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Last month saw the second conviction related to allegations that SNC-Lavalin executives paid $22.5 million in bribes to get the contract for a P3 privatization scheme.
Ottawa (21 Aug 2018) — Last month saw the second conviction related to allegations that SNC-Lavalin executives paid $22.5 million in bribes to get the contract for a P3 privatization scheme. The P3 privatization scheme was for the McGill University Health Centre’s Glen Campus.
The conviction came after former SNC-Lavalin vice-president of construction, Riadh Ben Aissa, pleaded guilty to using a forged document. Four years ago, Pamela Porter, the widow of president of the McGill University Health Centre (MUHC) at the time the contact was awarded, pleaded guilty to money laundering.
Three individuals are scheduled to go to trial in January 2019, including the former CEO of SNC-Lavalin, Pierre Duhaime.
MUHC P3 privatization scheme illustrates many of the problems with privatization
Bribery allegations are only one of the problems with the MUHC P3 privatization scheme. Like other privatization schemes, the secrecy and lack of accountability have led to a number of serious problems.
False assumptions used to justify using a P3 privatization scheme
If the value for money report prepared by PPP Québec had used accurate figures, it would have been clear that using a P3 privatization scheme was going to be more expensive that the public option. An audit by the Quebec auditor general found that “inappropriate” assumptions about maintenance and renewal costs were used to make the public option appear more expensive. The auditor general also found that the borrowing costs for the public option were artificially inflated. Had false assumptions not been used, the value for money report would have shown that the public option was cheaper than privatization.
The use of questionable assumptions for value for money reports for P3 privatization schemes is widespread. Quebec’s auditor general found the same problems with the cost estimates used to justify using a P3 privatization scheme at for a new facility for the University of Montreal hospital. The Auditor General of Canada, auditors general in Saskatchewan, Ontario, and New Brunswick and a forensic auditor in B.C. have also uncovered the same problem with other P3s.
Serious problems with completed hospital
Since the hospital was completed a number of serious problems have emerged. These concerns include wiring in operating rooms that wasn’t adequate for a key piece of surgical equipment and sewer water flooding the birthing centre.
Public on the hook for cost overruns
According to the privatization industry, with P3 privatization schemes, any cost overruns are supposed to be covered by the private company building the P3. In practice, it often doesn’t work out that way and the MUHC P3 is no exception.
The project was supposed to cost $1.3 billion, but there was a cost overrun of $360 million. Even though the private companies building the hospital were supposed to cover the cost, the Quebec government ended up paying $108 million of the cost overruns.
Will a criminal trial break down the wall of secrecy surrounding privatization schemes?
All forms of privatization come with a high level of secrecy. Even though the public is paying for services, they are not allowed to see key information about costs and about how those services are run. What is not clear is whether a criminal trial will be enough to break down the wall of secrecy surrounding privatization schemes. We will have a better chance when the next trial related to the MUHC P3 privatization scheme starts in January 2019.