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Reinventing the Building of Schools: The Real Legacy of Public-Private Partnership (P3) Schools in Nova Scotia (AIMS, May 2017)

Reinventing the
Building of Schools
The Real Legacy of
(P3) Schools in Nova Scotia
Paul W. Bennett, Ed.D.
Director, Schoolhouse Consulting, Halifax, Nova Scotia
Halifax, Nova Scotia
May 2017
Policy Paper
The Atlantic Institute for Market Studies (AIMS)
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Halifax, Nova Scotia
May 2017
Reinventing the
Building of Schools
The Real Legacy of Public-Private-Partnership
(P3) Schools in Nova Scotia
By Paul W. Bennett, Ed.D.
Director, Schoolhouse Consulting, Halifax, Nova Scotia
Table of Contents
Executive Summary 5
Introduction: Innovation Injection and Rejection 7
Background Context: Why Turn to Public-Private Partnerships (P3s) for New Schools? 10
Building Too Many, Too Fast: The P3 Schools Construction Program, 1993- 2001 13
Successes and Set-Backs: Assessing the P3 Schools Record 18
Hidden Legacy: Of Education Sector Mismanagement and the Innovation Quotient 23
Who Benefited Most from P3 Schools? Net Benefits and the Public Interest 28
Summary: Lessons Learned from Nova Scotia’s P3 Schools Initiative 33
Recommendations: Building Upon the Lessons 34
References 36
About the Author
Paul W. Bennett, Ed.D. (OISE/Toronto) is Founding Director of
Schoolhouse Consulting, and Adjunct Professor of Education at Saint
Mary’s University, Halifax, NS.
Dr. Bennett is a Halifax author, education professor, policy researcher
and news commentator. Prior to completing his doctorate at the
University of Toronto, Paul earned an Hons. B.A. in History and
Political Science (York), a M.A. in History (York), and a B.Ed. from the
University of Toronto. Over a career spanning four decades, Paul has
taught high school history, authored three national textbooks, headed
two leading independent schools, produced many policy papers and
written or co-authored eight books. His three most recent books
are The Grammar School: Striving for Excellence in a Public School
World (2009), and Vanishing Schools, Threatened Communities; The
Contested Schoolhouse in Maritime Canada, 1850 -2010 (2011), and
The Last Stand: Schools, Communities and the Future of Rural Nova
Scotia (2013).
Today Paul is primarily an education policy analyst and commentator,
producing regular columns for The Chronicle Herald, The Globe and
Mail, and The National Post and a variety of other publications. His
most recent academic articles have appeared in The Journal of Sports
History, Historical Studies in Education, Acadiensis, Canadian Issues,
and the Royal Nova Scotia Historical Society Journal.
Over the past seven years, he has produced major policy papers for
the Atlantic Institute for Market Studies, the Northern Policy Institute,
the Society for Quality Education, and the Canadian Accredited
Independent Schools Association. He specializes in K-12 educational
policy, education history, educational standards, school governance,
teacher education, and special education services.
Currently, Paul serves as Chair of the Board of the Halifax Regional
Library Board, and Vice Chair of the Board at Churchill Academy, a
Dartmouth school for students with learning challenges.
About the Author
Executive Summary
The current research report, Reinventing the Building of Schools, seeks to dispel the
enduring myths associated with Nova Scotia’s foray into Public-Private Partnership
(P3) schools from their inception in the mid-1990s until the present. With the 20-year
P3 school contracts expiring over the next few years, it seemed to be an opportune
time to take stock of the successes and shortfalls, to assess the real value of the whole
initiative, to identify a few public policy lessons, and to suggest a few ways to build
upon the P3 schools legacy in school planning, innovation, and management.
Public criticisms of the P3 school deals have been overstated and amplified by
politically-driven research which makes little or no reference to the later participation
of OMERS, a major Ontario union pension fund. The critical issue is not whether the
province should purchase or “buy-out” the private contractors or not, but how we
can sustain the innovative impulse unlocked by the first generation of P3s – nurture
the innovative ideas, re-capture entrepreneurial spirit, and move ahead with a more
flexible, integrated and responsive school building process.
Recent public revelations about “queue jumping” in the N.S. school construction
approvals process also suggest that political interference in deciding where schools
are built or renovated is a public issue of considerable concern. Building upon research
conducted for this policy paper and the lessons gleaned from recent Nova Scotia
Auditor General reports, I suggest that the Government of Nova Scotia, the Department
of Education and Early Childhood Development, regional school boards, and potential
private sector partners consider and act upon the following recommendations:
1. Make school capital planning a higher priority of the government and initiate a
multi-year school construction and renovation planning process.
2. Establish a Capital Asset Management Framework (CAMF) and expand the range of
strategic options from public procurement to alternative service models. End the
current counterproductive division of responsibilities in school planning between
the department and school boards.
3. Build upon the foundation laid by public-private partnerships by establishing
“Partnerships NS,” as a P3 advisory committee, tapping into entrepreneurial
4. Expand the network of school-level facilities management teams from P3 schools
to regular schools, as a demonstration of community engagement.
5. Conduct a comprehensive audit of the P3 school planning and management venture
assessing the hard lessons, community impact, costs and benefits to the public.
6. Develop a new set of provincial guidelines for identifying P3s, including clear
performance standards and criteria for selection.
7. Establish criteria for evaluating progress in reinventing school planning and
management process, drawing upon the latest research in public sector
management, including value-for-money (VfM) analysis and P3 screening.
Innovation Injection and Rejection
“We believe P3 models are largely misunderstood and often misrepresented in pub-
lic discussion….”
— Paul LaFleche, Deputy Minister of Transportation and Infrastructure Renewal, Testimony,
Public Accounts Committee, Nova Scotia Legislature, January 25, 2017.
Nova Scotia’s Public-Private Partnership (P3) schools have attracted more than their
share of “scare stories” since their inception two decades ago. The first ventures,
graphically symbolized by the new Horton High School in Wolfville, NS, tagged the
“Taj Mahal,” built at a total cost of over $30-million, cemented in the public mind the
image that private-public partnerships drove costs up, exemplified lavish spending,
and enriched private developers (Sheppard 1998). In December 2015, the public
reputation of P3 schools took another hit. An Access to Information release obtained
by the Nova Scotia Government and General Employees Union (NSGEU) rolled out
some big cost figures: the total inventory of 39 public-private partnership schools,
over 20-years, would cost provincial taxpayers at least $726-million, including $47.2
million for Horton H.S., representing $400 million in total principal and $326 million
in interest payments (Gorman 2015).
News reports highlighted the enormous costs, with no reference whatsoever to
comparable estimates for public procurement alternatives. The Canadian Centre for Policy
Alternatives (CCPA) seized on the cost figures, warned that the numbers could ultimately
reach $1-billion, and recommended that the government exercise its “buy-out” option
when the 20-year leases began to expire, starting in June 2016 (CCPA-NS, 2016).
The massive experiment with P3 schools in Nova Scotia from 1996 to 2001 was a
period of radical innovation in school construction with difficult-to-assess results. Over
the course of the first six projects, the province and the private developers essentially
reinvented school design, building, and management to break the traditional mold
and inject a little private sector entrepreneurial spirit into the rather formulaic public
capital procurement process (NS, PAC Hansard 2017; McCulloch 2017). A Nova Scotia
Auditor General’s report in 1998, focusing on the first school completed, O’Connell
Drive Elementary School in Porter’s Lake, NS, found the province’s decision to classify
the lease agreement as an operating expense instead of a capital lease to be unjustified,
and dealt a fatal blow to the rather “dodgy” plan to transfer the debt for school
construction “off-book” in the province (Auditor General 1998). In the absence of a
reliable public sector comparator, critics of P3s feasted on the revelations. The public
reputation of such projects never really recovered in Nova Scotia and far beyond, in
other provincial school jurisdictions.
Lost in the ongoing public debate over P3 schools was any real reference to the ultimate
success and positive impact of the thirty-nine P3 schools for students, parents, school
boards, and local taxpayers. Nor was there any recognition of the exciting possibilities
for “reinventing government” unlocked by the P3 “big bang” in Nova Scotia. The
purpose of this research report is to re-assess the actual Nova Scotia experience with
P3 schools and to right the balance. It demonstrates that, under certain circumstances,
public-private ventures, effectively monitored and managed, can be an innovative and
sensible means of achieving desired public purposes.
