” Looking beyond…to future P3 projects, there is a need for stronger public accountability requirements.” ~ Office of the Auditor General of B.C.

No kidding.

With the recent combination of distractions revolving around strata president duties, my sons highschool graduation and my garden, a very important report I have waited on nearly escaped my attention. I say nearly, because thanks to a wonderful reader who knows I have a fetish for such things, I spent the greater part of my free time yesterday evening mulling over the report, and not watching the Canucks take on game 5.

The office of the Auditor General of BC finally issued a long-awaited report on the Academic Ambulatory Care Centre at Vancouver General Hospital – one of the earlier P3 projects completed in BC. 

There are a number of findings as well as a number of key recommendations the Auditor General makes that I find alarming and should be brought to the attention of all British Columbians and yet again, there has been nothing in the press that I can find about this report.  Although this project was started in the early part of this decade – it was not opened until 2oo6-in my experience researching the P3 projects built since then, nothing has changed.

Among the Auditors key findings:

Overall, we concluded that not all of the key value-for-money goals of the Academic Ambulatory Care Centre P3 project were met:

* Construction was completed on time, but the final capitalized value of $123 million was 29.5% higher than the estimated capital cost of $95 million disclosed in the Project Report.

 *The use of a P3 contract was not effective in controlling VCHA initiated design and scope changes.

 * The performance-based payment structure for operations and maintenance of the facility does not represent good practice.

 * Facility users are generally satisfied with the building and services provided. However, there has been no public reporting on the ongoing results of the project since the Project Report was released in 2004.

 * The P3 agreement is flexible in allowing for change. However,VCHA was unable to provide us with documentation to support the analysis and approvals for key contract amendments.

Stunning findings to some, but not to myself and others who have called for similar audits on more recent P3 projects such as the Sea to Sky highway, the William R. Bennett Bridge and the Canada Line.

The government has repeatedly been shown to be incorrect in the biased and incorrect Value for Cost reports issued at completion of a P3 project.  They have repeatedly been shown to be in a conflict of interest with regards to Partnership BC being in charge of promoting and pursuing P3’s for the government, but also evaluating them.

This report supports my calls for an independent body being charged with overseeing the public’s interest in P3 projects being considered by any government body, and I am not alone in that request.

I spoke with Erik Andersen, who is a founding director and economic advisor of the BC First Party, about this report last night, and he had this to say:

After more than ten years of gaining an appreciation of how P3 projects have turned out in Canada (see John Loxley’s “Public Service: Private Profits“) one would think our government would be way up the learning curve on this process.Sadly that seems not so.

BC Auditor General’s audit of this P3 project found that instead of it costing $95 million, it ended up at $123 million. He gives two main reasons for the over-run. $11 million occurred because of less than adequate pre-construction preparations and $17 million because games were played with the selection of discount rates in order to give favorable pre-contract status to the P3 option.

Professor Loxley recounts a generous collection of these kind of games picked up by other Canadian Auditor Generals. It seems our government has a decided bias to P3s no matter the evidence available from other jurisdictions that these are not crafted and executed in the publics’ best interest.”

Erik has been a valuable colleague and resource for my work, as our interests and concerns are remarkably similar in nature. While I have mainly concentrated on the governments many P3 infrastructure projects, Erik has led the charge for a full reveal on BC Hydro’s structural changes and operations, which he believes are designed to bankrupt the crown corporation to sell it off to private interests, not unlike BC Rail. Not just theory, he supports this belief with comprehensive studies and analysis.

I can say with confidence that I look forward to more revealing reports to come forward as this report indicated the office of the Auditor General will be looking at other P3 projects in the future. Considering the repeated examples of P3 projects being conducted to preserve and protect the interests of the private corporate partner rather than taxpayers dollar, I could not more strongly urge all British Columbians to take an interest in this report, and P3 projects in general.

You can read the entire report HERE: OAGBC-P3-Report-May-2011[1] 

* past stories on several P3 projects can be found on the Best Of button at the top of this page.

20 thoughts on “” Looking beyond…to future P3 projects, there is a need for stronger public accountability requirements.” ~ Office of the Auditor General of B.C.

  1. cherylb

    Yup. Cost us 28 million dollars more as a P3 and performance based pay structure for operations and maintenance for 30 years. Such a deal. The BC Lieberals are such sharp financial managers! How on earth did we ever survive all these years without them?

