So what exactly is a P3?

Public-Private Partnerships or P3s are long-term contractual arrangements between a government and the private sector. They are a form of privatization – moving delivery of public services into the private sector. In a P3, the private sector typically finances, designs, builds, operates, and maintains infrastructure projects that have traditionally been funded by government, such as hospitals, long-term care facilities, schools, prisons, and highways. The services provided by P3s often include those traditionally delivered by public-sector workers. In theory, P3s include a level of risk sharing between the public and the private sector.

Why should we care about using P3s to build and maintain highways?

In a CBC story that aired on February 15, 2024, Newfoundland & Labrador’s Minister of Transportation and Infrastructure, John Abbott, revealed his plan to have the provincial government enter into a Public-Private Partnership or P3 in which the private sector would design, build, possibly finance, operate, and maintain a 40-kilometre section of twinned highway from Whitbourne to an area west of Bellevue, and a 15-kilometre stretch from Grand Falls-Windsor to Bishop’s Falls. Between them, the federal and provincial governments have already committed more than $300 million for the project.

Abbott said a request for proposals will be issued later this year to find private corporations (or consortiums of private corporations) interested in a 30-year agreement, with construction set to begin in 2025. According to CBC, Abbott also hinted there would be more P3 highway projects to come.

According to Abbott, his decision is based on the success of previous P3 projects in the province. Yet recently inspectors found thousand of deficiencies in two desperately needed long-term care facilities built using P3s in Gander and Grand Falls-Windsor, which delayed their opening by more than a year.

John Abbott also called P3s “a creative way of getting best value for money.”

Yet when the Government of Alberta was looking to redevelop part of Calgary’s Deerfoot Trail, which is maintained by the provincial government, it initially looked at using a P3 but decided against it because of the higher cost. Instead, government chose to finance the project itself.

And when Nova Scotia used a P3 to finance, build, operate, and maintain the Cobequid Pass Highway, it cost twice what it would have cost using traditional public procurement methods. And the private contractor ended up subcontracting snow clearing to Nova Scotia’s Department of Transportation.

In fact, traditional public procurement methods are often cheaper than P3s. In traditional public procurement, government issues a call for tenders for private-sector contractors to build public buildings and highways. The government provides the financing, and public-sector workers operate and maintain the infrastructure.

Many Canadian governments continue to promote P3s as a way to save money, ignoring 5 provincial Auditors General and multiple reports that say P3s cost more, in part because the private sector pays twice what governments pay to borrow money.

Governments also like to claim that using P3s transfers risk to the private sector when in fact governments often ends up assuming all the risk. That’s exactly what happened when Carillion – a major force in the field of P3s – went bankrupt leaving the governments of Alberta and Ontario scrambling to find a replacement to clear their highways of snow – regardless of cost.

Governments also claim P3s deliver better quality, yet those same 5 Auditors General found P3s often deliver less and lower quality. Private contractors often cut corners to increase profits, resulting in lower quality and public safety concerns.

Governments like how P3s allow them to transfer borrowing for major projects from their balance sheet to their private-sector partners. This makes the government seem more fiscally responsible. Yet taxpayers are still the ones footing the bill – for decades – and the bill is far bigger than it would have been if government had financed the project.

Using P3s allows governments to wash their hands of responsibility for public services. And unlike governments, which answer to taxpayers, their private-sector partners answer only to shareholders.

P3s also allow governments, which are supposed to be transparent and accountable, to cloak information in secrecy by claiming it is commercially sensitive, providing more opportunities for corruption and fraud. The $22.5 million corruption scandal arising from the $1.4 billion contract to build McGill University Hospital is one of many examples.

Ontario

Ontario – The Herb Gray Parkway P3

In Ontario, P3 consortium Windsor-Essex Mobility Group installed 320 concrete girders in the Berb Gray Parkway that did not meet the Canadian Highway Bridge Design Code. An independent review commissioned by Ontario’s Ministry of Transport (MTO) found the girders might be subject to cracking. As well, it found issues with how the reinforcing bars were welded to the girders. MTO later admitted to CBC that it knew the girders were not up to code in late December, 2012, before they were installed, yet installation continued until July 2013.