From the outset, the Nova Scotia P3 schools initiative was attacked as a “privatization”
scheme that threatened to subvert public education (Dobbin 2002; Shaker 2003). Most
of the more authoritative, independent analyses recognized it as “a cautionary tale,”
but (at the same time) critical in closing the education infrastructure gap (Deloitte
Research 2006, 24). Scaling back the original plan to build 55 such schools in 1999
made good business sense because of evidence of “a variety of political and other
problems, including cost overruns driven by project “gold plating” (i.e. increasing
school standards, expensive site selection), weak government management, and
problems with the contract terms” (Meek 2001). Few dispute the fact that the P3
school program allowed the province to bring far more new schools into operation.
In fact, by 2006, privately-operated schools accounted for about 14 per cent of the
total square footage in the province’s schools (Deloitte Research 2006, 24). Despite
the scare stories, the only value-for-money study of Nova Scotia’s P3 school building
program, conducted in 1999-2000 by KPMG, was unable to answer the key question
of whether the P3 schools actually cost more than those that would have been built
by conventional public procurement means (KPMG 2000; PAC, Hansard 2003).
Leading critics of P3 schools simply dismiss such contradictory research findings and
persist in claiming that the whole venture was a “bad deal” for Nova Scotians. In June
of 2016, the Canadian Centre for Policy Alternatives (CCPA-NS) issued a summary report
on Nova Scotia’s Public-Private Partnership Schools (P3s), entitled Private Profit at the
Public Price, that attempted to bury one of Atlantic Canada’s most adventuresome
forays into reinventing the building of schools. “The P3 schools program in Nova
Scotia,” the CCPA-NS media release declared, “was a failure that cost Nova Scotians
tens of millions more than the traditional system procurement system.” With the
twenty-year leases on thirty-nine P3 schools expiring, it claimed that “buy-out” was
the only option to put an end to the whole venture (CCPA-NS 2016).
Nova Scotia’s rather grand experiment with P3 schools two decades ago is now
coming to an ignominious end. Since August of 2016, the Province has, in stages,
retreated from leasing schools and announced that it would be purchasing most of
the 39 schools constructed in the late 1990s under successive Liberal and Conservative
governments. With the 20-year initial leases expiring, the province is preparing to pay
millions of dollars more to extricate itself from the school capital finance partnerships.
By March of 2017, the total cost of buying-out the P3 schools totalled an additional
$149.8-million (Flinn 2017) and will be added to the provincial debt in 2020 (Flinn
Big decisions are, once again, being made in haste, according to N.S. Auditor General
Michael Pickup, and serious questions arise about how and why it has happened. That
June 2016 CCPA report was doubtless timed to tip the balance in favour of a total
buy-back of the leased assets, at a time when the province is already burdened with a
$16-billion debt. Two reports by successive Nova Scotia Auditors General, in February
2010 and in November 2016, tilt in a different direction (AG 2010 and 2016). Taken
together, the more recent AG reports tend to raise serious questions about public
sector management, providing ample evidence of poorly worded contracts, structural
disconnects, lax public oversight and ossified infrastructure management practices.
Comparing school building and operation costs of the P3s with traditional public
procurement costs is not impossible and, as shown in this report, presents a completely
different picture of the real legacy of Nova Scotia’s public-private partnerships in the
education sector.
Background Context:
Why Turn to Public-Private Partnerships (P3s)
for New Schools?
“Reinventing public institutions is Herculean work. To succeed you must find
strategies that set off chain reactions in your organization or system, dominoes that
will set all others falling. In a phrase, you must be strategic.”
— David Osborne, “Reinventing Government: What a Difference a Strategy Makes”,
Global Forum on Reinventing Government, Vienna, Austria, June 2007.
Governments in the 1990s, in Nova Scotia and elsewhere, were struggling with
staggering debt, facing mounting concerns about aging school facilities, and looking
for alternatives. Entering into private-public partnerships allowed the province to
undertake a major rebuild of schools while transferring the financial risk to private
developers (NS, PAC, Hansard 2003). The appeal of private sector involvement was
broader than financial because policy-makers also sought to apply lessons learned
in private sector business to improve the performance of government in delivering
schools and related public education services. Inspired by public sector reform in
the United Kingdom, Australia and New Zealand, a “reinvention movement” made
its appearance in Nova Scotia with the arrival in 1993 of the John Savage Liberal
Government (Clancy, Bickerton, Haddow, Stewart 2000, 74-75).
The ideal of progressive reform of government services had lost its former lustre
by the 1990s, particularly among a civil service frustrated by bureaucratic obstacles
and a public increasingly dissatisfied with the delivery of services (Barzelay 1992).
Determined to close what was viewed as an “innovation gap,” a new breed of
“reinvention” reformers believed that the traditional bureaucratic form of regulatory
government would benefit from an infusion of the “entrepreneurial spirit.” Nova
Scotia Finance Minister Bernie Boudreau’s 1994 Government by Design plan echoed
the school restructuring philosophy popularized in David Osborne and Ted Gaebler’s
1992 book, Reinventing Government: “State government and school boards would
steer the system but let others row” (Osborne and Gaebler 1993, 314). An injection
of private business innovation was necessary to transform the public management
status quo where “public agencies utilize resources inefficiently,” were “stuck in out-
moded routines,” “insensitive to citizen’s concerns” and “run more for the benefit
of employees than clients” (Altshuler and Behn 1997, 4). When it came to building
schools on a massive scale, governments looked to tap into private business to
develop a “flexible, dynamic, project-oriented matrix” and “organic forms of
organization” that would be superior to the traditional “mechanistic-bureaucratic
form” (Lynn, 1997, 91) commonly associated with conventional school capital
planning, finance, and construction.
The whole idea of reinventing school design, building, and management adopted by
the Savage government from 1993 to 1996 was borne of that broader “reinvention
movement” aimed at public sector reform as well as better management of public
finances (Clancy, Bickerton, Haddow, Stewart 2000, 74-75). Facing mounting
provincial debt, damaged credit ratings and a backlog of school construction, Savage
and his finance minister found an exciting new prescription in David Osborne and
Ted Gaebler’s 1992 bestseller, Reinventing Government: How the Entrepreneurial
Spirit is Transforming the Public Sector. Premier Savage and his cabinet may have
embraced radical restructuring, but they did so for more pragmatic than ideological
reasons. The problem, in Osborne and Gaebler’s words, was “not too much or too
little government but the wrong kind of government.”
In the September 1993 Throne Speech and companion budget, Savage and his ministers
committed themselves to “client-centred government.” That meant delivering public
services differently “through the eyes of those being served, rather than the vantage
point of those delivering the service – the government and bureaucracy.” His finance
minister telegraphed what was to happen: “Innovative ways to deliver programs and
services will be developed, and traditional barriers to change will be removed.” As
Nova Scotia’s “reinvention architects,” they sought to transform the “special interest
state” in health, education, municipal services, and social assistance and enlisted
Education Minister John MacEachern in a series of education reforms, including the
development of P3 schools (Clancy et al. 2000, 75).
The earliest P3 school was the Evergreen Park School constructed between 1994 and
1996 in Moncton, New Brunswick, but the new venture came under its heaviest fire
in Nova Scotia. Public sector unions opposed such agreements, fearing that they
posed a threat to union contracts, wage rates, and long-term job security (Loxley
2010, 83, 91-93). During the 1998 provincial election, the ballooning costs of the
new P3 Horton High School being built in Education Minister Robert Harrison’s home
riding became a lightning rod, when NDP leader Robert Chisholm contrasted “Robbie
Harrison’s Taj Mahal” with his own high school which had to “sell cupcakes to buy
window blinds” (Bennett 2011, 137-138). While the P3 schools did serve a purpose,
removing the school construction backlog, by the time that the Liberal government
of Savage’s successor Russell MacLellan was defeated in July 1999, defending P3
schools became politically risky in the province (Dobbin 2002).
The original Liberal plan to construct fifty-five P3 schools was scaled-down to thirty-
three in 1999 by the incoming Conservative government of John Hamm. While the
new Education Minister, Jane Purves, considered P3 schools too costly with “extras
[that] taxpayers cannot afford,” Finance Minister Neil LeBlanc was more concerned by
a process “too out of control” (Meek 2001). Late in 1999, LeBlanc commissioned the
Halifax auditing firm KPMG to study the costs and benefits of P3 school construction.
The consulting firm produced a 31-page research report but was unable to answer
the central question – whether it was cheaper to build P3 schools or government-
built and funded capital projects.
“We are not in a position,” the report concluded, “to say definitively whether the
P3 projects did or did not achieve value for money” (KPMG 2000). Without access
to suitable public sector comparator, in the form of traditional school construction
projects, the consultants were unable to answer the critical question, but did propose
a few improvements in the P3 procurement process.
