Government rejects requests for information on public-private partnerships for school construction

April 20, 2009

TABLING RETURNS AND REPORTS

Len Mitzel, chair of the Select Standing Committee on Legislative Offices, tabled the April 2009 report of the auditor general. The report includes a review of school jurisdiction audit results.

Peter Sandhu (PC—Edmonton-Manning) tabled the program from 25th anniversary ceremony of Kirkness School, held April 16, 2009, in Edmonton.

MOTIONS FOR RETURN

Motion for a Return 12—Private–Public Partnership for Building Schools

Motion for a Return 12 was rejected. Sponsored by Rachel Notley (NDP—Edmonton-Strathcona), the motion requests “[a] copy of the initial proposal submitted by Babcock & Brown Public Partnerships Limited to the Ministry of Education for the construction of 18 Alberta schools, the findings of the selection process that resulted in Babcock & Brown Public Partnerships Limited winning a contract, the research that concluded that $118 million would be saved by constructing schools through P3s instead of through traditional methods, and the agreement signed between the Government and Babcock & Brown Public Partnerships Limited to design, build, finance, and maintain these schools.”

Rachel Notley (NDP—Edmonton-Strathcona): “As we know, the government has an agreement with Babcock & Brown Public Partnerships Limited to design, build, finance, and maintain 18 new schools in Calgary and Edmonton projected to open sometime in 2010. The agreement is set for a 30-year term. Basically, the reason we are seeking out this information is because this deal amounts to roughly a $650 million obligation on the part of Alberta taxpayers. Yet as a result of it being financed through a public-private partnership, we, of course, have this even thicker than usual cloak of secrecy that falls over the expenditure of that money on behalf of Alberta. Frankly, it shocks me that we can look at making that kind of expenditure and have so little public accountability for how it proceeds, whether it proceeds well, effectively, whether it meets the needs of the community, whether it meets the needs of Alberta taxpayers, whether it meets the needs of our bottom line, any of those things.

“Of course, the government is able to simply not proceed with providing us that information under the cloak of: oh, well, it’s a public-private partnership, and we couldn’t possibly make that information available because it’s private information that belongs to the corporation in question. I would suggest that it is well within the capacity of this government to suggest that where private industry agrees to work with government to construct capital projects, they simply need to be prepared that more information is going to become public. That’s part of the quid pro quo for successfully signing what appears to be about a $650 million contract. I hardly think that’s unreasonable.

“Instead, what we have are these repeated opportunities for hundreds and hundreds and hundreds of millions of dollars to just slip through the taxpayers’ fingers into these P3 financing arrangements where we lose all oversight and all control over how that money is spent. It strikes me that above and beyond all the other policy perspectives and public policy arguments against the effectiveness and the merits of P3 development, simply as taxpayers that particular one, that one issue, ought to make people stop and say: ‘No, we can’t accept that. We cannot agree that huge, huge portions of our tax dollars must be slipped under the table somewhere to a place where we will never see them again and will never be allowed the opportunity to assess the efficacy with which they were expended.’

“Our offices, of course, did a FOIP request on this issue, and we were given a very, very short document with a whole bunch of pages blanked out. More importantly, all the math was blacked out because, of course, we had asked how it is that we came up with this notion that we as taxpayers would save $118 million on a $750 million project by pursuing a P3 arrangement. You know, quite reasonably we asked for the basis for this math. Again, as people who are in this House with an obligation to represent the best interests of taxpayers, to make sure that the issue is discussed broadly, comprehensively, thoughtfully, in a well-researched, well-informed manner, we simply asked for this information to be provided so that the assumptions underlying those kinds of conclusions could be openly debated and considered, but throughout our repeated requests we have never been given access to that information.

“I think that that is an overwhelming rejection of our responsibility to Alberta, to Albertans, to Alberta voters, to Alberta taxpayers. This government perceives that it is the normal course of business that we would hand out really, literally, billions and billions of dollars or what may appear to be billions of dollars, ultimately if you add up all the different P3s, to private corporations and then actively and intentionally tie our hands behind our backs so that we are simply not able to engage in any kind of cost-benefit analysis for these types of investments.

