Evidence of meeting #68 for Transport, Infrastructure and Communities in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was p3s.
A recording is available from Parliament.
Conservative
NDP
Robert Aubin NDP Trois-Rivières, QC
Thank you, Mr. Chair.
Thank you, distinguished guests, for being with us this afternoon. The clarifications you have made are very useful. However, I always have a lot of trouble deciding between the pros and the cons. And so I would like to go back to basics and ask you a two-part question.
Mr. Stoney, in the definition you gave at the beginning of your statement, you excluded investments in cultural infrastructure programs, even though municipalities are clamouring for them. Do you think it would be a winning solution to finance a certain category of infrastructure projects through public-private partnerships, and another through public investments?
If that is the case, will the situation be the same if we are talking about a large city such as Montreal, or other, smaller municipalities? I am raising the question because terms are being used here as though they were a given, whereas the population of municipalities in Canada ranges between 300 inhabitants and 3 million.
Associate Professor, School of Public Policy and Administration, Carleton University, As an Individual
Through the Chair, thank you. That's actually a very good question.
One of the issues we found when we studied the gas tax over three years, in five provinces, was the different problems that arise for municipalities. Some of them were saying they had 300 different types of funding, from either provincial, federal—various sources. Certainly for some of the smaller municipalities, this was a problem. Also, because it was really directed—again, probably a political decision—at the smaller cities or smaller communities, you had some communities receiving cheques for $3,000, which really isn't going to do much in terms of infrastructure. We felt that the biggest bang for the buck was actually in the big cities in terms of infrastructure projects.
Where would a P3 be useful? There are certain areas that lend themselves to P3s. Obviously a road is one because you can install tolls and generate revenue. They're fairly non-controversial compared with other areas.
If I could flip the question around very quickly, in our paper we actually came up with five areas where you wouldn't want to consider public-private partnerships. One is that if you have an unsolicited sole-sourced contract then you shouldn't consider it at all. I think that more or less goes without saying, but we do see it.
The other one is that I don't think public-private partnerships should be used where the use of public space is involved and it's highly controversial. Obviously, Lansdowne would fall into that, as well as the Eaton Centre in Toronto. This is where public participation is crucial. They may not be interested in a road between two cities, but they would be interested in the use of public land. Therefore, I think it's unfair to use commercial confidentiality.
Where councillors are actually funded by the private partner in the proposed P3 model in the agreement, that seems to me to go against the very notion of good governance. At least, the optics are shocking. When there's insufficient municipal capacity, very often our municipal people, as well as federal and provincial, get bamboozled by these large international corporations that have lawyers who do nothing else but come up with these deals.
The last one, and it's an important one, is sports. I don't think you should involve it in sports. Sports tends to become too emotional. It dominates the issue around sports, as opposed to the real cost-benefit analysis.
NDP
Robert Aubin NDP Trois-Rivières, QC
Thank you.
Mr. Moist, would you have any comments to make on that same issue?
National President, Canadian Union of Public Employees
I would commend Dr. Loxley's work to you. He describes forms of P3s, he gives you some examples of sizes, and he canvasses Mr. Holder's question about the amount of infrastructure deficit we have in Canada. As well, in five pages of this 35-page report he mentions six pointed questions to ask municipal councillors, one of them being is risk being transferred and do you understand the value-for-money alleged savings being indicated to you?
This was written for elected officials, not for me. As a decision-maker, if you don't understand the answer to those questions, you have to keep asking. This is the transparency the decision-makers need to know, that the value for money really is real, the risk doesn't rest with the public sector, and are we getting ourselves into an area where we're mortgaging debt and it would be cheaper....
I think the public can handle the conversation about debt and fixing up infrastructure. But don't mortgage debt under the illusion that you can do more projects more quickly, because auditors general across Canada have said this can't be off your balance sheet. It's an expense.
Conservative
Lawrence Toet Conservative Elmwood—Transcona, MB
Thank you, Mr. Chair.
Thank you to our guests here today.