Building Too Many, Too Fast:
The P3 Schools Construction Program, 1993- 2001
“One of the most persistent threads of policy controversy set loose by the Savage
government became known as the P3 program…Essentially this was a new ap-
proach to financing public works, made possible by the virtual disappearance of
capital budgets during the deficit crisis years.”
— Peter Clancy, James Bickerton, Rodney Haddow, and Ian Stewart,
The Savage Years: The Perils of Reinventing Government in Nova Scotia (2000).
The partnership approach adopted in establishing Nova Scotia’s P3 schools sprang
from the Savage government’s desire to bring private money and management skills
to school planning, capital financing, and operations. Facing a mounting debt and
a credit crisis, the Savage government sought private partners to raise the capital
and also sought a way of circumventing the slow, time-consuming School Capital
Construction procurement process (NS, PAC, Hansard 2003). The other reasons for
involving private developers were clear: to secure the sizable amount of financing,
tap into new management capacities, acquire access to innovative technology, and
improve public service delivery. With private developers investing their own resources,
it was believed that they would have a strong incentive to closely monitor the projects
to ensure the best possible return on their investment. Building in financial incentives
was expected to help steer and keep a check on the private contractors’ behaviour.
Under the P3 school agreements, financial incentives were aligned to require the
private partners to share in the risks and rewards, improving the likelihood of a
successful, cost-effective outcome with social gains for school systems and the
broader community. Securing that private capital for school construction with proper
incentives for cost efficiencies was intended to help keep down operational costs. The
biggest advantage of all was that P3s promised to make new school infrastructure
available much more expeditiously than conventional public procurement, with its
maze of regulations and processes (Poschmann 2003 and 2017).
Nova Scotia took the plunge into P3 school construction with considerable zeal.
Upon taking office, the Savage government confronted two formidable barriers in
school capital planning. Aging schools and a school construction backlog presented
a problem requiring some $90-million in capital costs over three years, but so did
changes in accounting standards that required the government to go “on book” for
the costs of new schools (i.e., to record the borrowing costs for new schools rather
than transferring them to the accounts of individual school boards) (AG 1997).
Such a change would add another $217-million to the province’s net debt and even
more for each additional school. This would not only be politically unpalatable,
but also stymie the government’s ambitious plan to restructure the school system.
Shifting the costs to operating leases with private developers became, much to the
chagrin of Nova Scotia’s Auditor General, “the determining factor” in proceeding
with the venture (Salmon, PAC, Hansard 1998).
The Savage government found some justification for proceeding with P3s in two
supportive 1997 reports, the Department of Finance’s Transferring Risk in Public-
Private Partnerships (NS Finance 1997) and an independent consultant’s report on
P3s relating mostly to municipalities. Rightly or wrongly, the second report forecast
that public-private partnerships would – in theory – be more affordable, more
efficient, and provide better quality facilities than the traditional public sector plan-
bid-build approach (NS Finance 1997). Claiming that the province could not afford
to go it alone, Savage and his cabinet talked-up the advantages of public-private
partnerships to provide the needed infrastructure and engaged four private developers
– the Hardman Group, Nova Learning, Scotia Learning and Ashford Investments – to
build first six schools, then another 33, all over a five-year period (CCPA-NS 2016,
10). Exploring such innovations in school building was consistent with the Savage
Liberals’ bold educational restructuring agenda from 1993 to 1998 that encompassed
reducing school districts from 21 to 7, reducing the education budget from $806.5
million to $766.5 million, introducing school-based management, and establishing
school-advisory councils (Clancy et al., 2000, 158-159).
In accepting the P3 model for school construction, the Nova Scotia government
was persuaded that private sector expertise and resources could be harnessed
to address public needs. The Guide to Strategic Partnering, prepared in 1997 by
Anderson Consulting Services, not only explained the concept, but set out the
reasons municipalities should consider what were termed PPPs. Public sector bodies,
the document claimed, could expect to achieve some or all of the following benefits:
• Construction Cost Savings
• Operational Savings
• Faster Implementation
• Preserved or Improved Levels of Service
• Risk Sharing
• Financing Options
• Avoidance of Capital Debt
• Enhanced Public Management
• Greater Performance Measurement
• Increased Public Sector Revenues
• Enhanced Economic Development
• Innovative Solutions
• Realize the Value of Under-Utilized Assets
• Enhanced Facility Maintenance
• True Costing and True Value
• Arms-Length Independence
The Guide also attempted to promote more private sector involvement in a wide range
of formerly public service functions, including project design, financing, procurement
and construction, operations, and maintenance. It even provided a primer on the
various forms of public-private partnering from Privatization/Design-Build-Own-
Operate (DBOO) to Design-Build-Own-Transfer-Operate (DBOTO) and everything in
between, including maintaining public operations and maintenance functions (NS
Finance 1997, 1-10).
Conventional Procurement
Separate phases (Design, Finance, Build,
Operate) procured separately in a “design-
bid-build” model through a series of
contracts at each juncture of the project.
Short-term agreements for tendering
specific phases of design, construction,
FF&E (fixturing) and operation.
Conventional builds utilize stipulated price
contracts or construction management
contracts with contracts for sub-trades.
Funded through public debt borrowing
at government rates through the issuing
of bonds. Limited to regular payments to
contractors based upon work completed
to date.
(Prescriptive Specifications) Public agency
specifies the exact inputs required for the
facility, but specific outputs or perform-
ance standards may not be spelled out
in the contract.
Monthly payments are normally made to
contractors based upon percentage of
project completed. Up to 90 per cent of
cost may be paid in monthly installments.
Final payment paid upon delivery of
project, after the builders’ lien holdback.
Award contracts to lowest bidders and
highly dependent upon effectiveness of
public oversight over costly design errors
and change orders.
P3 Procurement
All phases (two or more) are integrated to
carry the project through from design to
build to fixturing to operation – and several
projects can be “bundled” in a comprehen-
sive series of agreements.
Longer-term contracts covering the useful
life of the asset, extending to 20 or 30 years,
covering complete services and assuming
risk. Include capital refresh sinking fund for
ongoing maintenance.
A substantial share of project cost is financed
through project-specific equity and debt.
Equity provided by consortium partners
usually makes up less than 20 per cent of
the project financing.
(Performance Specifications) Deliverables
are specified in terms of outputs, entrusting
oversight to public partner. Specified outputs
include functional design requirements, and
operational standards.
Private contractor expected to bear all the
capital costs and paid only for defined assets
or services upon project completion – in a
performance-based contract.
Close collaboration between design-build
team at all stages minimizes costly design
errors and change orders. Buildings designed
more effectively by team to achieve cost
efficiencies. Risk transferred to contractors
better able to handle risk.
Comparison of Conventional Public Procurement
and P3 Procurement
Contract Specifications
Payment Schedule
Cost Controls
Source: Adapted from Conference Board of Canada, Dispelling the Myths: A Pan-Canadian Assessment of Public-Private Partnerships
for Infrastructure Investments (Ottawa: Conference Board of Canada, January 2010), Table 1, p. 3.
Public-private partnerships do offer some advantages over conventional public
procurement for major capital projects which will incur sizable publicly-backed debt.
The most successful projects are those that efficiently achieve public purposes, like the
provision of new schools, while shifting the risks and rewards between the contracting
parties (Poschmann 2003). Critical to the arrangement are contracts which provide
an acceptable level of public transparency and yet respect the proprietary rights of
private companies to structure projects, financing, and performance contracts in
ways that reduce costs and ensure a fair return on their investments. In the case of
P3 schools in the 1990s, the P3s did provide the province with access to new money,
expanded managerial skills, project management expertise, and innovative ideas for
school design and service delivery. It was also viewed as potentially preferable to the
existing public procurement model. With so much invested in a project, the province
expected and anticipated that private contractors would be more inclined than public
managers to properly monitor the construction and to more carefully monitor the
operation’s ongoing performance (Poschmann 2003 and 2017). Deviations from the
normal P3 arrangement in the N.S. education sector, such as sub-contracting back to
the school boards, was not envisaged in the original plan for Nova Scotia.
The sheer scale and scope of the Nova Scotia P3 school construction program was
staggering, especially in comparison with traditional year-to-year school capital
infrastructure development. Table 1, Summary of the P3 Schools Lease Payments and
Buy-Out Prices, constructed by the Canadian Centre for Policy Alternatives (CCPA)
based upon raw data accessed by FOIPOP from the Department of Education, estimates
that the cost of leases for the total inventory of 39 schools was $726-million, with 45
per cent of the total coming from interest payments (Gorman 2015). While the data
set is incomplete, coming from only three of the four private developers, a statistical
procedure known as mean substitution was used to provide estimates for the missing
data. Nova Scotia’s Auditor General has pegged the costs higher, estimating that total
costs for 31 of the schools over the life of the leases will be $830-million (AG 2010).
Round that figure up to include the eight missing schools and the total cost may be
over $1-billion. It is likely that the discrepancy may be attributed to additional costs
above and beyond the lease totals, including project development costs, sinking fund
payments, and maintenance (CCPA-NS 2016, 17).
Building too many schools too fast was the undoing of the Nova Scotia venture
with P3 schools. Nova Scotia’s Finance Minister under John Hamm was sanguine in
March 2001 about what led to the undoing of the ambitious P3 school construction
program. The first six schools were too expensive, too politically contentious, and
“too out of control.” “I don’t blame the developers or the school boards,” LeBlanc
said. “It was the province that didn’t grab control of this. There weren’t enough
ground rules up front for controlling costs” (Meek 2001). Based upon the KPMG
findings, the P3 school construction projects were simply not carefully planned or
monitored by provincial education officials, giving local school committees and
private developers too much leeway, resulting in costly design changes, including
oversized gyms, bigger classroom sizes, and upgraded computer infrastructure (Meek
2001, McCulloch 2017).
The direct involvement of an Ontario union pension fund, the Ontario Municipal
Employees Retirement System (OMERS), in the Nova Scotia P3 initiative tended to
blur the tidy lines normally drawn between public and private interests. Fifteen
of the P3 schools were built by Ashford Investments in partnership with OMERS,
through its wholly-owned subsidiary Borealis Infrastructure Management, based in
Moncton, NB, and one other, already built, was acquired by OMERS at a cost of $162
million, financed by the issuing of bonds (Loxley 2010, 91-92). The union pension
fund’s involvement was a matter of concern for prominent P3 critics like University
of Winnipeg economist John Loxley who openly mused about the union’s complicity
in supporting the venture. OMERS’s role in aiding the private venture capitalists was
viewed as aiding and abetting “bad public policy” and roundly criticized by other
unions, most notably the Ontario branch of CUPE (CUPE-Ontario 2004, 9-11). Further
alarms were raised when CCPA research revealed that borrowing costs were higher
for Borealis (6.35%) than those of the province (5.6%), adding to the burden borne
by the province. What was clear to Loxley was that not only the odour of the Nova
Scotia P3 deals, but OMERS’s “complicity” driven by “a narrow motive of maximizing
returns” (Loxley 2010, 93).
Successes and Set-Backs:
Assessing the P3 Schools Record
“Comprehensive contract terms and management processes and procedures which
ensure that services are paid for and received are essential to protecting the public
interest. Our audit identified significant weaknesses in both of these areas.”
— Jacques Lapointe, Auditor General, Nova Scotia,
Report of the Auditor General, February 2010.
Appearing before the Nova Scotia Legislature Public Accounts Committee on January
25, 2017, Paul LaFleche, Deputy Minister of Transportation and Infrastructure
Renewal (DTIR), opened with an appeal to look again at the merits of public-
private partnerships. “We believe that P3 models are largely misunderstood and
often misrepresented in public discussion,” he stated. To set the record straight, his
presentation outlined “what they are and under what circumstances government
might consider a project suitable for a P3 arrangement.” “My remarks,” he added,
“are not meant to persuade or dissuade you on the merits of P3s but I do want
to explain why government might consider these types of arrangements for large
infrastructure projects, especially when it is in the best interests of taxpayers – in fact
– only when it is the best interests” (NS, PAC Hansard 2017).
With the province engaged in planning a massive QEII Heath Sciences redevelopment
project, including the demolition of the Centennial and Victoria Buildings at the VG
site, and a series of related renovation projects, LaFleche was attempting to ensure
that all options, including P3s remained on the table. Perhaps mindful of the cloud
left hanging over the P3 schools venture, he and his senior staff emphasized the
potential benefits of such partnerships. In testimony, he cited well-known examples
of P3 projects such as the Cobequid Pass toll highway, the Halifax Convention Centre,
and the Nova Scotia Correctional Facility in Burnside with only a passing reference to
the P3 schools. “If the business case supports it,” LaFleche said, “there can be mutual
benefits for all partners involved in public-private partnerships.” He then repeated
the purported advantages: “P3s can be a way to deliver large infrastructure projects
that speeds up delivery of the project and transfers day-to-day operating risk to the
private partner – such as building upkeep and operational costs—while allowing the
government partner to do what it does best in terms of operating its services to the
public” (NS, PAC Hansard 2017). The implication was clear: do not throw the “P3
baby” out with the P3 schools bathwater.
Nova Scotia’s massive plunge into P3 school construction may have been a
“cautionary tale,” but it was not without its remarkable successes. Given the dire
state of provincial finances in June 1993, school capital planning and construction
was in jeopardy. Barely recovered from the 1990 recession, the newly-elected
Savage government faced a serious budget crisis with a mounting debt, declining
provincial tax receipts and rising demands for social expenditures in health and
education (Clancy et al. 2000, 54). A Price-Waterhouse financial review for the first
quarter (April-June) of fiscal 1993-94 forecast a record deficit of $650 million, with
declining revenues (Boudreau 1993). Following the September 1993 budget address,
Minister Boudreau attempted to reassure the New York bond rating agencies, but
Moody’s downgraded Nova Scotia debt from A3 to A2 in the month that followed
(Tibbetts 1993). The rising cost of provincial borrowing and the shrinking numbers
of big lenders posed a grave danger to Nova Scotia and other debt-heavy provinces
seeking to finance infrastructure projects (LaFleche 2017). With little “fiscal room,”
Savage and Boudreau were forced to look for creative alternatives and found a way
forward by embracing the structural reform agenda of the “reinvention” movement.
Influenced by Osborne and Gaebler’s public management reform ideas, they began
to see it as a “catalytic crisis” opening the door to an injection of private sector
innovation and entrepreneurship. In purely pragmatic terms, initiating P3 schools
provided an immediate solution to two challenges – leveraging more finance capital
and transferring the costs “off-book” on the provincial finance ledger. The school
finance strategy worked, for a time, allowing for a massive infusion of new capital,
building need schools sooner, and putting off the debt reconciliation.
Adopting the P3 schools model succeeded in reducing the short-term cost of providing
a record number of brand new schools, eventually totalling thirty-nine over five
years. The initial costs borne by the Nova Scotia government were significantly less,
particularly on a per school or per pupil space basis. Converting the capital leases into
“service agreements” allowed the two parties, the government and private partners,
to finance the projects “off-book” until 2001 when the Nova Scotia Auditor General
weighed-in and ordered a $400-million capital charge be recorded in 2001. Out of
the P3 partnerships, the province secured news schools in over 30 local communities
and the annual contract payments in 2015-16 totalled $37.3 million, with an option
to either purchase the schools for agreed-upon prices or return them to the private
developers. The purchase prices will not be added to the provincial debt until 2020
and will not be amortized until that date. (Gorman 2015, Flinn 2016).