As opposed to replacing approximately 500 girders, MTO chose to salvage them by reinforcing the ones not yet installed and closely monitoring the condition of the ones already used.

Windsor-Essex Mobility, responsible for designing, financing, constructing, and maintaining the parkway over 30 years, disagreed with the findings of the independent report; however, they accepted the additional measures so they could resume work on the project.

Privatizing highway maintenance

In 1996 the Government of Ontario began to privatize highway snow clearing services. It said privatization would save the government at least five per cent compared to the public sector cost. But a 1999 provincial Auditor General’s report revealed that of the first four maintenance contracts, three actually cost $2 million more than having the public sector do the work. It also found that after awarding highway maintenance contracts, MOT hired the contractors to perform additional work without going to tender.

As well, the Auditor General found the MOT sold off snow clearing equipment, paid for by taxpayers, to private contractors for pennies on the dollar without going through the required public auction. This helped ensure it would be next to impossible to return highway snow clearing to the public sector.

At the time, MTO purchasing officer, George Kerhanovich, speculated that “Perhaps the biggest danger to taxpayers from managed outsourcing is that MTO equipment gets given away at fire-sale prices. It’s happening now. Contractors are picking up MTO plows and trucks for a song. Taxpayers are not getting fair value.”

By 2000, Ontario had fully outsourced all its highway snow clearing. In 2009, the MOT introduced a new performance-based contract model in an effort to reduce overall expenditures.

Under this new model, contractors are not required to use the MOT’s historically proven best practices to determine things like the type and amount of equipment to keep the highway system safe.

Companies won contracts without having enough equipment to fulfill them. They cut costs by short-changing on salt, sand, and other materials. And it took them twice as long to clear the highways.

Investigations uncovered hundreds of shortcomings. Companies were fined but often failed to pay the fines, and yet they were allowed to continue to do the work, and they were paid for it.

Even more significant than the financial losses from privatization were the safety issues noted by the Auditor General: “There were concerns that individual patrol areas were too large to adequately monitor the work of contractors to ensure that provincial highways were safe, usable and protected from untimely deterioration.”

In January of 2014, the MTO revealed that three highway maintenance companies in the northwest had been fined for failure to meet service standards. The MOT would not say how much the fines were, and a contractor said the company was not allowed to comment publicly on maintenance issues. This in itself confirms a common criticism of government contracts with private companies: they allow both governments and contractors to hide information from the public about how public funds are spent.

Provincial investigations in 2012-13 and 2014-15 uncovered more than 300 cases where private contractors failed to provide proper winter road maintenance services.

Road maintenance contractors were fined more than $47 million by the Ontario government over a five-year period for failure to provide services. According to the MOT, some of the fines may have been reduced or waived by the government.

Carillion Canada faced $900,000 in fines for failing to properly clear the QEW of snow and ice during storms in November and December 2014. The MOT investigation into the 2014 storms found Carillion was late in deploying snow clearing and de-icing equipment, and did not apply enough salt on the highway. Carillion was also investigated by the MOT after a series of accidents in Peel and Halton regions on New Year’s Day 2016. The MOT was checking to see exactly when the company dispatched salt spreaders and how much salt was applied on the Queen Elizabeth Way and on sections of Highways 400, 401, 403, 410, and 427 during a January 1, 2016 storm. About 20 accidents were reported on highways west and north of Toronto that day.

In a special report on winter highway maintenance, Ontario’s Auditor General found that by 2015 Ontario was saving money on road maintenance contracts but at a cost that included taking twice as long to clear highways of snow or ice than it did previously – nearly five hours in some cases. She also reported that private road maintenance companies were using insufficient salt and de-icing fluid.

