Monday, December 15, 2014

Monday Morning Links

Miscellaneous material to start your week.

- Barrie McKenna comments on how far too many governments have bought into the P3 myth with our public money:
Governments in Canada have become seduced by the wonders of private-public partnerships – so-called P3s – and blind to their potentially costly flaws. In a typical P3 project, the government pays a private sector group to build, finance and operate everything from transit lines to hospitals, sometimes over decades.

These projects almost always cost significantly more than if governments just put up the money themselves and hired contractors to build the same infrastructure, under conventional contracts. Ontario Auditor-General Bonnie Lysyk found that the province may have overpaid to the tune of $8-billion for 74 major infrastructure projects, dating back nine years.

A key factor is financing. Private-sector companies can’t borrow as cheaply as governments can, adding significantly to the cost, especially on contracts that may run for decades.

Other transaction costs, including lawyers and consultants, are also typically higher with P3s. But the biggest variable is the substantial price tag put on the risk shifted from governments to the private sector. Ontario is convinced the risks of cost overruns, delays, design flaws and the like are substantially lower with public-private partnerships, and it’s willing to pay a premium for that peace of mind.

Unfortunately, the government has struggled to accurately price that risk, relying on the murky and potentially inflated calculations of outside consultants. As Ontario Economic Development Minister Brad Duguid sheepishly admitted: “It is a bit of an art, identifying risk, as much as a science.”

Ontario’s Auditor-General is blunter, suggesting the government’s so-called “value assessments” are little more than junk science.
The allure may have a lot more to do with politics, than sound financial management. These projects give governments the ability to push spending down the road, with ribbon cuttings today and most of the bills due later.

They also allow governments to duck the inconvenient responsibility when things go terribly wrong. No politician, or bureaucrat, wants to have to explain why a high-profile project is late or over budget.

Taxpayers may have a very different perspective on the responsibilities of public officials, and a few good suggestions on what to do with an extra $8-billion.
- And James Bagnall notes that it's also a regular practice for the Cons and other governments to write the rules of supposedly neutral competitions to favour their preferred bidders.

- Jim Tankersley reports on the devaluation of the American worker over the past few decades. And David Climenhaga finds that Jim Prentice's idea of getting input about the needs of workers is to gather seven executives in a closed-door "blue ribbon" panel.

- Allan Maki interviews Ted Clugston about Medicine Hat's success in eradicating homelessness - though the most important lesson to be drawn from the story may be that we shouldn't let naysayers (which Clugston once was) stand in the way of vital public policies. And Cory Weinberg discusses San Francisco's push to make sure that underused public land directed toward meeting housing needs, while David Ball reports on a creative effort to make home ownership more affordable in Calgary.

- Finally, Gerald Caplan explains what he'd tell Stephen Harper if given the chance. But in light of the tiny odds of Harper having interest in a word of it, I suspect we're better off making the same statements to the general public.

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