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  2. RonS

    Once again this LIbERal government is shown to be corrupt to the core. Not only are they playing with taxpayers money they’re virtually giving it away. Giving it away with out a care in the world. They know the media won’t say or do anything. We the taxpayers are the victims in this revolving door of deceit and corruption. I hope the LIbERalS are booted from office and the new government pursues them like a bloodhound on the scent of the criminals they are!

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  3. John's Aghast

    You’ve gotta vote ABC this next election! Don’t like the NDP? Then vote Conservative. The BC Rail stench will NOT be addressed by Christy’s Lieberals. Kevin Falcon assured us several years ago that P3’s could not over-run “because they were fixed price Contracts”. Or maybe he said “Lump Sum Contracts” Yeah, sure. Whatever.
    They may have been fixed for a determinate amount of work, but things have a way of changing as the work progresses. And then the price changes. Does it ever go down? Not that anyone can recall!
    Just remember, Anyone But Christy on election day. Then perhaps we may find an answer to some perplexing questions.

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  4. Roger Cooper

    Hidden in all this is the initial assumption that the $95 million was a reasonable estimate for the facility, but where are the competitive bids or independent estimates with which to test that assumption? That 29.5% over-run rests on a very shaky number to begin with.

    That is the underlying problem with P3s. They provide no incentive at all to find the best value for taxpayers. Which makes this audit and value-for-money exercise fundamentally flawed.

    Bring back real competition and sealed bids, and get rid of the partnership nonsense.

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  5. Linda

    What really gets me is, thousands of BC people will never use the sea to sky highway, nor, the Kelowna Bennett bridge. However, the tax payers will foot the bill. I had thought there were to be tolls on, both of those projects? Or am I mistaken?

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    1. Laila

      Shadow tolls are on both projects Linda, the province pays for every vehicle that uses either project – both I have written about. Neither project was transparent and I broke the shadow toll story on the sea to sky, caught the government in several lies, which was subsequently covered by Mark Hume in the Globe and Mail. Partial proceeds from the sale of BC Rail were used to fund the first, non-P3 portion of the sea to sky, which was revealed by a report in an overseas infrastructure journal that I discovered. All links are on the Best Of page to the Sea to Sky Shadow toll series.

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  6. Only a fool could believe that 3 P’s result in a better product or a lowerprice to the public.
    The 3P model is inherently flawed. There is no way a project can be built better and cheaper once the twin factors of profit and commercial interest rates are factored in. Something has to give- whether it is lesser quality material is used, relaxed safety standards for the worker or the opportunity to use some “changed condition” clause to escalate the cost the public will always ended up with less value for their money. I saw firsthand how a company will shortchange the BC public to save money on a project. I left the project because the standards were not even close to the standards the public expects. I will not drive on the bridge I helped build.

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  7. Robertus

    The P3 model is a great model for change. Becoming a parapaliegic is a change too, just sub-optimal. BC Rail was portioned off and assests sold while the Crown (us) got stuck with the bill. This will happen to BC Hydro. Whether under Madame Premier or Gordo, both are working to a script. Nor would it have mattered if Falconer or anyone else took over. Our lovely province’s assets are being sold off while the Crown goes further and further in debt. This will reach a crisis eventually, there is no doubt, and the only way out will be a massive loan from the IMF and World Bank. Sound familar? Look at Africa from the 1960’s onwards or South America in the 80’s or Russia under Yeltsin, Or Poland, or anywhere else the IMF has been. Our politicans are preparing the ground for them. Pay your taxes.

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  8. Evil Eye

    I believe that the judge in Susan Heyes first court case called the Canada line P-3 a “charade”. Of course the mainstream media ignored this comment.

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  9. Laila

    Roger hits the nail on the head, as does John – nice to see you both again! As much as they like to claim these contracts offer Value for Cost, it never adds up with the transfer of risk argument, because inherently the taxpayer ends up on the hook via a loss of quality control on structure or services. While many governments continue to move away from P3’s in general – many failures have left a lasting impact on other projects and budget in provinces across Canada – our government continues to embrace this method of building seemingly to reward corporate friends and donors.

    Evil Eye, Canada line was a complete charade, considering how much opposition there was to the project, even from city officials, along the way. It was a railroading similar to the Sea to Sky, simply done for the Olympics. Considering the massive subsidies given to the project, the ” shadow fares” being paid to the operator, etc etc… the only way you can call this project a success is if you look at the operators bank account and see how much they are making off this project, because it certainly didn’t take any more cars off the road- most people who take it would have simply taken the buses that ran from north to south.

