Saskatchewan – The Next Frontier for P3s

By Cheryl Stadnichuk

Eighteen months ago, John McBride, the CEO of Public Private Partnerships Canada, was at a cocktail party during a P3 conference in the United States. “All people wanted to talk about,” he said, “was what was happening in Saskatchewan.” McBride was one of dozens of speakers at the Saskatchewan Chamber of Commerce’s second P3 Summit on June 9 in Regina. The conference brought together proponents of P3s (public private partnerships), construction companies like PCL and Graham, financial advisors, lawyers and delegates from provincial, municipal and school board sectors. Its not surprising that McBride gave his anecdote from the United States. The speakers and organizers were clearly aiming to hype Saskatchewan as the next frontier for P3s (as does this insert from The National Post.)

Canada has become the most stable P3 market in the world, several conference speakers stressed, and Saskatchewan is finally playing with the big league. The fact that Saskatchewan quickly launched five P3s is a “testament to the strength of our team,” SaskBuilds CEO Rupen Pandya boasted. All speakers spoke about the deficit in infrastructure spending and how infrastructure is critical to the Canadian economy. Perrin Beatty, a former Minister Mulroney’s government and now CEO of the Canadian Chamber of Commerce, said that the under investment in infrastructure is one of the key barriers for Canadian business.“There’s not a single business that does not rely on infrastructure,” he said.

Of course business has always benefited from public infrastructure spending. A Statistics Canada study put the savings to business at 17 cents for every dollar in public infrastructure spending. For some industries, such as transportation, construction, retail and wholesale trade, the economic benefit was over $2.50 for every dollar of public infrastructure spending. The infrastructure gap is huge in Canada and Beatty said governments need to prioritize where to invest. “We can’t spread infrastructure money across the country like jam on bread,” he noted, referring to the federal infrastructure stimulus funding in 2009.

“Where do we get the greatest return?” he asked. “In transportation infrastructure like ports, pipelines, border control — infrastructure that aids our ability to get products to market” (or as Atkinson later referred to as “trade-enabling” infrastructure).

The majority of municipalities, however, prefer federal and provincial funding to infrastructure without P3 strings attached. In late 2008, the Federation of Canadian Municipalities urged the federal government to release stimulus funding in its January 2009 budget to create jobs and kick-start the economy. They said municipalities had 1,000 ready-to-go projects. The FCM criticized the last Building Canada Fund because applicants have to go through a “cumbersome P3 screen” that could shift more of the project costs on local governments. It’s not surprising, therefore, that the municipal sector was singled out as a key target for P3s. Beatty lamented that “despite the success of P3s, many municipalities are reluctant to embrace them.”

In a clear reference to the democratic referendum on the P3 waste water treatment plant in Regina last fall, Beatty commented “I don’t have to tell you in Regina how easy it is to organize against P3s based on a campaign of fear.” It is unfortunate that a former elected public official sees democratic expression through a referendum as a negative thing. Even Provincial Auditor Judy Ferguson told the summit that public accountability with P3s is critical. She said that the public feels that accountability is obscured with P3s and that a public sector body may be reluctant to release information because they are concerned about compromising private sector competitiveness. But this “does not diminish government’s accountability to the public.” In fact, she stressed that government needs to clearly define the need for a P3 project and that it “can’t outsource responsibilities” for oversight and monitoring. Recognizing that Saskatchewan is entering into numerous P3 arrangements, her latest report has a chapter on managing risks in P3s.

Accountability to the public becomes even more critical with the increasing role for private investors in P3s. Beatty was not in Regina to simply promote public infrastructure. Beatty said that P3s are a way to “attract private investment.” Michael Atkinson, head of the Canadian Construction Association, also emphasized that P3s should be about “leveraging additional private financing.” When commenting on what has changed in the P3 market in the last decade, Atkinson said P3s have gone from being led by developers to now being led by financiers.

So here is the real risk to the Canadian public. We have a massive infrastructure deficit, but according to the P3 lobby, our needs as citizens should be secondary to the needs of Canadian exporting businesses and financial investors.

Cheryl Stadnichuk is a Research Representative with CUPE Saskatchewan.

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