Mr. Stoney, I want to talk about a couple of other items that you brought up in your introductory remarks that I found quite interesting and intriguing. One of the things you brought up was decentralization versus centralization. We hear a lot of talk about requiring a national strategy for transit, for almost anything you can think of. You talked very succinctly about the idea that municipal governments and towns should have the ability to make their own decisions as to their priorities and needs. I'm wondering if you could quickly expand on that for us.
Associate Professor, School of Public Policy and Administration, Carleton University, As an Individual
Again, it's really a question of subsidiarity, as the Europeans would call it, that people at the ground level understand the local situations. That's not to say there aren't projects that require federal intervention and oversight. Clearly, going back to the construction of the railways, interprovincial bridges, those kinds of things, it seems to make a deal of sense to have some national thinking. It needn't necessarily be with cash on a project basis, but I think certainly the federal government should have a role. If it's not thinking about it already, we should be thinking about what we are going to do when the next stimulus is required. Are there high-speed connections we can put in place between different cities?
Conservative
Lawrence Toet Conservative Elmwood—Transcona, MB
You're talking about connectors and things like that—
Associate Professor, School of Public Policy and Administration, Carleton University, As an Individual
Yes, I am.
Conservative
Lawrence Toet Conservative Elmwood—Transcona, MB
—but I'm talking about individual towns being told this is their money and they have to spend it on this. You were really saying their priorities may be very different and very varied from region to region. We have a large country with very different weather conditions, so we're going to see a real variance. I think it's important that we bear that in mind, so I'm glad you brought that forward.
I wanted to quickly correct a little of the idea that the government, when it gives infrastructure funding, is saying these are the projects you must do. I know in Manitoba we work very closely with the province and the city to make sure their priorities are addressed. We don't always agree with their priorities. As a local person, I'm not really happy with where that funding has gone, but they have their priorities and we allow them the autonomy to do that. I think there's a bit of a myth to what you were bringing forward.
You talked about unbundling these contracts so all sizes of companies could compete. Obviously, you see a need for everybody to be able to do contracts. Do you see any need for any type of contracts where any type of company should be excluded from being able to be part of that bidding process? As long as they have the ability to perform the scope of the work, that would obviously be a given, is there any other reason why they should be excluded?
Associate Professor, School of Public Policy and Administration, Carleton University, As an Individual
Occasionally, you can see conflicts of interest arise, but I think maybe what you're driving at is this. If you have a company or a couple of companies that effectively almost have a monopoly over contracts is that anti-competitive? At that point would we put a percentage and say you're only allowed to get 50% of the contracts, and then the other 50% has to be opened up to other companies? I think it becomes a lazy relationship when there are big contractors in town. A couple of big companies in this town seem to get at least 80% of city business. Maybe they offer the best deal, but I think there's a certain amount of familiarity there, and sometimes I wonder how much genuine competition is out there. Under those circumstances, we might consider that. I know the EU does.
Conservative
Lawrence Toet Conservative Elmwood—Transcona, MB
I can give you an example. In Manitoba there are consortiums of companies, smaller construction companies, that have come forward. As a group they will have bid on some of these contracts. They have been shut out, essentially being told that you can't bid for certain reasons. The reasons have absolutely nothing to do with capability, ability, and being able to compete on an even playing field. In fact, they're not even allowed to put their price in so nobody even knows where their price is at.
Would you find that to be a very strange way of opening up competitiveness and getting the best bang for our public funding?
Associate Professor, School of Public Policy and Administration, Carleton University, As an Individual
Yes. I am absolutely for competition. It's in the public interest to have a competitive process. I would need a lot of convincing that it's worthwhile preventing that kind of competition.
When I refer to these umbrella contracts, that's one of the things the umbrella contracts do, they actually preclude companies that are not in the initial stage from entering later on when things might change. That's the danger with the umbrella contract agreements.
Conservative
The Chair Conservative Larry Miller
Your time has expired.
Mr. Larose and Mr. Sullivan are splitting their time.
You have five minutes.
NDP
Jean-François Larose NDP Repentigny, QC
Thank you, Mr. Chair.
I would like to start by apologizing to Mr. Stoney. I mis-mentioned your name earlier and didn't do it on purpose. I really apologize for that.
Associate Professor, School of Public Policy and Administration, Carleton University, As an Individual
Somebody tried to impersonate me earlier.
