The Conference Board on P3s: more myths

The Conference Board of Canada published a report late last month, Dispelling the Myths, which purports to show that public-private partnerships (P3s) have delivered major efficiency gains for the public sector, a high degree of cost certainty, and greater transparency than conventional procurement.

While the report maintains it provides an impartial assessment of the benefits and drawbacks of using P3s, it is astoundingly superficial and biased in its analysis.  

A major flaw with the report is that it takes the superficial “value for money” reports produced by P3 agencies at face value without questioning of their assumptions or methodologies for its claim that P3s have delivered efficiency gains.  

In doing so, it also completely ignores recent reports by provincial auditors general that have been highly critical of the value for money methodologies used by these agencies.  For instance, in his report from just last November, the Auditor General of Quebec stated that the value for money methodology used by Quebec’s P3 agency was essentially useless.  This well-publicized report and other P3 scandals put the province’s P3 agency and approach in disarray, but it is completely ignored in the Conference Board report, as are other auditor general reports critical of P3s. 

On the other hand, in its examples for its case studies, the Conference Board report makes good use of conventionally procured projects that were reported on by auditors, and so are likely to have major problems.  There’s also a fair amount of misinterpretation of evidence in this report.

And there’s no analysis of the two really crucial issues in valuation of P3s: discount rates and risk transfers.

Even though the report’s authors interviewed over 30 people for the report, they don’t appear to have interviewed one person from a public auditor’s office. With the exception of one academic, all the people interviewed were from P3 companies, P3 promotion agencies, government officials in this capacity, from agencies directly engaged in delivering P3s, or on the record in supporting P3s.

There are many other flaws with the report, which I’ve summarized in the following critique on CUPE’s website.  The Journal of Commerce in Western Canada also published a good article critiquing the Conference Board study.

It should be no surprise that this Conference Board study was entirely funded by the federal and provincial P3 promotion agencies.  The source of the funding shouldn’t necessarily disqualify the research, but in this case, it appears to be clearly crafted for the interests of its sponsors.

There’s a very cosy world of provincial P3 agencies and companies engaged in P3s in Canada.   On more than one occasion, we’ve been offered seats on the boards of these agencies in an attempt to get us to quiet our criticism of P3s.  

And certainly some unions aren’t critical of P3s.  If they can ensure their members are still employed and their pension funds can benefit from the high rates of return, it can seem like a win-win proposition. 

The problem is that somebody loses out, and that is future generations.  P3s create massive and growing liability payments for future years, which is largely being covered up by the creative accounting of P3 agencies–and by reports such as these, which also ignore this problem