Winnipeg Free Press - PRINT EDITION
Book uncovers dangers of P3s
Private-public partnerships explained
Add this to your reading list, councillors and citizens -- an award-winning Winnipeg professor is set to launch his new book tonight, blasting the hidden dangers of private-public partnerships, including a few sharp jabs at Veolia Canada.
John Loxley, an economics professor at the University of Manitoba, will release Public Service, Private Profits, which includes case studies of major private-public partnerships -- or P3s -- in Canada over the past two decades.
"What I tried to do was produce a book that explains what they are and what the economics and financial aspects of P3s are, and how you go about analyzing them," said Loxley, who has been working on the book since the late '90s. "It has to do with how you evaluate the projects, and on what terms you should get involved.
"It's designed to be accessible. It's for people who are interested and involved in what's happening in Winnipeg."
One of the studies includes multinational mega-firm Veolia, who the City of Winnipeg has hired to design and build $661 million in upgrades to two sewage-treatment plants and help manage them for 30 years.
While the book doesn't look specifically at the Winnipeg deal, it does look at a similar deal Veolia has with the City of Moncton, N.B.
Loxley maintains Winnipeg's agreement with Veolia seems to be following much the same script.
"It was sold as a cheaper alternative," Loxley said, noting that, in the end, Moncton ended up paying $31 million for a $23-million water-treatment plant, while Veolia made 24 per cent profit.
City officials in Moncton say they've had a good relationship with Veolia for more than a decade.
In Winnipeg, the France-based company will manage and run the renovated plants for 30 years, reportedly saving the city between 10 and 20 per cent of the expected total $1.2 billion operating and capital costs.
Still not made public is how much Veolia will make in profits, the penalty the city must pay to terminate the deal, exactly who covers cost overruns, and from where exactly the 10 to 20 per cent savings will come.
Most of that information is considered proprietary and not even councillors nor Mayor Sam Katz have access to it.
"There is a tremendous lack of information of what these deals actually are. It's very difficult to get information on them," Loxley said, adding he's still waiting for information on the Charleswood Bridge, another case study in his book.
Loxley will launch his book at Mondragon Bookstore and Coffee House on Albert Street at 7 p.m. Loxley won the prestigious 2010 John Kenneth Galbraith Prize in Economics in March, for a demonstrated contribution combining economic analysis with a commitment to social justice.
matt.preprost@freepress.mb.ca
Republished from the Winnipeg Free Press print edition June 8, 2010 B3
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6 Comments
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Posted by: Huey Long
June 8, 2010 at 8:15 PM
@Carlos: Apparently you don't know much about Winnipeg with your musings that it is "anti-profit, anti-wealth and anti-buiness." Just to let you know we have a mayor called Sam Katz who is in fact religiously pro-profit, pro-wealth and pro business, but anti-democratic. As to your comment about prefering our "tax money go to a private firm's profit than get wasted in normal government operations" is to me one in the same.
Posted by: ...
June 8, 2010 at 5:08 PM
@jay - no need to read anything, just assume you know it all and dismiss educated opinions out of hand...
Prof. Loxley lectured a seminar of mine on ecological economics once and it was amazing how eloquent he was in explaining the concepts and relationships. People like jay need to realize that old ideological debates have led us nowhere. There no such thing as a free market, There's never been such thing as a truly marxist/communist economy. Blindly advocating for either one of these theories instead of critically reviewing existing and historic policies is foolish.
Posted by: Carlos
June 8, 2010 at 4:16 PM
Ooooo, the evil private-sector is going to take over the world!!!! Another left-wing economist sprouting his biased views as gospel. Take it with a grain of salt.
Even if there were cost overruns in a P3 arrangement, how can anyone know if and what cost overruns could or would have occurred if the government had run the project without private-sector help?
Let's not forget that every level of government has had its own share of boondoggles and project failures - in fact, that is why the P3 model was suggested for Winnipeg's sewage treatment plants. The new water treatment plant that just opened was built by the government and that had massive delays and cost overruns. (I can just see a bureaucrat detailing the list of excuses beginning with "...systematic failure," which absolves bureaucrats of any and all responsibility.)
I'd rather see tax money go to a private firm's profit than get wasted in normal government operations of incompetence and mismanagement.
But this is Winnipeg, with its culture of anti-profit, anti-wealth and anti-business. We'd rather be a have-not province than be resourceful and self-sufficient.
I applaud council, the majority of which supported the P3 agreement with Veolia, for trying something different.
Posted by: Jay
June 8, 2010 at 12:25 PM
Another Marxist professor blaming capitalism. Nothing to read here move on....
Posted by: bwalzer
June 8, 2010 at 8:55 AM
A lot of the issues here are generic to any sort of contracting. If there is a technical requirement in the worst case all the engineering has to be done twice, once by the contractor and once as part of the oversight process. If the effects of poor maintenance are not easily detected then the contactee can find that they have to spend extra money on ongoing oversight. These sorts of things create an incentive for the contracting company to be overly optimistic on their bids in an attempt to make the total cost of a project seem lower than the economics dictate.
Something like a sewer system is a special case in that the city can not simply move away if things go really wrong with the contract. As a result a common strategy is to bid low and then make it up later with no or poor maintenance. Simply demanding more money later in the contract is also fairly common. Once all the skilled people have left the public side this strategy can work really well...
Posted by: Whalers or Bust
June 8, 2010 at 8:33 AM
It's a good thing that city council just blindly voted for one of these deals. :rolls eyes: