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School's out
The jury is out on who benefited from Nova Scotia's public-private partnership for the building of schools and from the decision to cancel it.

by Jim Meek

Nova Scotia's ambitious P3 (public-private partnership) school construction program has been turfed by a new government as too expensive, too political and - in the words of Nova Scotia's finance minister, Neil LeBlanc - "too out of control."

The Conservative government of Premier John Hamm came to power in July 1999 after promising to review the province's controversial P3 school construction program. The previous Liberal government had pledged to build 55 P3 schools. The new government cut that number to 33 last summer - schools which were supposed to be completed at a cost of $350 million. By July of last year, however, cost overruns on the program had already hit $32 million.

"The former government used P3 as a blank cheque to build schools with costly extras taxpayers can't afford and - quite frankly - students don't need," Education Minister Jane Purves said at the time. "We have a responsibility to taxpayers to build schools at a reasonable cost. That absolutely rules out P3." Those comments came after a series of P3 school flareups across the province. P3 contracts were not standardized as turnkey operations, so "so-called" off-site costs often became inflationary.

"The standards for the new schools were continuously raised. The site selection process resulted in the purchase of land that was too expensive," LeBlanc said. "Basically, the whole process just got too out of control."

Ironically, the P3 program was axed even though the government had no hard evidence that it was inefficient or expensive. Late in 1999, LeBlanc awarded KPMG an $89,000 contract to study P3 school construction. In the end, though, the consulting firm said it couldn't answer a central question - whether it was cheaper to build P3 schools or government-funded and -built projects.

"We are not in a position to say definitively whether the P3 projects did or did not achieve value for money," the consultants concluded in a 31-page report. "While the two projects we reviewed in detail did include financial analysis and/or benchmarks as a basis for assessing the financial implication, a formal public sector comparator had not been prepared."

In short, the consultant was not provided with the cost data from "traditional" school construction projects to compare to the P3 projects. Still, KPMG did recommend several steps to improve the P3 procurement process in Nova Scotia. It called on the government to:

adopt common policies and procedures to guide and support P3 procurement across government departments;

improve project pre-qualification before utilizing P3 procurement across government departments;

clarify roles and define responsibilities within government;

improve project planning;

establish a process for due diligence review of P3; and

emphasize the requirement for a clear and precise paper trail to document the P3 procurement process and the resulting decisions.

LeBlanc is willing to concede that the government dropped the ball on the P3 school program, which was neither carefully planned nor carefully monitored by bureaucrats. "I don't blame the developers or the school boards. It was the province that didn't grab control of this," he said. "There weren't enough ground rules up front for controlling costs." As a result, developers and local school committees ended up agreeing to design changes, including bigger classroom sizes and upgraded computer equipment.

The minister said he isn't against public-private partnerships in general, and the Hamm government still plans to complete a combined jail and forensic unit on the P3 model. But don't expect any P3 schools to be built in the near future. "For schools, in the near term, we had to set a clear direction," LeBlanc said. The government did just that last June, announcing it will award non-P3 contracts for the construction of 17 new schools by 2004. At a total cost of $200 million, the schools will cost about $2 million less each to build than P3 schools. (They will also be built to a smaller scale.)

Meanwhile, officials with the three developers that built Nova Scotia's P3 schools were reluctant to comment on the cancellation of the project. But Kirk MacCulloch, president of Halifax-based Nova Learning, said his company built nine "excellent schools with the help of community input."

"The point is not whether the schools are owned by the operator or whether the schools are owned by the government," said MacCulloch. "The schools are owned by the community - that's the key." In the end, though, MacCulloch said, it's not his job to set public policy, and he has no quarrel with the government for deciding to abandon the P3 program.

Instead of giving up on the P3 sector, Nova Learning has started developing opportunities for school projects in the United States. "We're taking our expertise to New England, where there is a need for new schools," MacCulloch said. "We learned a lot from the process here."

Jim Meek, former columnist with the Halifax Chronicle-Herald and winner of the 1999 Hyman Solomon Award for Excellence in Public Policy Journalism, now works as a freelance journalist in Halifax, Nova Scotia.



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