More than a decade ago, the B.C. government introduced an aggressive program to use public/private partnerships (known as P3s) to build public infrastructure such as bridges and hospitals. P3s are complex business arrangements involving private-sector financing, design, construction and operation of infrastructure, committing governments to contracts that span 25 to 30 years or longer.
The P3 approach makes sense when it is the right business decision for the right project, and serves the long-term public interest. However, with more than $11.8 billion committed to P3 projects in B.C. since 2002, and with the B.C. Liberal government’s renewed mandate, we should consider aligning how we run B.C.’s P3 program with international P3 best practices.
Issue No. 1
In late 2002, under its core review austerity program, the B.C. government eliminated the central department responsible for overseeing public-infrastructure spending and decision-making. At the same time, the government announced its P3 agenda and created Partnerships B.C. as a Crown corporation to move forward a comprehensive P3 program.
In the current business model, PBC gets revenue only if projects such as the new hospitals in Courtenay and Campbell River are done as P3s. Yet, PBC has been given full control by the B.C. government to decide which projects should be done as P3s.
A cornerstone of P3 programs operating elsewhere is a well-resourced central government agency that is not involved in P3 project delivery, and has a primary mandate to ensure that P3 is the best business decision based on the long-term public interest.
A crucial feature of these other central agency examples is that they provide impartial advice to decision-makers of whether a capital project should be done as a P3 or through more traditional design, construction, financing and operation.
Recommendation No. 1
Complying with international best practices, B.C. should reinstate a central government agency responsible for overseeing P3 policies and program decision-making. Like Australia’s Partnerships Victoria or the P3 department within the United Kingdom’s treasury branch, such an agency should have no involvement in P3 promotion or project implementation, thus avoiding any real or potential conflict of interest.
Issue No. 2
Long-term P3 contracts extend beyond the shelf life of politicians who approve them and of the management careers of government staff and private P3 managers who negotiate the deals. Over time, the intent, knowledge and shared goodwill behind each deal can be lost, and once government is locked into long-term contracts, it can be at the mercy of P3 operators if government needs to adapt the agreement to meet changing needs or unanticipated events.
One potential scenario could be government not enacting new climate-change policy initiatives intended to reduce vehicle traffic because of contractual obligations to ensure private toll-bridge operators have sufficient car-traffic revenue to cover the financing costs of a P3 bridge.
International best practices emphasize the absolute necessity of attracting and retaining within the public sector the expertise and management skills to plan, negotiate and analyze the effectiveness of P3 deals. Yet, my recent research revealed that auditor general staff in B.C. have limited in-house P3 expertise to examine whether the P3 route always makes best sense. They have too narrow a mandate to review the province’s P3 program to ensure relevant performance standards and public interest measures are in place.
Recommendation No. 2
That B.C.’s P3 program include a strategic human-resource policy to attract and retain qualified staff needed to conduct adequate and impartial up-front project planning and reviews of completed projects. This includes the Office of the Auditor General having the mandate to perform more frequent P3 audits.
Given B.C.’s multibillion-dollar commitment to P3s, we need to ensure proper public-sector checks and balances are in place, and sound business practices are being used by skilled public managers. Without adequate P3 program oversight, we might know only that P3 deals have been poorly structured or negotiated when government has to take back P3 projects due to financial catastrophe, or private P3 operators walk away from money-losing deals.
These recommendations are intended to shine a light on some international best practices in infrastructure planning and decision-making, and help improve how B.C. manages and governs its P3 business. We are reminded daily that public funds are limited, but the likely result of expecting the public sector to “do more with less” is doing many things poorly and some things badly.
If P3s are the right thing for B.C. then let’s ensure we are doing them the right way.
Maurice Rachwalski has more than 20 years of experience managing public infrastructure programs in B.C., and has studied and published on global P3 practices.
