Dear Ms. Farrell: In the matter of Partnerships BC

Dear Ms. Farrell:

 

I read with interest your letter-to-the-editor in the Times Colonist in response to my column on Partnerships BC. Thank you for sharing your views on the issue.

I’ve taken the liberty of annotating your letter.

Since you’ll be most familiar with it as the project director, many of the citations in the annotations are taken directly from the auditor general’s 2013 report on the Evergreen Line project.

The excerpts from your letter are in bold.

Provincial construction contracts are awarded after a rigorous and impartial procurement process, directed by public servants, overseen by fairness advisers and protected from improper influence such as political contributions.

Partnerships BC is a Crown corporation. It’s board is appointed by the BC government and the board appoints the CEO. It has about as much independence as BC Hydro or any other Crown corporation.

You will have seen that independence at work this week with the appointment of Brad Bennett as chair of BC Hydro.

Procurement decisions are made by a team of public-sector employees and advisers who have relevant expertise. Proponents’ proposals are evaluated in accordance with established criteria that follow a technical qualification process.

Out of five board members and a seven person management team, we count one engineer, one economist, three chartered accountants, two chartered financial analysts, a lawyer, couple of former stockbrokers, and exactly one person who has hands-on construction experience, unless you count Frank Blasetti’s oversight of the fast ferries project in the 1990s.

On that “established criteria” point, let’s check in with BC’s auditor general:

The 2008 and 2010 business cases fell short of meeting the Capital Asset Management Framework (CAMF) guidelines because they did not adequately communicate the project risks or how agencies would measure performance…

Given the costly and complex nature of the Evergreen Line project, we expected agencies to have rigorously and fully applied CAMF’s risk management guidelines.

Because of inadequate documentation and record-keeping by agencies, we could not be assured about the scope and rigour of their reviews of the 2008 and 2010 business cases.”

Evaluators are screened by a conflict-of-interest committee and must be cleared prior to evaluation.

They’re the ones who recuse themselves and their companies from a particular bid, so as to evaluate the bids, but may bid on future projects, right? Awfully cozy.

And what about past or future conflicts-of-interest?

PBC has a new document on its website: an Ethics and Conduct Policy (revised as of October 2014). Wasn’t there before, but this caught our eye:

Accept appointment to a board of directors of, or employment with, entities with which you personally, or through your subordinates, had significant dealings during the period of one year immediately prior to the termination of your service;”

How many people at PBC have had the one-year cooling off period waived?

The competitive selection process is monitored by an independent fairness adviser, who has access to all documents, meetings and information related to a project.

The sale of BC Rail had a fairness monitor too.

And your point on documents is also predicated on them actually existing in the first place. Let’s check in with the auditor general on that, specifically in regards to the Evergreen Line:

The documents we reviewed fell short of what was required to fully understand the analysis and reviews that supported agencies’ recommendations.”

During and following a project’s procurement process, the fairness adviser’s reports are made publicly available.

So let’s take a look at what’s not publicly available:

British Columbia’s Interior Health Authority won’t say how much it is spending on a new residential care facility, with a spokesperson claiming that information can only be disclosed via a freedom of information request.”

The Kelowna Capital News also reports the “health authority has even gone so far as to tell the winning bidder not to reveal the figure either.”

Key information about the new Okanagan jail, including its long-term cost to taxpayers, remains locked away in government files.

A freedom of information request filed by the Western News to obtain copies of the construction timeline, details of contractor performance penalties and the 30-year schedule of payments was denied almost in full.

In its response letter, the Ministry of Technology, Innovation and Citizens’ Services cited provisions of the Freedom of Information and Protection of Privacy Act that allow it to withhold information it believes could harm the financial interests of the government and its business partners.”

Who would the principal partner in that jail project be, BTW? Plenary Justice.

Here’s a birds-eye view of Plenary Group (parent company) from Down Under (Australia), where Plenary is actually based.

