P3 Evaluation: A Co-dependent Relationship?

In response to the provincial NDP’s call for an independent evaluation of the costs of the government’s proposed P3 school construction project, Minister of Highways and Infrastructure Don McMorris dismissed the opposition’s concern stating that “there will be an independent evaluation, not by government,” but by an independent “accounting firm, whether Ernst & Young or Deloitte.” Pressed by CBC Radio Host Sheila Coles regarding the independence of the evaluation process from government, Minister McMorris added:

“If appointing a professional accounting firm is playing with the process, then I think we have to question professional accounting firms. They are going to do their work regardless of who is appointing them. Ernst and Young will not be swayed by what government wants, they will look at the numbers and the facts.”

We should certainly welcome Minister McMorris’s invitation to question the professional accounting firms that are used to justify virtually any and every P3 proposal that has been made in this country over the past few decades. Despite the Minister’s assurances that such accounting firms can be relied on to provide an independent and impartial assessment of P3 proposals, the degree to which such firms might be compromised by their ties to the P3 industry should warrant profound skepticism.

Firstly, all the “big” accounting firms that advise government’s on P3 proposals – KPMG, Deloitte, Ernst & Young and Price Waterhouse Coopers – are sponsoring members of the Canadian Council for Public Private Partnerships. Described as the premier lobbying organization for the P3 industry, the Council’s explicit mandate is the “promotion and facilitation of public-private partnerships across Canada and with all levels of government.” One has to question the ability of an organization to impartially assess P3 proposals when they have a stated commitment to their expansion. Secondly, as Stuart Murray explains, “because of their historic role as auditors, these major accounting firms have established a reputation for fair dealing and independence.” However, as these firms have branched out into general consulting services, the dual role of both auditor and consultant creates a “potential conflict-of-interest” because accurate auditing – such as counseling against a P3 –  might result in conclusions that could jeopardize potential millions in consulting fees. And those fees are substantial. The much-beleaguered Brampton Civic Hospital P3 registered $34 million in consulting fees alone. So it is perhaps not all that surprising that these accounting/consulting firms would regularly counsel governments on the superiority of P3s.

So here’s the question we should ask when assessing the independence of these firms. Have they ever counseled a government against a P3 model? The P3 industry regularly states that P3’s are not a panacea for public infrastructure and that they should only be used in certain cases. Indeed the CEO of PPP Canada, John McBride, has publicly stated that P3s are only useful for maybe 15 to 20 percent of public infrastructure needs. But have any of these firms ever determined that conventional public procurement is the better model for public infrastructure construction? If these firms cannot point to one instance where they advised a government that a P3 model was not the best choice,  while the P3 industry itself admits that only 15 to 20 percent of infrastructure projects would benefit from the P3 approach, what does this say about the supposed “independence” of these professional accounting firms? The provincial NDP’s call for an impartial assessment of the P3 school proposal that is independent of government is a welcome and prudent suggestion. However, to truly be impartial, it must also be independent of the P3 industry. Unfortunately, none of the major accounting firms can currently claim to have the requisite distance from the P3 industry to make the independent and impartial assessment that the citizens of Saskatchewan need on this issue.

Simon Enoch

 

3 comments

  1. I remember when Vancouver was looking for an independent outsider to review an aspect of the Canada Line public private partnership. They could only find one major accounting firm not tied up with one of the bidding consortia. And that firm did accounting work for one of the large members of one consortium.

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