Total Contract Total Principal Total Interest
District (School) Payments Payments Payments Buy-Out Price
Champlain Elementary School $10,559,760.00 $5,679,496.48 $4,880,263.52 $2,405,660.00
Horton High $47,200,080.00 $27,500,448.94 $19,699,631.06 $13,338,600.00
Northeast King’s Education Centre $32,393,412.14 $17,083,552.70 $15,309,859.44 $7,857,612.00
Pine Ridge Elementary School $21,401,760.00 $11,373,851.73 $10,027,908.27 $5,173,177.00
Cape Breton
Cape Smokey Elementary School $8,061,556.00 $4,413,837.01 $3,647,718.99 $2,010,659.00
Greenfield Elementary School $14,871,876.19 $8,204,288.51 $6,667,587.68 $3,825,306.00
Harbourside Elementary School $19,549,372.74 $10,733,681.87 $8,815,690.87 $5,100,544.00
Jubilee Elementary School $11,333,273.00 $6,205,159.25 $5,128,113.75 $3,588,338.00
North Highland Elementary School $8,013,610.00 $4,389,370.10 $3,624,239.90 $1,993,340.00
Riverside Elementary School $11,685,169.03 $6,467,585.48 $5,217,583.55 $3,042,885.00
Sherwood Park Education Center - Sydney $23,715,486.00 $12,897,884.28 $10,817,601.72 $6,600,000.00
Amherst High School $36,492,886.29 $20,036,603.83 $16,456,282.46 $10,000,000.00
Enfield Elementary $10,898,400.00 $5,861,178.73 $5,037,221.27 $5,285,301.42
Maple Ridge Elementary School $15,619,606.00 $9,058,736.48 $6,560,869.52 $4,550,000.00
Pictou Elementary $10,238,160.00 $5,506,099.77 $4,732,060.23 $5,285,301.42
Riverside Education Center $33,497,175.00 $16,176,430.77 $17,320,744.23 $8,950,000.00
Conseil Scholaire
Ecole Beaubassin $14,066,640.00 $8,050,774.05 $6,015,865.95 $5,285,301.42
Ecole Bois Joli $14,470,560.00 $8,281,949.96 $6,188,610.04 $5,285,301.42
Bedford South School $16,958,880.00 $9,094,100.95 $7,864,779.05 $5,285,301.42
Eastern Passage Education Center $17,949,612.00 $10,258,718.79 $7,690,893.21 $5,285,301.42
Lockview High $33,839,040.00 $19,317,359.50 $14,521,680.50 $5,285,301.42
Madeline Symonds Middle School $18,055,200.00 $10,333,552.51 $7,721,647.49 $5,285,301.42
O’Connell Drive Elementary School $13,038,940.50 $7,195,256.51 $5,843,683.99 $3,950,000.00
Park West School $16,959,120.00 $9,120,645.01 $7,838,474.99 $5,285,301.42
Portland Estates School $11,706,960.00 $6,296,024.02 $5,410,935.98 $5,285,301.42
Ridgecliff Middle School $17,738,820.00 $10,118,809.59 $7,620,010.41 $5,285,301.42
Sackville Heights Elementary School $11,706,960.00 $6,296,024.02 $5,410,935.98 $5,285,301.42
St. Margaret’s Bay Elementary $10,293,120.00 $5,891,072.31 $4,402,047.69 $5,285,301.42
South Shore
Apostogan Consolidated Elementary School $8,421,800.40 $4,614,452.86 $3,807,347.54 $2,056,885.00
Bayview Community School $19,162,800.00 $10,333,780.55 $8,829,019.45 $4,371,572.00
Antigonish Education Centre $22,961,874.84 $12,689,106.09 $10,272,768.75 $5,899,606.00
Bayview Education Centre $18,414,753.03 $10,158,759.49 $8,255,987.54 $4,819,494.00
Cape Breton Highlands Academy $23,477,056.00 $13,030,296.48 $10,446,759.52 $6,061,083.00
Dalbrae Academy $20,473,077.35 $11,312,048.61 $9,161,028.74 $5,377,555.00
East Antigonish Academy/Education Center $26,503,880.48 $14,645,798.07 $11,858,082.41 $6,737,971.00
Richmond Academy $21,144,849.29 $11,688,674.67 $9,456,174.62 $5,457,355.00
Tamarac Academy Education Centre $22,267,646.97 $12,309,346.05 $9,958,300.92 $5,762,940.00
Forest Ridge Academy $9,913,920.00 $5,332,136.39 $4,581,783.61 $2,287,255.00
Meadowfields Community School $21,509,760.00 $12,398,710.16 $9,111,049.84 $6,2000,000.00
TOTAL $726,566,853.25 $400,355,608.57 $326,211,244.68 $206,126,755.46
Summary of Lease Payments and Buy-Out Prices
Nova Scotia’s P3 schools in the second wave were delivered, in most cases, on
time and on budget. Scanning the initial lease dates for the thirty-nine P3 school
projects provides compelling evidence that most, if not all, opened close to their
scheduled completion dates (CCPA-NS 2016). A detailed analysis of the nine schools
built by Nova Learning Incorporated, produced by President/CEO Kirk McCulloch,
demonstrates that the schools were not only constructed in a timely fashion, but,
overall, at costs significantly less or comparable to traditional schools (Scotia Learning
2017). That is consistent with the detailed British research on their version of P3s,
the Private Finance Initiative (PFI) projects, constructed during the 1990 to 2006-time
period. Out of 600 operational new public facilities with PFI investment over those
15 years, some 200 or one-third were new and refurbished schools. A 2006 HM (Her
Majesty’s) Treasury study examined 61 PFI projects, in detail, and found that 89 per
cent of the projects were delivered on time or early; all were delivered within public
sector budgets with the exception of a few user change orders. With respect to PFI
construction performance, the U.K. National Audit Office (NAO) confirmed in 2006
that over 75 per cent of the reviewed PFI projects were delivered on time or early, and
in no case, did the public sector bear the cost of construction overruns, a significant
improvement over public procurement projects (HM Treasury 2006, 4 and 5).
Building high quality schools was a priority in the Nova Scotia P3 construction program
and, after 20 years, the thirty-nine schools are in good shape and reasonably well-
maintained. Speaking to the Public Accounts Committee in January 2017, the DTIR
Executive Director of Major Infrastructure Projects, John O’Connor, confirmed that
they were “good buildings and built to a similar standard that we were using for our
own buildings” (NS, PAC, Hansard 2017). The N.S. Auditor General’s 2010 report found
that, overall, the 13 principals of P3 schools surveyed were “satisfied with the level of
services” in spite of the documented lapses and gaps in oversight by education sector
management (AG 2010, 33). Senior Nova Scotia government officials speaking freely
at a January 2017 Atlantic Association of Applied Economists session on Private-
Public Partnerships were less reserved in their assessment of the total inventory of
P3 schools. Recent assessments in preparation for deciding about whether to “buy
out” the contracts revealed that they were in “excellent condition.” The P3 schools,
one official commented, were “better maintained” and “not comparable to regular
schools with no regular maintenance plans” (Discussion Notes, AAAE 2017).
The first P3 school in Halifax Regional Municipality, O’Connell Drive Elementary School
in Porter’s Lake exemplifies, in some ways, the complexities involved in assessing the
value of the whole venture. When it opened in September 1998, the P3 school built
by Nova Learning won national accolades, winning first place in the “infrastructure”
category in the Canadian Council for Public-Private Partnerships (CCPPP) Awards for
Innovation and Excellence (CCPPP 1998). When the school’s well water was found to
be unsafe in 2000, possibly because of site selection, a water filtration system was
installed, but Scotia Learning encountered difficulties with the Halifax Regional School
Board in trying to get it connected and in operation. Students and teachers were
required to drink bottled water for over a year, while both parties worked to resolve
the matter (Shaker 2013 and McCulloch 2017). Sixteen years later, the province was
quick to decide on purchasing O’Connell Drive Elementary, a well-designed 50,000
sq. ft. K-6 school in good condition in a growing community, for $3.9 million, one of
two purchased for $13 million in July of 2016 (Gunn 2016).
One of the four private contractors, Nova Learning Centres, a consortium headed
by Halifax developer George Armoyan, held firm to the letter of the agreements
and exposed the P3 schools to public criticism (Shaker 2003). From the outset, Nova
Learning sought to maximize its return on the investment in nine schools, exploiting
holes in the P3 contracts allowing the private contractor to charge higher rates for
community use of schools. Under the terms of the leases, the province was entitled to
use the building for 3,500 hours a year, even though some claimed to use only half of
that time. Armoyan and Nova Learning began charging several times the normal HRSB
rates for renting a double or single gym for youth and adult community programs.
Nova Learning took the matter to arbitration and won the case, securing the right to
rent the building after school hours and set their own rates. It also secured a ruling
that the private owner was entitled to a 35 per cent share of cafeteria food and
vending machine sales, amounting to an estimated $50,000 a year. When it came to
paying for computer upgrades in new classrooms, the arbitrator also sided with the
Armoyan firm (Nova Learning v. Nova Scotia Government 2003, Shaker 2003). On
the matter of paying for repairs caused by vandalism, Nova Learning challenged the
province, again, insisting that it was not responsible for any vandalism repairs during
extended school hours (Sherwood 2003). The actions of Armoyan and Nova Learning
not only stirred up a “hornet’s nest” but gave the other P3 private partners a bad
name, even though they generally refrained from such overt profit-seeking activities
(Jackson and Sherwood 2003).
Hidden Legacy:
Of Education Sector Mismanagement and
the Innovation Quotient
“State governments and school boards would steer the system and let others row.
They would set minimum standards, enforce goals… and establish the financing
mechanisms necessary to achieve the standards and goals. But school districts
would not operate the schools.”
— David Osborne and Ted Gaebler, Reinventing Government:
How the Entrepreneurial Spirit is Transforming the Public Sector (1992), p. 314.