NDP
Jean-François Larose NDP Repentigny, QC
I would like to begin by saying that I heard the government's position earlier, and I must admit that it made me feel somewhat sick.
When I sat on the Standing Committee on Government Operations and Estimates, the government at least had the decency to say that the study showed that there was indeed a problem and that the P3s were not applicable in every circumstance. Today, I am hearing that that is not the case. Whatever the consequences, some people will profit, and so it is fine to implement P3s.
We have heard about the United Kingdom, where there are consequences on the debt and on hospital services. I see some red flags. Soon the Champlain Bridge is going to be built in Quebec. There was also the construction of the A-25. I think that at a given point, we have to think about the position we adopt carefully.
When the government imposes its will by specifying that funds will be allocated to transfers on condition that P3s be in place, and doesn't even have the decency and openness needed to acknowledge the problems, there will be consequences.
In my municipality, we are talking about millions of dollars for infrastructure, and we don't have the means to make these improvements. However, now we are told that there could be funds, and that there is no problem insofar as we implement P3s despite the consequences, since no one seems to be taking them into account anymore. There is a problem. On our side, we are favourable to P3s, but we need to see some evolution. All the better if our society can evolve.
I am wondering if the witnesses have any brief comments to make regarding the consequences.
National President, Canadian Union of Public Employees
Very quickly, through the chair, the member mentions the Standing Committee on Government Operations and Estimates. I've read the recommendations and I can tell you that if Professor Loxley was here he would agree with many of the recommendations from that committee. They said: “hat the calculation of the risk premiums should be supported by verifiable figures based on empirical evidence for federal P3 projects.”
This came from the standing committee.
I'll just mention one more:
The Committee further recommends that value-for-money analysis methodology for federal P3 projects should be readily available and accurate, and comprehensive information should always be made available on the detailed value-for-money calculations.
Professor Loxley is urging municipalities to take that same test. There's been some decent work done around here. These recommendations—and I know there are others that aren't in there that we'd like to see—are very valuable pieces of work done at this committee and should be incorporated into this committee's recommendations.
Associate Professor, School of Public Policy and Administration, Carleton University, As an Individual
Through the chair, this is an excellent question and an excellent point.
I am neither ideologically for or against P3s. I'm a pragmatist. If I think they are a better tool in a certain situation to spread costs, or whatever the reasons may be, I'm quite happy to see the government funding those. Again, I come back to the issue that the government is also the regulator. Somebody has to regulate these deals. In the Lansdowne case there was no value-for-money audit done.
NDP
Mike Sullivan NDP York South—Weston, ON
The actual title of this study is how competition can make infrastructure dollars go further. I want to come back to the title of the study and suggest that if we create a system in which the only way that a project can get built is if it's P3 with operations and whatnot at the end, we've actually lessened competition. This is because we no longer have available to us, in terms of the design and build of the operation, the full range of potential partners, because that's what they are in the private sector, who could build it.
We are actually reducing competition by creating this mythological beast called the P3 that will design-build-operate-maintain. The operate and maintain may not be something that is able to be done by all of the potential partners. Is that in fact reducing competition and making things more expensive?
National President, Canadian Union of Public Employees
I'll just say very quickly that Mr. Toet's question about bundling or unbundling was a good one.
Here's an Alberta example, and it's nothing to do with the federal government. The Alberta government said it wanted to build a package of 10 schools under a P3. A gentleman came up to me at the FCM convention. He runs a small construction company in Lethbridge, and he's built schools before. He cannot build 10 schools. He can't bid on it. He knows how to build schools and he runs a construction company. He has no union bias because he came up to the CUPE table. He's really angry that the Government of Alberta has bundled up 10 schools and taken him out of the game. He could have built the two schools they want in Lethbridge.
There's an unintended consequence. I expect the Government of Alberta, if they were sitting here, would say, “Well, this will be cheaper. This is better. We have to pay for these schools, and the P3 is the way to go.” They haven't read the Auditor General of Nova Scotia's report on that.
I would say in that example that there's less competition at play in Alberta to build schools. That's in nobody's interest. We have a collective responsibility to support local entrepreneurs who run small construction companies. You can cut them out by the way you structure these things.