As recently as March 2014, the Ontario government was reported to be reconsidering the privatization of winter road maintenance in the province after a report from Global News raised questions about road safety. A poll released to Global News suggested more Ontarians than not feel road quality in the province is getting worse.

Personal injury lawyers contacted Global News suggesting both the government and private contractors could be opening the door to litigation if safety standards are not maintained in road maintenance.

The Minister of Transportation at that time suggested that the government was looking at a potential overhaul of the privatized system.

If we’re going to manage the liability on behalf of the people of Ontario . . . then I would rather have that done directly by the public sector who is directly accountable to the legislature and the people of Ontario than a contractor who at this point in time has not met the terms of the contracts they’ve signed.

Québec

While it is difficult to determine what percentage of highways in Québec are maintained by private sector contractors in any given year, a few things are perfectly clear.

• The number of people employed by the provincial ministry of transportation has declined steadily – between 2009-10 and 2015-16, it fell by 41%. There have been additional cuts since.
• There is a shortage of qualified snow plow operators in Québec.
• Québec does not require snow plow operators to have a special license or specialized training, but at least public sector snow plow operators receive specialised training.
• Snow clearing contractors in Québec did not provide specialized training to their snow plow operators until pressured to do so as a result of a media exposé.
• There is no limit on the number of hours a private sector snow plow operator can work in a given day in Québec.
• Private snow-clearing contractors in Québec have been convicted and fined for price fixing but allowed to continue providing highway snow clearing services to the province.
• In 2015-16, the ministry of transportation issued 95 notices of reprimand to subcontractors “for breaches that compromised public safety.”
• Following a highway snow clearing disaster, the minister responsible for transportation at the time vowed to return at least 50% of highway snow clearing to the public sector but was unable to hire enough qualified snow plow operators to meet that commitment.
• A 2017 report by Québec’s Auditor General revealed the department, which contracts out 95% of its work, was unable to determine it was getting the best price available or to ensure the quality of the work being done. Small firms were often excluded from the process, and cost estimates were not being conducted properly.

Contractors reprimanded for compromising public safety

In 2015-16, the MTQ issued 95 notices of reprimand to subcontractors “for breaches that compromised public safety.” MTQ’s spokesperson refused to share these notices with Le Devoir, telling the paper it could request them under access to information legislation.

In Québec, private snow plow operators are not required to have any special training or to be licensed. There is also not limit on the number of hours they can be required to work in a day.

In March 2019, an opposition MNA called on the Government of Québec to return all highway snow

clearing to the public sector. He was reacting to a video report published by The Tabloid, which showed that many private-sector snow plow operators receive practically no training when they are hired. They also do not have a specific license or a limit on the number of hours they work.

In the public sector, employees are trained before being hired as snow plow operators, but still are not legally required to hold a special license – a legal vacuum in the industry.

According to the opposition MNA, 80% of snow removal in Québec is entrusted to the private sector.

In response to the Tabloid exposé, the association representing Québec’s private snow-removal contractors said it would put a new training program in place.

GOVERNMENT OF CANADA

The Champlain Bridge P3

Infrastructure Canada signed a P3 contract worth just under $4 billion to design, build, finance, operate, and maintain a new Champlain Bridge. The new bridge was supposed to be finished by December 1, 2018. In January of 2018, Canada’s Auditor General issued a report on the project, which found that, among other things:

Infrastructure Canada completed its analysis of the procurement models for the new Champlain Bridge project two years after it announced it would be using a P3. This was despite the fact that before deciding to use a P3, federal organizations are required to perform qualitative and value-for-money analyses based on the practices established by PPP Canada.

The Auditor General found that Infrastructure Canada’s value-for-money analyses were of little use to decision makers because they contained many flaws favouring the P3 model. The project involved significant risks, was of unprecedented size, and required an accelerated schedule. The Auditor General determined the values used in the analysis were not sufficiently conservative.

In the end, the Champlain Bridge, built using a P3, was $325 million over budget and 6 months late.