P3 approach abandoned

On a day when the keys for two brand-new schools in Red Deer were handed over to the divisions set to run them, the province gave word that a new build scheduled for Blackfalds may not open as planned.

On a day when the keys for two brand-new schools in Red Deer were handed over to the divisions set to run them, the province gave word that a new build scheduled for Blackfalds may not open as planned.

Speaking from Edmonton, Infrastructure Minister Wayne Drysdale said Wednesday that 19 new school builds the government announced in 2013 might not be ready for students by 2016, as had been previously pledged.

The potential delays stem from the province moving away from its planned public-private partnership (P3) method to build the bundle after determining that the long-touted approach would actually prove more expensive in this case.

Over the last seven years, the government has thrice used the P3 approach to fund the construction of 40 schools across the province, bundling builds together in large groups to be handled by a single consortium.

The last bundle of 12 schools included three for Red Deer and one in Penhold, all of which will open in September.

But while in each of the first three cases at least four consortiums bid on the work, for the latest batch of 19 builds — including an elementary facility for fast-growing Blackfalds — only one consortium showed interest. The Build 2 Learn group’s cost estimate for the work, said Drysdale, was ultimately too high.

“We have always maintained that Alberta would only use P3s where they showed value for money and in this case, the Alberta government’s rigorous evaluation process determined a P3 does not make sense,” he announced.

Build 2 Learn’s bid amounted to $570.7 million, while a “public sector comparator” done by the province and vetted by outside consultants determined that the work need only cost $556.6 million if done through traditional methods. Thus, said Drysdale, the government will either look after the construction of the schools or provide grant funding to individual school boards so that they can look after their own builds.

The 19 are part of the government’s larger $2-billion commitment to open 50 new schools and modernize a further 70, a task it has long pledged would be completed by 2016 when the next provincial election is scheduled to be held. Wednesday was the first time 2017 was cited as the new delivery date.

“People get hung up on a date made in a political promise but I think as Infrastructure we have to do what’s right for the province and for the people,” said Drysdale.

He said the majority of the school projects should still be completed by 2016, but that some may be pushed back into early 2017, at which time students could move in in the midst of the school year. Starting down the P3 road for the 19 builds has already cost $750,000 and meant some time has been lost, but a lot of the preparatory work done for the planned P3 builds will still apply despite the reversal.

Municipal development permits have been secured and school designs completed. Drysdale said tenders will go out in the next few months and shovels could be in the ground for the 19 by fall.

Wolf Creek Public Schools will now have the option to take over the Blackfalds build itself or leave it to Alberta Infrastructure, where it could be bundled with other builds. Being the only one of the 19 in Central Alberta could preclude the latter option, said superintendent Larry Jacobs.

He said the division needs more details from the government before determining how it will move forward. Throughout the P3 process, he said, the division got precious little information about what work the department was doing.

“It depends what we find out in the next few days. It could be frustrating if we find out that the front-end process is only about 40-50 per cent complete, but we’re hopeful that everything has been done on the front end and all we have to do is go to tender. If that’s the case then we’re fine,” said Jacobs.

The contract to build the 12 schools opening this year was awarded in 2012 for $288.78 million. The province said at the time that using the P3 method for that bundle would save $43 million and ensure the schools would open up to two years sooner than if done by traditional methods.

But in this case, provincial officials have claimed that last year’s flooding and an overheated construction market left most bidders unable or unwilling to take on the school builds. And Drysdale said the competitiveness of bids in past bundles has driven down profit margins, pushing builders toward more attractive projects.

Other analysis has found that the government has made the bundles too big, which leaves smaller contractors unable to get involved.

Drysdale said he was “surprised and disappointed” that the P3 approach did not prove cost-effective, but he said the government will continue to consider the method for future capital endeavours.

Under the P3 format, industry is to design and build new schools in the province, financing at least half the cost of construction before being paid out over 30 years. A contractor will also provide maintenance of the facility for that 30-year period.

Once opened, the schools will be owned and operated by the school boards, and the ownership contract will allow for joint-use agreements and third-party leasing arrangements.

Thirty-one other new school builds — including two in Red Deer and one in Sylvan Lake — in the province will not be affected by the P3 reversal. Those projects will either be handled by individual school boards or by the province, and are expected to be completed by 2016.


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