    The end game for all these projects is the lucrative rate of return on the initial investments for the private financer/operator. I don’t know how many times I can state it. The BC government has conducted every deal with secrecy, not transparency, has trumped up the sham of the fairness adviser- link embedded in story above – and in the end we pay dearly for an entire generation.

    Kind words Kim, thank you, but this is not Webster material-although I have published with quite a few papers, I highly doubt a nomination would ever be submitted with my name on it!!

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  10. It’s clear that a reasonable person can see that the p3 model doesn’t benefit the citizens of our country and, looking around the world, other countries have noticed that too – some have rejected the p3 model. We recognize that assets of our country belong to all citizens both now and in the future – so why is it, that Canadians (and specifically in BC) why are we unable to stop p3s?

    Is it that we lack a historic model in which to base our projections and assumptions?

    The first p3 project that I am aware of was IG Auschwitz a corporate partnership with the Nazi government – a private concentration camp built for the exploitation of prison labour.

    It may surprise you to learn that IG is the parent corporation of many modern blue chip companies such as Bayer, BASF, Aventis, Agfa, Hoechst.

    IG Farben in WWII, was a group of Corporations that came together to protect their assets, make a profit and shelter their wealth. They did that both within international law and by breaking the laws. The CEOs were brilliant men – skilled as chemists and inventors with the support of bankers who learned how to move money and patents around the word to benefit themselves and their stock holders.

    It is very convenient to blame the Holocaust on Hitler – forgetting how and who funded that war and who made profit? Without IG there would have been no war. IG corporations produced the gas, the oil and rubber for tanks and planes – paved the roads and created nitrate for ammo and bombs. IG created the pesticide that was used to kill soldiers and de-lice victims in their gas chamber showers. They made the ships and and built the trains – they were the largest of many German Corporations and when you do the research you find they built the dams to make the power that fired the kins to make the steel to build the ovens to cremate the dead.

    IG was an industry without conscience for the benefit of stockholders who lived in every country of the world.

    By the end of the war, the IG Corporation knew the laws and made the rules to own this planet. There were some minor adjustments – but the results of that incredible operation is what we live with today. Our food is owned, seed is owned, genes are owned, disease is owned and the natural resources are owned not by the citizen – but by the corporation who sells shares to those who can afford to own what used to be their’s by design.

    The axis of evil was a phrase that was coined by Hitler. History does repeat itself…

    The benefit of WWII Corporate genocide was not lost on those without moral conscience. As Naomi Klein points out every disaster can be readily exploited for the corporate interest – it used to be done in secret – not now – now we face global fascism – dictating a future for the wealthy because wealth is the only power alive. Now, like WWII Germany – the faceless Corporations are openly making us into unwitting collaborators. Now, we can see how it was done.

    We must have more – making someone have less – we can’t have unions – otherwise I can’t have more – we need to have an investment portfolio – purchase our pensions. We keep on believing we are a great country based on the perceptions of those who re-write the history books of mankind.

    Laila has pointed out how it is done – the media reports the trivial, the scary one off items – a bear attack, a bus crash, instilling a rush of fear. Reporting the funny and false information necessary to deflect attention. Mainstream media is controlled by those with power since Government ads will not run in papers that speak the truth. The protest that never was…

    MSM (including CBC) repeats the praise of Canada’s latest abuse of power (or rather Stephen Harper’s government as it has lately been re-named) Yes our politicians brag about their scandal – point to it as though it was reasonable – and then they remind us that our retirement depends upon it. Corporate propaganda for the “economy” – the big citizen on our planet.

    If we want to stop the p3s – we need to know the p3 history. Read the book “The Crime and Punishment of IG Farben” by Joseph Borkin who worked for the US Government after the war on un-American activities. Obviously, it’s not in print but you can get it on the Internet from the Soil and Health Library in Australia.

    Certainly it doesn’t hurt to understand the roots of p3 evil. To recognize what’s behind the name “Liberty Link” or “Round Up” … their’s is a sanitized genocide so beware the P3 prisons where free labour benefits the corporate interest. Once we are all on the same page – then we will see how to attack the beast and stop it.

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    1. Laila

      Interesting and well thought out commentary Priscilla. I agree, behind every war, fight or other political agenda, one can usually find a corporate supporter or prompt behind it.

      Many people are not aware that these private investors actively shop around ideas for P3 projects to the provincial government- it is assumed the government has the project idea first and issues the RFQ and RFP’s but that is not always the case. It is often a case of what deals the public doesn’t know about, can’t hurt them.