Many of the contentious issues and setbacks associated with the P3 schools stemmed
from poorly worded contracts, confusion over public-private responsibilities, and lax
oversight by education authorities. Two recent Auditor General reports, in February
2010 and November 2016, identified a litany of concerns centring upon school board
management competencies, the Education Department’s inability to enforce contract
compliance (AG 2010), and glaring weaknesses in school capital planning related to P3
and regular school construction and management (AG 2016). Public sector managers,
in the Department and school boards, come in for the heaviest criticism for failing
to negotiate “comprehensive contract terms” and for their laxity in “management
processes which ensure services paid for and (sic) received are essential to protecting
the public interest.” Auditor Jacques Lapointe was particularly alarmed to learn that,
over the 20-year life of the contracts, there was a forecasted $52 million shortfall in
payments between the private developers and the regional school boards (AG 2010,
The Department of Education’s management of the P3 service contracts did not pass
the test in the February 2010 performance audit. The Provincial Auditor identified, in
exacting detail, the shortcomings of the public managers and was surprisingly “soft”
on the private developers throughout the report. Public management oversight was
found sadly lacking in a whole range of management and compliance areas, including
student health and safety, staff criminal reference checks, fire safety inspections,
and CPR training. It was unclear as to whether this might apply more broadly to the
situation in regular public schools. Over half of the P3 schools reviewed (18 out of
31) had held joint Facilities Management Team meetings. School officials were not
effective in monitoring lease/service payments and, in one case, by December 2008,
had failed to collect $61,000 due as a result of annual inflation adjustments.
For one-third of the tested schools (5 out of 15), staff were unable to provide
data on how operating payments were determined, more than ten years after the
commencement of the leases. The Department still did not have a comprehensive P3
school contract management manual and two key management staff had retired,
leaving the positions vacant from March 2008 to December 2008. The Auditor also
found serious holes in the contracts which lacked specificity when it came to cleaning
standards and maintenance response times and contained no process to monitor
private developer performance. It was abundantly clear that the Auditor found the
Department ill-prepared to “hold the developers accountable and effectively manage
the contracts” (AG 2010, 37-40).
Regional school boards (RSBs) fared no better and, in the case of the Cape Breton
Victoria Regional School Board, Lapointe was scathing in his assessment of board
managers for sub-contracting maintenance and operations back to the board,
transferring risks back to the government. On top of the RSB subcontracting problem,
the audit turned up contract calculation errors involving hundreds of thousands of
dollars (AG 2010, 40-45). None of the Auditor General’s 2010 findings amounted to
much of an endorsement of public sector management of school facilities, with or
without P3 agreements.
From the outset, Nova Scotia public education authorities recognized that they were
breaking new ground in the provision and management of school infrastructure.
When KPMG conducted its 1998 study looking at whether P3s were a good deal or
not, the consultants were unable to answer the question. Conservative Education
Minister Jane Purves, speaking in the Legislative Assembly in March 2000, put it this
way: “Our consultant told us that they couldn’t answer the question about whether
P3 financing was good value for money because the proper analysis had not been
done before the projects began. But since no other government had ever attempted
such a construction program, we lacked a public-school comparator.” Then came a
rather prophetic forecast of what was to follow: “What the consultant could do was
give us the tools to do an up-front analysis, using proper comparators, before we go
forward with any more public-private partnerships” (NSLA, Hansard 2000).
School management officials involved in overseeing the P3 school contract arrange-
ments were more forthcoming in acknowledging their initial challenges. Speaking
before the Public Accounts Committee in April 2003, three senior management officials
were quite honest about changing school capital planning processes requiring them
to venture outside their realm of experience. The Department of Education’s Director
of Facilities, Charles Clattenburg, was most comfortable outlining the conventional
steps in the School Capital Construction process and testified that sizable cost
escalations in the case of two schools, Horton High School and Meadowfields School
in Yarmouth County, were the direct result of program enhancements, including
larger gymnasia, requested by the local school boards and negotiated by the private
developers in community consultations. Negotiating the P3 contracts for the first six
projects was so new to the Nova Scotia government that the contract negotiations
were delegated to a private sector law firm. Looking back in April 2003, John Traves,
Director of Legal Services at the Justice Department, offered this post-mortem: “I
don’t believe there was value for money for the first six.” That is why, he explained,
the government decided to “bundle” the next 33 projects into bigger deals, aiming
to achieve economies of scale through “bundling” with three private development
contractors. Summarizing his experience, Clattenburg conceded: “We’ve had some
good successes and we have had some problems in the P3 process. It’s been a learning
curve” (NS, PAC Hansard 2003).
Bundling the second wave of P3 projects made the massive construction venture
more manageable for the province and likely more cost-effective in terms of school
cost per square foot. By then, the Education Department had Traves as in-house legal
counsel and was better equipped to deal face-to-face with private developers as
project partners. Taking on all 39 projects over such a short time line proved to be the
supreme test for public sector managers steeped in a more methodical, sequenced
model of school capital planning and construction. One example of what went
wrong was the structuring of the contracts limiting school boards to 3,500 hours and
leaving the setting of community rental rates to the private managers of the facilities
(NS, PAC Hansard 2003). Years later, in February 2017, senior government staff, in a
private briefing conceded that if the P3 process was “out of control,” it was because
“too many were undertaken all at once” and because it “takes time to build up the
expertise” (AAAE Notes 2017).
School capital planning has advanced significantly since the “big bang” of P3 schools
from 1996 to 2001. Better processes have emerged to establish school capital funding
limits and to allocate funding to schools and communities based upon an assessment
of needs. Examining the province’s budgeting for school construction and renovations
from 2012-13 to 2016-17, Auditor General Michael Pickup found that a relatively
stable $80 million or so a year was approved by the Education Department. His most
recent report on School Capital Planning also clearly indicated that there is still plenty
of room for improvement (Auditor General 2016, Doucette 2016). Since the spring
of 2015, school boards are required to conduct a Long-Range Outlook as part of the
School Review process, but that inventory of the province’s 400 schools provides only
a very basic summary of building conditions. For its part, the Department does nothing
further with the information, leaving the province without a full assessment of the
“condition of good repair” of the buildings in operation, including the P3 schools.
Decision-making responsibilities for capital planning are still divided between the
Department and the regional school boards, despite being interdependent with one
another. The Department is responsible for approving new schools and renovations,
while the boards entrusted with closing schools and reallocating students to make
best use of existing facilities (Auditor General 2016, 29-30). In cases where schools
are recommended for closure, such as Pentz and Petite Riviere in the South Shore
Regional Board of Education, transition plans are completely disrupted when the
province fails to approve funding for the proposed new school (Lee 2017, CBC Nova
Scotia 2017).
The decision-making process in school construction became a live public issue in
March of 2017. A Global News Maritimes investigation, conducted by provincial
legislature reporter Marieka Walsh, provided clear evidence of what was described
as “queue jumping” in school construction. Documents released through N.S.
access to information included scorecards for schools that were “pushed ahead”
of others higher on the waiting list for new builds or renovations. Out of 17 school
projects approved in 2014-15, six schools were approved to jump the queue, five of
which were in government-held ridings. In the case of the Tatamagouche School, in
Education Minister Karen Casey’s riding, the cabinet overruled provincial bureaucrats
who provided documentation to support the conclusion there was “no benefit
demonstrated” for the project. When asked to justify the decision, senior Education
Department official Heather Fairburn offered the justification that “some factors”
cannot be “adequately expressed on a scoresheet” (Walsh, Global News 2017).
Whatever the explanation, the revelations severely damaged the credibility of the
provincial ranking and approvals process in school capital planning. It also suggested
the need for significant governmental reform.
Deciding on the future of P3 schools posed a bigger challenge. Facing a few major
decisions involving the fate of the 39 P3 schools involving as much as $200 million
in potential “buy-out” costs, the Department was hamstrung by the existing school
planning process, essentially dependent upon school board closure decisions before
deciding on whether to retain nearby P3 schools. With the 20-year lease expiry date
approaching in 2016-17, the province was compelled to extend deadlines and make
decisions in hasty fashion without evidence of detailed case-by-case analysis. Not
only did the division of school planning responsibilities disrupt sound, integrated
school capital planning; it also left the Department in the lurch and rushed in making
decisions on whether or not to purchase a few P3 schools at the end of their 20-year
lease agreements (Auditor General 2016, 30, 35-38).
Twenty years on, P3s are no longer a new public sector management strategy. P3s-
or PPPs – or PFIs – are common in most countries and in some Canadian provinces.
