tally of multi-year agreements in excess of $50
million for "the delivery of services and construction of assets."
Only the combined amounts were listed, by year and by sector -- health,
education,
transportation, and so forth. But in response to a request from The
Vancouver Sun,
the ministry provided detail on individual agreements. As well as the P3s,
the list
included conventional contracts for construction of such unpartnered
projects as the
upgraded highway through Kicking Horse Canyon and the Vancouver convention
centre
expansion. Contracts for delivery of services included the deal with the
RCMP to
provide policing services in the province, with BC Ferries for transportation
services, with power companies to supply electricity on a long-term basis.
But some of the service contracts were more unusual. The Liberals have
been hiring
private firms on a long-term basis to provide services formerly delivered
in-house
by government itself. These P3-like agreements are called "alternative
service
delivery" (ASD) arrangements. They include Maximus Inc. managing medicare and
pharmacare for the ministry of health; EDS Advanced Solutions handling
collection
services on contract to the revenue ministry; IBM Global Services
providing work
station support across government; PPH Inc. for vehicle leasing and
management' and
a variety of other long-term contracts for business and support services.
The Liberals insist these arrangements will bring private sector savings
to the
public sector. As with P3s, there are a growing number of them. The
ministry listed
about $1.5 billion worth of alternative service delivery contracts, again
spread
over many years. The finance ministry's all-in tally of "contractual
obligations" is
sizable -- $27 billion, or right up there with the $34 billion provincial
debt.
About 60 per cent of those obligations extend past the next election;
almost 40 per
cent extend to 2012 and beyond. The Liberals, it will be recalled, came
into office
grumbling about the financial burden of the labour contracts signed by the
union-friendly New Democratic Party government. But they haven't hesitated
to lock
the Crown into a no-less-controversial and longer-term set of obligations
with
private companies.
vpalmer@direct.ca
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