Government Operations Committee on Oct. 23rd, 2012

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you, and thank you to all the witnesses for being here.

Since we're all mentioning our towns, Markham may or may not be the most beautiful, but it's certainly the newest city in Canada. We became a city on July 1, having been a town of more than 300,000 people before that. It's also Canada's most diverse community.

Now, collectively, you make a very strong case for P3s. I'm not saying I disagree with you, but I do have one question.

I think you might have heard the tail end of Professor Siemiatycki's presentation when you first came in—some of you. He studied, I think it was, 28 Ontario P3s valued at $7 billion. He found, on average, that it was 16% less expensive to use the traditional model. I imagine that's largely because of interest rates or financing costs. He said there was a risk premium of 49%, but he was unable, in his research, to find out what was driving that big number.

My reaction was, first of all, do you agree with his analysis? This is to Mr. Clark. Second, 49% seems a big number. Third, a lot of these projects probably came under your office. Is there some way we could get to the bottom of what drives this number of 49%?

[Bert Clark]

I haven't actually looked at his analysis, so I don't want to comment on it specifically. As I said in my remarks, every one of our projects has been looked at generally by an accounting firm to confirm the way we've looked at it and that there is value for money. It is correct that the heart of the rationale for public-private partnerships is the risk transfer. That is a difficult thing to get your hands on and to get your fingers into.

What we've done to calculate that is hire experts in cost consulting, people who have many years of experience delivering projects traditionally, for the private sector, for the public sector, and who also have experience with public-private partnerships. And they've developed very comprehensive risk matrices for us that put a value on the sorts of risks that are transferred in the context of a P3.

[John McCallum, Liberal, Markham—Unionville, ON]

Okay. But if you say you want to be clear and transparent, and if university researchers or committees such as ours cannot find out what is driving this, because the information is private and we don't have access to it....

[Bert Clark]

I'm not sure our risk matrix is private. I'm not sure we'd have an issue sharing that.

[John McCallum, Liberal, Markham—Unionville, ON]

Well, if you could, I would certainly like to see it.

[Bert Clark]

Okay.

[John McCallum, Liberal, Markham—Unionville, ON]

There's also been the suggestion—and I'd like the mayor to comment on this, too. I'm not criticizing or attacking anybody. There has been the suggestion that the people doing this analysis are somehow inherently committed to P3s and perhaps less objective than they might be. For example, your organization only does P3s. Is that right?

[Bert Clark]

No, that's not right. We manage the real estate portfolio on behalf of the province. Lots of those projects are traditional. We have a mandate to deliver commercial transactions, the bulk of which would be P3s.

[John McCallum, Liberal, Markham—Unionville, ON]

Let me put the question neutrally. Are you convinced of the objectivity of the third parties who do your value-for-money calculations?

It's to the mayor and to Mr. Clark.

[Bert Clark]

I absolutely am. Infrastructure Ontario was set up to do just that, to make sure this method of delivering projects was used only in appropriate circumstances. We have a board of private citizens to whom we have to bring this analysis before we proceed with any RFQ. They take that very seriously. So yes, at multiple points along the way, there's a serious discussion about it.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you.

[Sam Katz]

First of all, I would love for the professor to study the Winnipeg projects. That's number one. I welcome him to come and study them.

Number two, I have seen situations where you will have.... Do I believe that everybody is giving you a fair, objective opinion? Yes, because the reality is that they have a duty to do that. They're professionals. Whether you're a lawyer or a CA, lawyers swear an oath and CAs also have someone to answer to. I can give you the exact opposite. A professor at one of our universities, who was retained by the provincial government, has said the same thing; maybe they're in a conflict because now they're working for the government and then saying something, because they're supposed to be objective.... Everybody has an opinion. Nobody's opinion is wrong, so let's just deal with the facts.

I think you said 16% they thought...? I am willing to bet that when they do that analysis.... Here's the key thing: the savings are not in just the construction. That's just part of it, okay? The true savings are in the maintenance.

I'd challenge anybody who has come from any of these beautiful cities to go to their city and show me a road, a bridge, or a public facility that has been properly maintained and that doesn't have deferred maintenance or, worse yet, is crumbling. Just last month we had to close down a City of Winnipeg parkade because of deferred maintenance. They're not being maintained.

The easiest thing in the world is to build something. The hard part is maintaining it so that it doesn't fall apart. That's what I believe the professor is missing.

[The Chair, NDP, Pat Martin]

Thank you very much.

Thank you, John.

[John McCallum, Liberal, Markham—Unionville, ON]

Could I repeat that it would be really helpful if Mr. Clark could provide us some information on this risk model to let us see into this black box a little bit?

[The Chair, NDP, Pat Martin]

Yes, I think that's in order.

The committee would like to request that you table risk analysis documents along the lines of what Mr. McCallum is asking for, Mr. Clark.

I believe the same question could be put to Mayor Katz for some information on the modelling and the methodology used, to add veracity to the claims that there will be savings of $31 million and $48 million in the two infrastructure projects mentioned in his testimony.

Having asked for that in a reasonable amount of time, I think the committee would look forward to documentation along those lines to help us in our deliberation, which ultimately is to be able to recommend to the public of Canada whether or not it's a cost saving to use public-private partnerships. That's really the subject of our study.

We're well over time. I'm going to have to adjourn this meeting as committee members have to get to their next committee meetings. We thank the witnesses very much for their very valuable testimony.

Your Worship, Mayor Katz, Deputy Minister Fagan, and Mr. Bert Clark, thank you very much.

The meeting is adjourned.