North Bay P3 Math

It hasn’t been covered in southern Ontario, but there is an emerging controversy over the cost of a public-private-partnership (P3) arrangement undertaken to expand and manage the North Bay hospital. See the article here.

Those following my regular rants on P3s may find it surprising that I agree with the province in their methodology for calculating total cost. The province originally announced the project as a $551 million venture. The project involved a company (Plenary Health) building, financing, and operating the additions to the hospital. The province has agreed to pay Plenary Health $35 million a year over the 30-year contract period.

The Ontario Health Coalition and others did the quick math, 30 times $35 million, and got $1.05 billion. But that comparison is illegitimate — streams of payments over time must be adjusted into today’s terms as $35 million in the future is not worth $35 million today (for those interested, see a discussion on discounting )

The real problem with the province’s math is in the figures and analysis that have not been shared with the public, particularly when it comes to cost comparisons to non-P3 arrangements. Infrastructure Ontario, the province’s P3 broker, put out a press release citing a report by PriceWaterhouse Coopers that estimates the savings (relative to traditional infrastructure delivery) of the P3 at $57 million.

But the consultant’s report hasn’t been made public. No questions can be asked about the assumptions underlying the report, which would range from financing cost differentials between the government and the private sector to hospital operating costs under a government model. As far as I’m concerned, the conclusion is useless without the full report. The public has been completely ignored — perhaps the term private-private partnership is more appropriate?

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