Are public-private partnerships a thing of the past?

Declining markets could put city’s P3s in danger

City councillor Justin Swandel doesn’t think that public-private partnerships will drop during the recession. Mark Reimer

Public-private partnerships, or P3s, have become a popular option in recent years for the city’s buildings and infrastructure. Yet the recession may impact how the city contracts out public projects.

P3s are contracts that the government makes with a private company to build and operate a public structure, in return for regular payments over a certain period of time.

Councillor Justin Swandel, chair of the Finance Committee at city hall, said P3s are made only when it is the most cost-effective way to carry out a project.

“A P3 is basically a contract which offers the best price to the city,” said the councillor.

When the city makes decisions about public projects, Swandel said the whole life cycle of the project is taken into account.

“There is a myth that we do these as if we’re drunken sailors. It’s not true – we do a full cost analysis,” said Swandel.

Kevin Rebeck is the president of the Canadian Union of Public Employees (CUPE) Manitoba, the union representing 23,000 public workers in Manitoba.

He sees P3s as a form of privatization that is not effective at providing any public structure.

He pointed to the higher interest rates that private companies pay and the lack of public information on the deals as apparent downsides.

Asked if he thought the recession would slow the demand for P3s, Rebeck is quick to respond.

“I certainly hope it does.”

There is a myth that we do these [P3s] as if we’re drunken sailors. It’s not true –  we do a full cost analysis.

Justin Swandel, city councillor

A recent Statistics Canada report suggested that total private investment in Canada is expected to fall by 13.1 per cent in 2009. At the same time, public investment is expected to jump by 9.5 per cent.

Rebeck said that as the recession deepens, there is increased pressure on the public sector to make up for the jobs lost in the private market.

With more government investment needed, contracting work out to private companies may become less relevant.

“The companies just won’t be there to operate in this recession,” Rebeck said.

Yves Gauthier, chief of the Capital Expenditures Section for Statistics Canada, said it is not entirely clear what will happen to P3s during this recession.

He did note that public expenditure is going up as a way of compensating for diminished private investment.

Yet public money could still be used to go toward P3s.

“Public-Private Partnerships are fairly new concepts, right now we’re unsure what will happen to them,” Gauthier said.

Swandel said that regardless of the recession, P3s will still remain an option when they are most cost effective.

“We will continue to use it as a tool in our toolbox,” he said.

Two Winnipeg projects are currently operated as P3s, a police station on Dugald Road and the Charleswood Bridge.

Swandel points to both of these projects as success stories in Winnipeg.

Rebeck said it is impossible for him to assess the success of the project since financial records are not public.

“Public accountability is the major issue in a P3,” said Rebeck.

The city has one P3 slated for development in 2010 – the Disraeli Freeway upgrade.

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