From the Sydney Morning Herald (2012):

Plenary Group is one of the largest (if not the largest) participants in the Australian and Canadian PPP markets. Its financial position is of vital interest to Australian and Canadian state and federal governments.

Some of the largest government PPP assets in Australia and Canada therefore are majority-owned and controlled by four people – the founding members of the Plenary Group, Messrs O’Rourke, Oppenheim, Wilson and the widow of founder, Jim Cox.

Plenary is not listed on a stock exchange where its financial statements are there for all to see, and where it can access public equity. Although a few entities within its burgeoning corporate empire do disclose, Plenary’s ultimate financial position is unknown.

A byzantine maze of companies winds to a cul-de-sac: a private trust controlled by the three Plenary principals and associated entities. Zero transparency.”

By our count, Plenary has won three bids with PBC. But they take credit for four.

The fourth is the Abbotsford Regional Hospital, managed by Mike Marasco when he was at PBC from 2003 to 2007, which was after he was the VP of Hospital Development with the Fraser Health Authority, and before he became CEO of Plenary Concessions in 2007, part of Plenary Group.

Why do they take credit for the fourth? Because, in 2004, ABN Amro lost three of their key staff who left to form Plenary Group.

ABN Amro provided the financing for the Abbotsford Regional Hospital project.

And that touches on the little problem with the Sea-to-Sky project six years later. Let’s check in with the auditor general again:

During 2010, the private-sector partner ownership changed. We found the ministry did not conduct a detailed analysis of this sale, something it is able to do under the terms of the contract.

Because the government is such a long-term partner in any P3 arrangement, its contract managers need to ensure government’s best interests are reflected in any proposed ownership change.”

B.C. is an international leader in public procurement, and at Partnerships B.C., we are always looking for opportunities to improve.

Let’s take a stroll down memory lane with the auditor general, again:

May 2011: We recommend that the public sector partner of P3 projects: retain all documents related to key changes in the project agreement.”

..

July 2012: “Certain areas for improvement in my current report reflect some of the recommendations issued in my Office’s previous report on P3s…specifically, the need to retain all documents related to key changes in the project agreement, and to establish formal requirements for public reporting.”

March 2013: “The documents we reviewed fell short of what was required to fully understand the analysis and reviews that supported agencies’ recommendations. Business cases omitted assumptions and explanations I considered critical to understanding the project’s costs, benefits and risks, and none of the agencies documented the substance of their reviews of the material presented to Treasury Board.”

December 2014:More than half of the consultant and contractor files reviewed didn’t contain adequate documentation, such as the justification for hiring the successful contractor, the reasons for direct awarding contracts to individuals or the rates paid.”

Improvement comes at a glacial pace.

Whether it’s working with our industry stakeholders or implementing the recommendations of the B.C. government’s Crown corporation review, our practices are constantly evolving.

From the auditor general:

Missing were: issues raised with the business case analysis and how these were resolved; purpose and outcomes of meetings held to review the business cases; and some of the specialist review documentation (for example, the consultant who reviewed the 2008 business case was not required to provide a written report).

Business cases omitted assumptions and explanations I considered critical to understanding the project’s costs, benefits and risks, and none of the agencies documented the substance of their reviews of the material presented to Treasury Board.

Since 2002, Partnerships B.C. has participated in more than 40 infrastructure projects, including transportation projects linking communities around the province, and health-care facilities in Abbotsford, Fort St. John and Victoria.

As taxpayers, we can all celebrate that every project to date has been delivered fairly, on time and on budget.

Seriously? You want to run with that one?

OK. Two words: Evergreen Line. Not on time. Not on budget.

And from Montreal last month:

The city’s inspector-general says the engineering firm did not hold Demix Construction to the technical specifications of its contract. He said he is “seriously questioning the surveillance work of SNC-Lavalin’s supervisors…”

Montreal hired SNC-Lavalin for the supervision of its roadwork sites for 2015–2017 at a cost of $2.9 million.

Oh, nearly forgot, how are the pipes holding up at the Abbotsford Hospital?

 

Cheers,

 

Dermod