The “cautionary tale” of Nova Scotia’s P3 schools may well have dampened the
public appetite for such ventures in Atlantic Canada, but not in the United Kingdom,
Australia, or British Columbia (Conference Board 2013, Boothe et al. 2015). While
Nova Scotia school capital decisions are still made on a traditional government cycle
of one year, the government has acquired, over time, more expertise and experience
in structuring alternative financing arrangements and managing public-private
partnership schools. With the recent addition of a senior Education Department
facilities planner, the Department of Transportation and Infrastructure Renewal team
is much better equipped to assess and potentially oversee new school construction
and renovations, including possible future P3 projects. While the future of P3 schools
is very much in question, determined to a large extent by political considerations, the
province is capable of initiating, guiding and properly managing major P3 projects,
most likely in the health and transportation sector. “We are now in a different place,”
Deputy Minister LaFleche says, “with 20 years of experience” (Private Briefing, DTIR
Who Benefited Most from P3 Schools?
Net Benefits and the Public Interest
“Public-private partnerships have a long history, but they recently have come to the
fore as a way to make projects happen sooner and more cost effectively than they
would if managed by the public sector alone.”
— Finn Poschmann, Private Means to Public Ends: The Future of
Public-Private Partnerships. CD Howe Commentary, No. 183, June 2003.
“We’ve had some good successes and we’ve had some problems in the P3 process.
It’s been a learning curve.”
— Charles Clattenburg, Director of Facilities Management,
Nova Scotia Department of Education, Testimony, Public Accounts Committee,
Nova Scotia Legislature, April 9, 2003.
The most commonly asked question about Nova Scotia’s P3 school venture is whether
the province achieved value for the $726 million to $878 million spent over the
20-year span of the lease-to-purchase agreements. Recent reports commissioned
by the Canadian Centre for Policy Alternatives, Nova Scotia Office, and supported
by the Canadian Union of Public Employees (CUPE), have provided their definitive
answer that Nova Scotia’s P3 schools were a “financial failure” and purchasing the
buildings will ensure that public schools are back safely under public ownership
(CCPA-NS 2016, CUPE 2016). Completely missing from the CCPA-NS analysis was
any reference to the participation of the Ontario municipal employees pension fund,
OMERS, in partnership with Ashford Investments. The only comprehensive research
study, conducted in 1999-2000 by KPMG, was unable to answer the critical question
of whether the public got good value because of the absence of a public-sector
comparator (KPMG 2000). Based upon the KPMG report and his own experience
overseeing the contracts, Justice Department expert David Traves responded to the
question carefully back in April 2003: “I feel you (Nova Scotians) received good
value, but I think there is certainly room that… the province could have gotten
better value.” His governmental colleague, Darrell Youden of Education’s Corporate
Services, admitted that it was difficult for anyone to render any judgement four years
into a 20-year arrangement (NS, PAC Hansard 2003).
Years later, officials in the Department of Transportation and Infrastructure Renewal
are still reticent to render a clear judgement on deals done in the late 1990s.
Furthermore, DTIR’s in-house expert John O’Connor recently told Conservative MLA
Tim Houston before the Public Accounts Committee that government managers had,
as of January 2017, “not gone back through a backward-analysis of all the deals for
the P3 schools” (NS, PAC Hansard 2017).
The private partners may well have benefitted inordinately from the inexperience,
confusion and ineptitude of government managers initially assigned to the file,
particularly during the negotiation of the first six P3 school contracts. That was the
damning assessment rendered by the Auditor General in his 2010 report on the
management of the P3 schools (Auditor General 2010). Two developers were also
paid by the province to deliver operating and maintenance services but subsequently
subcontracted the work back to school boards for far less than the province had
paid. That resulted in a windfall profit to the service provider of $52 million over the
full term of the 20-year lease (Auditor General 2016, 37). It is also quite clear that
one private partner, Nova Learning, took advantage of a loophole in its contracts to
squeeze more of a profit out of after-school space rentals and food service proceeds
(Shaker 2003).
One of the lead private developers, Kirk McCulloch, has countered the June 2016
CCPA-NS report, Private Profit at a Public Price, with a Value for Money (VfM)
comparison of his own, utilizing data gleaned from the financial records for nine P3
schools built and managed by his own development company, Scotia Learning. His
Cost Comparison for all Scotia Learning Schools, comparing the P3s to province-built
schools, covers the full term of the 20-year leases and provides evidence that the
province may well have come out ahead in the whole transaction. Originally prepared
for the Government of Nova Scotia as a document meant to inform decision-makers in
the Finance, Education, and Transportation and Infrastructure Renewal departments,
it was updated recently for inclusion in this research report (McCulloch 2017).
The Scotia Learning Cost Comparison Schedule (Table 3, next page) includes all nine
Scotia Learning schools, comparing the costs with a public-sector comparator, in this
case, the estimated costs of province-built and financed schools. Each of the Scotia
Learning Schools is broken out in terms of its detailed costing over the 20-year period,
with the lease expiry dates and established option-to-purchase prices. It confirms
that the first P3s (O’Connell Drive Elementary School and Riverside Education Centre)
were costlier, but, overall, the province reaped a saving of $14.1 million over the life
of the contracts. Without necessarily accepting the developer’s detailed analysis, this
much is clear: Bundling of P3 schools in the second phase worked to the advantage
of the province and yielded a much better return for the taxpaying public (Scotia
Learning 2017). “We can build school infrastructure for 10 to 15 per cent less than
the province,” the President of Scotia Learning maintains. “When it comes to P3
schools, we delivered value at the end of the day” (McCulloch 2017).
The P3 school venture succeeded in delivering building facilities and services far
superior to the previous buildings and adhering to reasonably high quality standards.
A whole succession of Auditors General reports from 1997 to 2016 picked holes in the
public management of the P3 schools and identified a few examples of the first phase
cost overruns, but raised few, if any questions, about the quality of the facilities. In
April of 2003, the Cape Breton-Victoria Regional School Board confirmed, in a letter
to Liberal MLA Russell MacKinnon, that their P3 schools were well received. “Without
exception, these schools have been well accepted by the school communities, have
provided students with enhanced physical facilities with special program areas, and
have provided access for the communities to participate fully in student-centred
activities” (NS, PAC Hansard 2003).
Access to a capital sinking fund, under the P3 school contracts, helped ensure that
the schools were reasonably well maintained and deferred maintenance was kept
to a minimum, especially in school boards where facilities management is a system-
wide priority. With Scotia Learning’s Maple Ridge Elementary School in East Hants,
NS, under review for possible closure in January 2017, McCulloch described the
Total Net Option Option Total Total Pricipal
Area Lease Lease Purchase Price Cost Incl. Interest Repayment Total (positive=saving)
School Grade (Sq. Ft.) Expiry Payments Price /Sq. Ft. Purchase Payments On Maturity Cost (negative=cost)
O’Connell Drive Elementary School P6 48,098 Jul.31.18 $14,435,657 $3,950,000 $82 $18,385,657 $10,247,677 $8.047,404 $18,295,081 -$90,576
Porters Lake, Halifax Co.
Riverside Education Center 6-8 104,114 Jul.31.18 $31,632,563 $8,950,000 $86 $40,582,563 $22,542,468 $17,410,000 $39,952,468 -$630,095
Milford, Hants Co.
Maple Ridge Elementary School P-5 52,612 Jul.31.19 $15,653,862 $4,550,000 $86 $20,203,862 $11,981,060 $9,090,000 $21,071,060 $867,198
Lance, Hants Co.
Meadowfields Community School P-6 73,754 Jul.31.19 $21,420,060 $6,2000,00 $84 $27,620,060 $15,083,424 $11,759,732 $26,843,156 -$776,903
Yarmouth, Yarmouth Co.
Forest Ridge Academy P-6 38,309 Aug.31.20 $9,913,961 $2,287,255 $60 $12,201,216 $7,702,330 $5,718,137 $13,420,467 $1,219,252
Barrington, Shelburne Co.
Champlain Elementary School P-5 41,096 Aug.31.20 $10,559,784 $2,585,592 $63 $13,145,376 $8,706,982 $6,463,981 $15,170,963 $2,025,587
Annapolis Royal, Annapolis Co.
Bayview Community School P-9 73,476 Oct.31.20 $19,162,740 $4,519,081 $62 $23,681,821 $15,141,180 $11,297,702 $26,438,882 $2,757,061
Mahone Bay, Lunenburg Co.
