|P3 and the proposals
Published Thursday 23rd October, 2008
The new Minister
of Finance, in delivering her first budget speech on September 22, made
several important statements on the government’s infrastructural
proposals. We touched on some of these in the last column and considered
the implications for our national planning system.
This week we will
begin looking at the P3 procurement model which is the stated preference
of the government for these large-scale infrastructural projects. The
Minister of Finance stated in the 2009 budget that the P3 method was to
be used for two important elements of the new transportation
infrastructure: the Rapid Rail System and the National Highways
The P3 model will
require that the State enter into public private partnerships with
private entities, the idea being that the private partners will finance
and build the projects with the State making periodic payments to them
upon completion. Those payments are intended to repay the cost of
finance and allow the private sector partners a reasonable level of
profit. The stated benefits of this procurement method are cost and time
savings due to the involvement of the private sector and insulation from
price escalation. The private sector rewards are limited to the risks it
takes on the project.
know that the P3 model is now under serious re-examination
internationally due to its failure to deliver the promised benefits. The
common criticism seems to be that, in the worst cases, the private
entities did not actually take any kind of risk since the State
(taxpayer) ended up paying for everything, even the private sector
mistakes. Given our own poor record at holding contractors or designers
to account (yes, just like at Tobago Hilton) one has to wonder whether
our country can benefit from that procurement method.
But when one
considers the proposals in a planning framework, it is clear that there
is more to this story. To begin with, the Ministry of Works and
Transportation in 2005 commissioned a Comprehensive National
Transportation Study at a cost of $24 million. The results of that study
are still awaited, but yet, in typical wrong-side fashion, we are calmly
told that rapid rail is a reality, along with the other transport
For the P3
proposals to be viable, they must be carefully studied so that the
private entities can quote an appropriate and competitive annual cost to
the State. The Minister of Finance stated in the budget that both the
Rapid Rail and the National Highways Programme were to be procured by
the P3 model.
highlighted by the P3 critique is that there was almost chronic
over-estimation of passenger numbers in the relevant projects in London.
I ask myself, how are these bidders to estimate the passenger numbers
for the rapid rail. If, as shown in the sidebar, we have virtually
simultaneous execution of the highways, rapid rail, water taxis and PTSC
expansion, how can we estimate the numbers of passengers using any one
If we cannot
estimate the passenger numbers, how then can we set fares which would
repay the private entities their investments?
It seems likely
that we will be unable to set proper fares to cover the cost of the
various projects; be they rapid rail or water taxis. In that case, we
would actually be talking about a “take-or-pay” type scenario in which
the State agrees, whatever the actual usage of the provided service, to
repayment terms which satisfy the private entity. That is a perilous
situation for our nation, since we have to consider a private partner
who takes no risk.
If that is indeed
the case, one could well wonder why bother with P3, since those private
entities would have no motivation to set higher service standards to
improve public participation. If we cannot benefit from the private
sector involvement, why are we pushing ahead with this method of
We would also note
that despite repeated claims by Imbert that these transportation
projects are viable, he has never published any supporting reports.
We leave the most
important for last. Of course we are referring to the importance of
We need to locate
those transportation proposals so that they can best serve residential
communities, business districts, educational centres and so on. The
Ministry of Planning, Housing and the Environment has to be at the
centre of this vital stage of national development. It is impossible to
properly design all these transport proposals without the active
involvement of that ministry. That ministry must not be allowed to table
a draft national plan for discussion in two years’ time, when all these
projects are already underway. This level of recklessness is going to
cost our country too much.
Does the Ministry
of Planning, Housing and Environment have a view on these proposals?
Are we going to be
Infrastucture Development Company’s (Nidco’s) high-profile
advertisements for rapid rail are now giving one pause. Hear this: “As
part of a holistic plan to ease traffic congestion and create a more
modern, efficient, transportation network, the Ministry of Works &
Transport…signed a design-build-operate-maintain contract on April 11,
2008, for the implementation of the Trinidad Rapid Rail Transit System.”
Where is this
comments ever invited on that plan?
Where can the
public see that plan?
In the absence of
committed leadership of integrity, it might really be that this time
around we could be forced to “pray for rain.”
We no longer have
leaders who can admit to error, so it might be up to falling energy
prices to make the whole adventure too expensive.
Next week we
continue to examine the ways in which these transport proposals
interlock, or not.
Afra Raymond is a chartered surveyor and a director of Raymond & Pierre
Ltd. Feedback can be sent to email@example.com.