3-Ps

After three years of effort and investment by Centennial College, its bid to redevelop the former Guild Inn in Scarborough is likely at an end. In a meeting at City Hall, the Government Management Committee will probably recommend that the City pursue a diminished different development concept with a new set of proponents. Sadly, this redirection will result in a far less beneficial outcome for the community, which has been pressuring the City for restoration and redevelopment of the former hotel site for more than a decade.

The merits of this specific proposal and the City’s alternatives are less interesting than the general pattern I’ve observed in the way public-private partnerships fail. Ignore the splutterings from 3-Ps proponents; they almost always fail, whether that failure is measured in suboptimal results or, as in the case of Centennial College, in the rejection/withdrawal of the proposal, or in the number of good ideas that are never proposed because the process is so frustrating. During this period of public sector austerity, promised by all three levels of government, it’s about time we stopped using the prospects of 3-Ps as rhetorical candy whenever the treasury can’t underwrite the public sector’s grand schemes.

Furthermore, these schemes aren’t so grand. The City’s parks, for example, are struggling with a growing backlog of unfunded capital needs that will require hundreds of millions of dollars to clear. At Guild Inn Park, Centennial College was attempting to bring about $6 million in private sector dollars to fix and reuse an important heritage building. Lacking the funds to look after its own asset, the City will likely bulldoze it and plant grass, shifting funds from other park priorities to pay for the demolition, disposal, and landscaping costs. Multiply these scenarios across the City’s massive real estate, heritage, parks, transit, housing, and recreation portfolios, and it becomes glaringly obvious that this a bad moment in history to be ignoring the reasons why so many 3-Ps proposals end in futility.

I think it’s a structural problem in the relationships within which 3-Ps are negotiated. The public and private sector positions are necessarily opposed, as both sides try to extract maximum value for their stakeholders. The private sector cares little for the public interest, and the public servants have little concern for the profitability of the venture for the private sector investor. Both sides are held accountable for the risks and costs of the deal, but neither side is accountable for the lost opportunity when negotiations falter.

The inherent merits of a great idea aren’t enough to survive the adversarial behaviour of the entrepreneurs and bureaucrats assigned to make these deals work. A third party needs to mediate the public and private interest and be accountable to both sides for the survival of the proposal to a successful conclusion. It’s silly to imagine that the success rate and quality of 3-Ps proposals will improve otherwise. The public and private sector have to be at the table, but unless someone is advocating for the deal itself, maintaining a focus on the mutual benefits, and facilitating negotiations with understanding and respect for both parties, most of these proposals are doomed, like the Guild Inn.

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