“It was with this objective in mind and this concern about how well a job we are doing here in this House for the people that elected us that we thought we would bring this matter to the Legislative Assembly. As I’ve said, under the FOIP provisions we have been unable to have that information provided to us because the whole issue of proprietary commercial information has been used to ensure that that information not go forward.

“I certainly believe that there is absolutely no reason under that particular heading that the math underlying the $118 million in alleged cost savings cannot be widely distributed to Albertans for us to analyze. I, frankly, find that very hard to believe because, presumably, that $118 million assessment was done before we actually decided who would receive the final contract. In any event, even if that wasn’t the case, this Assembly has the ability to provide information and to table information to members of the Assembly if ultimately it’s deemed to be in the best interests of taxpayers.

“I would suggest that it’s very possible to provide far more information than has been provided to date without in any way jeopardizing any sort of proprietary information that could do any sort of genuine damage to the business interests of this particular company and that, on the contrary, that particular heading under which we exclude the distribution of information to the public about the public interests is far overused and far too often relied on and that there is much more room for us to be provided with the kind of information that we as Members of the Legislative Assembly have a right and an obligation to ask for and to know and to evaluate on behalf of Albertans.

“It’s for that reason that we are making this motion here today, seeking once and for all this information which for two years now has been kept outside of the public sphere for Albertans to view.”

Deputy Government House Leader Rob Renner: “On behalf of the Minister of Infrastructure I would like to urge members to reject this motion. This motion basically requests four documents: one is the initial proposal of the successful proponent; next, the findings of the selection process; the research from the public-sector comparator; and a signed agreement between the government and the successful proponent. This is all to do with the Alberta schools alternative procurement project, or ASAP 1. Don’t you love the acronyms around this place?

“The minister is recommending that we reject this motion for a number of reasons. Firstly, the signed agreement is already on the Ministry of Education website. Secondly, the financial information already released is consistent with what’s available for other publicly tendered construction project bids. Also, Mr. Speaker, some of the information can’t be released because it does have proprietary commercial information included in it, and releasing it could take away from the competitiveness of the process. It jeopardizes the proponent’s ability to do business or to competitively bid on other projects. In fact, Mr. Speaker, it may even negatively influence the bid process which is currently under way for ASAP 2.

“There is a rigorous process used to evaluate the bids. We’re confident that the public-sector comparator is accurate. It’s based on data from our own experiences building and maintaining schools all over the province, and it includes analyses from the independent consultants, Tech-Cost, and the accounting firm of Pricewaterhouse-Coopers. I need to point out, Mr. Speaker, that the successful proponent and the public-sector comparator numbers are already public. They, too, are on Education’s website and the news release from September of 2008.

“Finally, Mr. Speaker, the Auditor General is initiating an audit of the ASAP 1 process, and the results of that audit are expected in October of this year.

“For all of these reasons, Mr. Speaker, I urge all members to reject this motion.”

Harry Chase (LIB—Calgary-Varsity): “This government views P3s as the greatest invention since sliced bread but will not provide the details to explain their tremendous enthusiasm. Now, the government has indicated through a series of puffball questions that Babcock & Brown just coincidentally happens to be the same name as the English subsidiary that is providing the financing now that the mother company from Australia has gone bankrupt. They’ve assured this House and, through this House, all Albertans that there is no problem over the next 30 years of what must have been a wonderfully sweet deal, considering that it was arranged at close to the height of the boom period. Now, the information contained on the website and the so-called public-sector comparator are far from detailed. How those figures were arrived at is not included as part of the website.

“With regard to these 18 P3s the publicly elected trustees had no choice whatsoever. It was to either take a P3 or not get a school. So much for the collaborative, collegial, intergovernmental approach.

“As to the proprietary nature of the information Babcock & Brown would be basically competing against itself. The sweetheart deal that they got during this boom period in order to successfully rebid for the second set of 32 schools would have to be considerably lower because the cost of steel, the cost of cement, the cost of building materials, and the cost of labour have dramatically reduced during this recessional period. So if there is some fear on the government’s behalf that Babcock & Brown’s bid is somehow going to be prejudiced for the next 32 schools unless the government already has predetermined that they’re going to be the recipient of the bid, then providing detail that’s already out there – the contract is over in the construction sense.

