NZ executive questions P3s; Canadian politicians should pay attention
The top executive of New Zealand's largest construction firm has told the country's new national government that its plans for massive infrastructure investments would be delayed if financed through so-called public-private partnerships (P3s).
Governments around the world are planning massive infrastructure investments to blunt the effects of the current crisis facing the world's economies. Both the Canadian and British Columbia governments favour the use of P3s to provide private finance for these projects.
But questions have been raised about whether P3s can deliver these projects in a timely or cost-effective manner.
And now the top executive of New Zealand's Fletcher Building's infrastructure division, Mark Binns, says complicated legal frameworks and a dodgy credit market mean P3 projects will be subject to lengthy delays.
If the aim was to bring projects to fruition quickly, making them PPPs would be a retrograde step, as so much time is involved in setting up the legal framework between participants in the project, he said. He also questioned whether private sector funding would be viable in the current credit environment without Government guarantees, which nullified the transfer of risk to the private sector.
Binns goes on.
Sometimes benefits of transferring the risk of PPP projects to the private sector were illusory, it said, citing the British Government's bailout of Metronet, the private operator of the London Underground.
Binns suggested that if the transfer of risk was not complete, the true benefits of PPPs came down to an analysis of the funding costs, and there was a strong argument that the Government would be better off just raising debt, potentially through infrastructure bonds, to do the project using other traditional methods of contracting.
The builder also cited major "upfront paperwork and contractual costs" on PPPs, saying the time and cost involved in this phase was significant and tended to counter any savings in the design and delivery phase.
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Fairbanks, Alaska, United States