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What is your opinion of public-private partnerships (P3s)?

compiled by David Newman

Bob Fischer, vice-president of Government Relations, Computing Devices Canada (CDC), sees potential in P3s as a government procurement tool yet to be realized. When Fischer was assistant deputy minister for Materiel at National Defence (DND), ground was being broken on implementing Alternative Service Delivery - engaging the private sector in the delivery of non-core functions. Now at CDC, he is looking at P3s from an industry perspective.

"Like others in our industry, we have been trying to take the government up on opportunities to partner. While private sector partners can provide experience, expertise and investment, governments can provide policy expertise and infrastructure most companies don't have easy access to," he says. "For example, for several years we have been working with DND's facility in Suffield, which specializes in biological and mine detection research. An informal partnership with Suffield and our own investment resulted in contracts and products that derive directly from commercializing those technologies."

Fischer says CDC has "leveraged our historical successes with DND's R&D community, [and] has signed a Memorandum of Understanding with DND to harmonize our respective R&D programs towards the achievement of common objectives. The Crown gets industry expertise; we get intellectual knowledge enabling us to commercialize defence technologies and pursue market opportunities." According to Fischer, the jury is still out on whether this particular partnering initiative will be deemed a success. "In our experience, when you engage in dialogue beyond broad conceptual framework agreements, the more specific you define the partnership, the more difficult it becomes to implement.

"[P3s] should have a win/win effect, but they don't always. From an industry perspective, one of the main issues is that the Crown wants industry to shoulder more of the risk but does not appear prepared to rebalance the "risk-reward" equation. If we're going to take a greater share of the risk, we should also have the opportunity to realize more than the normal profit margins we would expect from less risky, more conventional contracting."

Judy Darcy, national president of the Canadian Union of Public Employees (CUPE), does not support P3s. "We don't say the private sector has no role in public services and infrastructure. In most provinces it has been involved historically in designing and building new water treatment plants, schools and hospitals, but we believe that's where the involvement must stop. There's a big difference between building a water plant and deciding [who should] receive the water."

CUPE's objections go beyond principles. "Higher borrowing rates and lengthy lease schemes mean these 'partnerships' cost taxpayers more than publicly financed services - the private sector can't borrow as cheaply, or with as good a credit rating. Where there are cost savings, often generated by cutting services and staff, they're pocketed by the corporation. And new user fees often erase any savings that do trickle down. Lengthy lease agreements, 'secretly' negotiated with little or no public input, saddle governments with deals that stretch over 20 or 30 years. In addition, public sector 'partners' are often left with the ultimate liability for any problem - as when Hamilton's wastewater treatment plant caused millions of litres of raw sewage to spill into the harbour and area homes and businesses.

"[They] are a bad deal for governments, taxpayers, workers and communities. The cozy word 'partnership' is a fundamentally misleading term."

Judy Rogers, city manager for Vancouver, feels there is a role for P3s. "The public sector environment is increasingly complex and ongoing service demands need to be balanced and prioritized within a framework of what is best when serving the public good. New technologies allow for easier service delivery and globalization offers more flexibility in the marketplace. Now more than ever, local governments have the opportunity to partner with the private sector to leverage pooled resources to improve basic service delivery to all citizens.

"However, there are challenges when sectors with differing strategic responsibilities come together in a joint alliance," Rogers notes. "Government's mandate is to ensure that all citizens have access to basic cost-effective services within a balanced budget environment. The private sector's focus is on strategic and sound business principles maximizing value to investors. These differing business drivers may clash, resulting reciprocal mistrust and a lack of understanding of each partner's needs and interests. There are also underlying legal, political and institutional obstacles, which may conflict with each organization's values and visions. These risks, however, could be offset by cost savings and gains in customer satisfaction.

"Local government is receptive to exploring joint initiatives and working with the private sector to develop a clear framework for [P3s], which should address the roles and responsibilities of both parties - an accountability framework and an agreement of how to manage the risks and measure the value of such ventures. [P3s] have potential to benefit both parties and to add value to their respective stakeholders. Further exploration and discussion should be encouraged."

Do you think e-procurement will save money?

Reply to:
David Newman, Contributing Editor
Summit: The Business of Public Sector Procurement
180 Elgin St, Suite 800
Ottawa ON K2P 2K3 
Fax: (613) 688-0767

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