P3s: "Little more than money-making mechanisms for builders and banks"

Banks and construction companies are ratcheting up vast profits from public private partnerships (P3s) according to a new British study that looked at equity sales for P3s.

A study of p3 projects from 1998 through 2010 by Dexter Whitfield for the European Services Strategy Unit reveals that there are huge profits to be made from the sale of equity once a P3 project is operational. 

The study found more than 240 P3 equity sales involving more than 1,000 P3 projects.  The sales generated £10 billion.  This amounted to an average profit of around 50%.  That's not too shabby when compared to an average operating profit for construction companies of 1.5%.

Whitfield said that, based on the findings, P3 projects were "little more than money-making ventures."

"The level of profiteering from PPP equity transactions makes a nonsense of the original value for money assessments," he said. "If these profits had been taken into account at the evaluation stage then few projects would have been approved. PPP projects are little more than money-making mechanisms for builders and banks," he said.

The two highest profiting sectors were health and criminal justice, with averages of 67% and 55% respectively, with transport and education falling below the 50% average for P3s, the report said.

The study concluded that  the British Treasury and National Audit Office failed to identify the true scale and profitability of P3 equity transactions

Ontario continues to follow Britain by developing privatized P3 hospitals (which the Ontario government now calls 'alternative financing and procurement').

The study is available here.   A report from the Guardian on the study is here.

dallan@cupe.ca