P3 school projects blasted by AG report

The former Liberal government pushed forward with a public-private partnership agreement to build two schools without proper evidence to support the decision, according to the provinces auditor general.

Auditor General Kim MacPherson said in her report that she found no evidence the Department of Supply and Services performed a formal preliminary analysis before moving forward with a private-public partnership to build the Eleanor W. Graham Middle School and the Moncton North School.

"We found no evidence, however, that any kind of formal preliminary analysis was performed to support the P3 decision made by the cabinet," the report said.

"We were advised there was some informal discussion among senior officials in the Department of Finance and the Department of Supply and Services during the budget process, but we were unable to determine the rationale for this decision."

There were other questions about how the Liberal government moved forward with the project.

In October 2008, the government merged the two school projects into one overall agreement. But the auditor general found "no evidence that this decision was supported by any type of formal assessment showing [the agreement] as the most cost-effective form of P3 for this project."

As well, the report said neither the Department of Supply and Services nor the Department of Education were officially involved with the decision alter the procurement method.

And the report said, the provincial government performed a value-for-money analysis after the decision to adopt the P3 approach was picked. The auditor general pointed out that normally those assessments are conducted before the decision is made.

MacPherson's report said this could raise questions about bias.

"Since the P3 decision was already made when the VFM [value-for-money] analysis began, there is a potential risk that the VFM analysis could be biased to support the Cabinets P3 decision," the report said.

The auditor general also raised concerns about the payments and the process of hiring two advisors.

A "process advisor" was paid $107,000 and a financial advisor was paid $565,000 for their services.

However, the two advisors were hired without a public competition.

"In our opinion, due process was not followed in engaging these advisors," the report said.

No advance debate

The report, which was released on Thursday,also said the deal was signed before the legislative assembly was told of the deals.

She said the project was not included in the capital estimates until 2010-11 although the provincial government had signed multi-year agreements with a successful bidder in September 2009.

The deal with the contractor included a commitment to make annual payments of roughly $5.1 million for a 30-year period.

"The legislative assembly had no opportunity to debate this commitment in advance of the decision being made," the report said.

"In our view, government should obtain approval of the legislature through the budget process before a multi-year P3 contract is signed."

Questions over costs

The auditor general also raised questions over the project'scost savings touted by the government.

The department said the P3 project would save $12.5 million compared to the traditional approachof building a school. The auditor general's report offered a different view, however.

The report said the provincial government inflated the costs of maintenance and other life-cycle costs.

The department estimated those costs would be $23.7 million compared to the $9.5 million cited by the auditor general.

When those differences are factored in, the auditor general's report said the traditional method would actually have saved $1.7 million.