“What remains to be seen, of course, is the keeping up of the infrastructure over the 30 years of the contract. That is such a convoluted piece of contracting that the role of the school boards in terms of daily maintenance, cleaning, and so on, versus the role of Babcock & Brown to make sure that the buildings don’t fall around the students’ ears, certainly isn’t clearly spelled out on the website. That’s the type of information we need to have.

“I was very pleased when the AG indicated that he was going to provide an analysis of the 18 contracts to date. This is something that I was asking for, and when he came ahead with it, I was extremely pleased.

“We need to have a sense and Albertans need to believe that this government’s idea of borrowing against the future – it’s cheaper to borrow money than it is to expend the money that was set aside in either our stability fund or our capital fund. If you’re going to back up those mathematical beliefs, then this Babcock & Brown would be a good first place to demonstrate the reasoning behind why it’s better to borrow, particularly at a time when we had sufficient money through our royalties and our surpluses to actually build them in a traditional manner, which we have maintained all along would have been cheaper and would not have required Albertans and their children to submit themselves to a 30-year mortgage on schools.

“Now, it’s interesting that part of the secrecy behind the contracting is not even being revealed to the school boards as to why the government is opposed to having preschool and after-school programs in these P3 schools. Somehow that’s part of the proprietary information where the contractor and the investor, Babcock & Brown, get to dictate to the public school boards, who in theory own the schools but have to submit themselves to the will of the financier, whose information is hidden by the government.

“The requests are all part of the transparency and accountability that this government has prided itself on under the watch of our Premier. By not providing this information and using proprietary information as an excuse, Albertans will never know what has happened until such time as this 40-year-and-running government is forced to vacate its position, and at that point the whirring that we will be hearing will be the shredding of document information.

“It’s a reasonable request. It has to do with transparency. It has to do with accountability. It has to do with the 30 years that this government has sentenced Alberta’s children to in terms of paying for this P3 contract. For a variety of reasons I support the hon. mover of this Motion for a Return 12, the hon. Member for Edmonton-Strathcona. We, too, would like to peer inside this extremely sweet deal.”

Motion for a Return 17—School Construction Financing Audit

Motion for a Return 17 was rejected. Sponsored by Rachel Notley (NDP—Edmonton-Strathcona), the motion requests “[a] copy of the independent audit of the financing method being used for the construction of schools in Calgary referred to in the Assembly by the Minister of Education during Oral Question Period on Wednesday, November 7, 2007.”

Rachel Notley (NDP—Edmonton-Strathcona): “I appreciate that this is a somewhat old reference. Nonetheless, on November 7, 2007, the Minister of Education and the now Minister for Health and Wellness mentioned an external review that took place in the summer of 2007 which compared the traditional model for building schools to the ‘design, build, finance, and maintain model.’ The minister mentioned this external review in the House but did not table the document, and the issue is still relevant today, so it’s very important that we make the audits that the minister referred to public.

“Albertans need the proof that they are not being misled about the actual costs of these projects. As we mentioned with respect to debate around Motion 12, we subsequently had a roughly $650 million to $700 million announcement to proceed with a public–private financing initiative in Calgary, and I believe that that was premised on this audit, which the Minister of Education referred to in November of 2007.

“Once again, for the reasons that were discussed in our debate around Motion for a Return 12, we believe that it would be of value to members of the Assembly as well as to Albertans, who elected us to be here, that we get access to this audit referred to by the Minister of Education in the House in November of 2007.”

Deputy Government House Leader Rob Renner: “I rise on behalf of the Minister of Infrastructure to urge members to reject this motion. The November 7, 2007, reference by the Minister of Education during question period relates to a review by an independent project financial evaluation team, consisting of financial advisers, financial market advisers, and transactions advisers. The minister advises me that releasing this information could interfere with the government’s contractual or other negotiations.

“I also remind all members once again, as I did in comments to an earlier motion, that the Auditor General initiated an audit of this process in March of 2009, and that audit will include a review of the financing method. Once again, I remind members that that report is expected this October.

“I would like to advise the member that upon release of the Auditor General’s report, the Minister of Infrastructure would be pleased to sit down with the Member for Edmonton-Strathcona to answer any outstanding questions that she might have. For this reason, Mr. Speaker, I recommend and urge members to reject Motion for a Return 17.”

To review the status of legislation of interest to the Association, please consult Bills and Motions 2009.