      It is interesting the major media does not cover these kinds of issues with any regularity- I have found the publications that have picked up my work have had excellent response to them and the issues around P3’s are not as complicated as they may seem at first. Certainly if presented in laymans terms, the average joe can easily understand the concepts behind them that are faulty and misrepresented by our government who is very eager to have infrastructre built quickly, without having to report the true cost for some time…

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  11. Pingback: The p3 deal for Lumby? I don’t know how big it is – do you? » theXpress

  12. So if private investors actively “shop around” ideas for P3 projects to the provincial government does that mean they can just chat up the Mayor at the golf club? – hey do you want to do a ppp and get a prison here in Lumby? No need to make a petition to Council? No need for a record? No names – no dates – no record of getting the Village to act on behalf of those ppp friends?

    Apparently Premier Campbell asked Mayor Acton to – shop it round’ – but MLA Foster said the prison was suggested to him by “some local residents” – so given that the initial local residents wanted to ppp a prison here – where’s the record of discussions?

    Mayor Acton claims it was all the result of an in-camera motion made while he was running for office (that is not credible). All the stuff that went down about the Mayor selling (shopping around) private land for a prison – when Kevin Acton was Councillor – it was in the works – local Lumby friends electing Mayor Foster and then those same Lumby friends helping elect him as MLA – check out Mr.Foster’s website he admits it.

    Why was Janet Green there at the meeting when three lonely Councilors went in camera and made a prison for Lumby resolution? Was she one of the local residents? Did Mayor Foster’s election team help Janet Green get elected too?

    There is no reason to believe that a prison for Lumby needed to be in-camera since Eric Foster MLA said he intended to put his study out for public discussion – was there was reason to keep the names of those friendly “local residents” a secret?

    The ppp advice from Minister Chong suggests the p3 thing is open and competitive – Right – that’s why NORD called the owners of Lumby property on the day the Solicitor General speakers came to town – asking if they wanted to sell their land for a prison.

    More likely it’s why the day Mayor Acton swore his Oath of Office he rezoned residential land to light industrial – we all know it wasn’t to put in a new saw mill – Mayor Acton has been pretty clear on that – houses are selling but poor Mayor Acton lives in a Village with no saw mills! Was it competition or the perception of competition for prison land? Look at the Globe and Mail picture of Mayor Acton standing on a hill – the article claims it’s an old sort yard – old sort yards are ususally flat.

    The Mayor was a mill worker – how did he make that error? Likely it’s above that rezoned corn field – lots of BS (behind the scenes) ppp cronyism going on here.

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  13. Julie

    Harper himself said, he wants Global Governance. He said, Global Governance has been worked on, since WW11. Right after Hitler’s plan for a thousand year Reich, which was also Global Governance. The New World Order, some call it.

    It is the giant corporations that hoard all the money. The cash stops flowing around the globe, we then have a recession. How many recessions have we had since WW11? Sixty? I have lost count. The gas company’s hoard the gasoline, to drive up the prices, same thing. Harper was going to take them to task. What a farce, Harper gives them millions of our tax dollars and huge tax reductions to boot. The entire world is at the mercy, of their extortion and greed.

    There is anger and mayhem in some country’s, those citizens could stand no more. Canadians have a tremendous capacity to take repression and corruption. The laws of the country, are just for the citizens. Politicians and big business, have a different set of laws, they may thieve at will, our corrupt courts have said so.

    Have the assets and vast resources in BC, been of any benefit to the people? Not on your Nelly. Follow the money, it sure in the hell doesn’t land in our wallets.

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  14. erik andersen

    Adding to Roger’s important remarks, it needs noting that when trying to understand the P3 there is never symmetry of financial risk. Each P3 is isolated into its single purpose limited liability corporation which has a contract fully guarranteed by all citizens. It has full ownership of the contract that has been issued by a goverment or a publicly owned crown corporation. You can be very sure that we will never know how much. if any, equity is delivered to the project by the private partner.
    This contract is always transferrable so events such as Macquarie selling on its interest in the “shadow toll” Sea-to-Sky project is normal. It is at this step the private partner monetizes the unearned equity that materializes from a present value calculation of the public’s guarrantees. When there is no equity left in a contract the private partner leaves town, as happened with the Olympic Village project.
    Otherwise and at this step in the P3 processing, the origonal private partner cashes in a windfall, usually in a non-taxable off-shore jurasdiction.

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