Pine Ridge Middle School 6-8 83,719 Jan.31.21 $21,401,815 $5,173,177 $62 $26,574,992 $16,929,223 $12,932,943 $29,862,166 $3,287,173
Kingston, Kings Co.
Northeast Kings Education Centre 6-12 126,415 Aug.15.21 $32,393,412 $32,393,412 $62 $40,251,024 $26,106,915 $19,644,029 $45,750,944 $5,499,920
Canning, Kings Co.
TOTAL 641,593 $176,573,854 $46,072,717 $72 $222,646,571 $134,441,259 $102,363,928 $236,805,187 $14,158,616
Cost Comparison: All Schools Over 20 Year Lease plus Purchase
P3 (Actual) Compared to Province Built/Financed (Estimated)
Net Cost/Saving
Schools P3 School Leases Over 20 Year Lease Term (Actual) If Province Had Built and Financed Schools (Est.) to Province
52,000-square foot building on a 4.5-hectare plot of land near Highway 2 in Lanz
this way: “It’s a well-designed, well-built and well-maintained school in excellent
condition” (Campbell 2017a). A month later, the School Options Committee chaired
by Milford lawyer Kerri-Ann Robson, wholeheartedly concurred with that assessment
in recommending that it be retained and purchased by the province for $4.5 million,
a figure far less than the $13 million to $15 million it would cost to construct today
(Campbell 2017b). None of the 39 P3 school facilities across Nova Scotia has proven
to have been shoddy in its construction or to have structural problems, as have some
in Scotland and elsewhere (Johnson 2016).
Provincial and school board facilities staff concur on the effectiveness of school
maintenance and repair in most of the P3 schools. Recent school reviews for closure
in two rural counties, Pictou and East Hants, found the 20-year-old P3 elementary
schools in ‘good condition’ and better maintained than most built and maintained
by the province (Berry CBC News 2017; CCRSB Long Range Outlook 2015). Unlike
school board-owned properties, the P3 schools are maintained through a sinking
fund allocating some 40 cents per square foot for repairs per year. While the province
also provided a technology management fund, at least one of the contractors sub-
contracted with board staff to manage the “technology capital refresh” in their
schools (McCulloch 2017). Any initial fears that the P3 schools would fall short of
established standards were far off-the mark and, in fact, it may well be the reverse.
School authorities and public education research organizations, such as CCPA, start
with the assumption that the public interest is always best protected when social
infrastructure is under public management. Commissioned research studies, such as
CCPA-BC’s 2006 paper Value for Money? and CCPA-NS’s 2016 report Private Profit at
a Public Price are not only openly hostile to public-private partnerships, but dismissive
of research that calls into serious question the effectiveness of public management
of schools, with or without P3 contract arrangements. Most such research reports
are ideologically-driven and that is clear from the conclusions they reach: “Schools
are vital parts of our communities here in Nova Scotia, and they need to belong to
the public, not private corporations” (CCPA-NS 2016, 30). Missing from such studies
is any recognition or discussion of the dramatic changes remaking public sector
management or of fundamental questions being asked about whether “public service
delivery” is always the best way to serve the public interest (Dean 2011). Looking
back over twenty years of experience with P3 schools, McCulloch waxed pragmatic:
“We want to build the best school we can and, in the end, make a dollar.” If the Nova
Scotia P3 schools venture proves anything, it’s that a little competition between civil
servants, private contractors, and school board officials may be good for everyone.
The time of decision is upon us. In school districts across the Nova Scotia, the wake-
up call came in September of 2016 when the public was alerted to the fact that
dozens of P3 leases on privately-built, publicly-rented school buildings are expiring
in four years, or, in a few cases, in 2019 and 2021. The actual time frame is shorter
because the 20-year contracts require the province to give the landlord four years’
notice of their intentions – whether to purchase the schools, close the schools and
vacate, or enter into new lease agreements. The first school board to decide on the
fate of its P3s was the Cape Breton-Victoria Regional School Board. Back in April
2016, six months ahead of the deadline clause, the CBVRSB advised the province
that the province should dispose of two of its seven leased schools, Harbourside
Elementary and Sherwood Park Education Centre (Farries 2016).
The Nova Scotia government is now deciding whether to retain the P3 schools and
will likely elect to exercise its right to “buy-out” most of the contracts held by the
four private developers, Scotia Learning, Nova Learning, Ashford Investments/OMERS,
and the Hardman Group. Given all the public controversy surrounding the P3 schools
initiative, since its inception, that is the safest political bet and the option that looks
the most favourable in terms of costs to Nova Scotia taxpayers. In announcing a
November 2016 decision to purchase 12 of the Scotia Learning Centres schools
for $85.7 million, Education Minister Karen Casey set out what would become the
standard rationale: “It was certainly in our best interest to purchase rather than
lease,” she told Canadian Press. “The lease would have been more expensive than the
$85 million” (Doucette 2016). It is not shaping up as much of a negotiation, since the
“buy-out” prices are stipulated in most, if not all, of the 20-year contracts.
Summary: Lessons Learned from Nova Scotia’s
P3 Schools Initiative
The Nova Scotia foray into Public-Private Partnership (P3) schools was tantamount
to a “revolution” in school capital planning, innovation, and management. Critics
of the massive P3 schools experiment are inclined to interpret the whole province-
wide initiative as “a cautionary tale,” marked more by cost overruns and mishaps
than successes (CCPA-NS 2016). Public service managers acknowledge that the whole
initiative, symptomatic of the entire John Savage structural reform agenda, took on
“too much too fast” and presented them with a “steep learning curve” (Clancy et al.
2000). Claims that the Nova Scotia P3 school saga was a total “financial failure” are
largely driven by ideological motivations and based almost entirely upon revelations
surrounding the first few projects. In the case of Nova Learning, a good case can be
made that the province gained financially over the life of the contract (McCulloch
2017). Whether the province achieved good value for the massive undertaking remains
a matter in dispute, largely because of the absence of comprehensive data based
upon a public-sector comparator.
Nova Scotia’s P3 schools’ initiative has been, in the words of a Nova Scotia Deputy
Minister, “misunderstood and misrepresented” in public discussion. “We revolutionized
school construction in this province,” Nova Learning president Kirk McCulloch says in
recalling the tremendous jolt of innovation generated by the initiative in the late 1990s.
Far from being a strictly formulaic, bureaucratic school planning and construction
process, the P3 community consultations broke new ground in designing innovative
program spaces and responding to local school needs. Faced with initial resistance,
the private developers also proved themselves capable of working collaboratively with
school communities. “We had to build up credibility,” McCulloch recalls, “and to win
over communities expecting private developers to be looking out for their own interests”
(McCulloch 2017). Recent decisions to purchase most of the P3 schools might suggest
that the province is looking to return to business as usual in school capital planning,
financing, and operations. Tapping into the business acumen and entrepreneurial
spirit of private partners remains the best way to reinvent government service in the
education sector. The success of P3s ultimately lies in developing the management
capacities to steer the process and hold the private partners accountable for delivering
better educational services (Boardman, Siemiatycki, Vining 2016). It would be a pity if
the province slipped back into old habits given how much has been learned about how
to embrace innovative school building models, how to build high quality schools, and
how to exhibit more flexibility in responding to local community needs.
Building Upon the Lessons
This research report has sought to dispel the enduring myths associated with the
P3s and set the public record straight. Nova Scotia’s ambitious P3 school experience
produced some valuable lessons and suggests the need for a second phase of
structural reform in school capital planning and construction.
Here are eight recommendations, gleaned from recent Auditor General reports and
fully explained in this research paper, that build upon the largely unrecognized P3
schools legacy in school planning, innovation, and management:
1. Make School Capital Planning a Higher Priority and Initiate a Multi-Year Planning
Process, focusing on improving the existing year-to-year, ad hoc School Capital
Construction Plan process.
2. Establish a Capital Asset Management Framework (CAMF) for Education
Infrastructure, modelled after British Columbia’s CAMF (2002), to guide the review
proposals for capital spending and provide a “strategic options analysis,” including
a full range of options: traditional procurement, alternative service delivery options,
PPPs, asset trading or leveraging, and asset disposal.
3. Merge the current separate school facilities planning processes which divide the
responsibilities for school approvals and school closures between the Department
and school boards, and establish a provincial School Capital Infrastructure
Committee to break the logjam.
4. Build upon the Foundations laid by Public-Private Partnerships by Establishing
“Partnerships NS”, a PPP Advisory Committee populated by private developers,
architects, consultants, and facilities experts from outside of government.
5. Expand the Network of School-Level Facilities Management Teams to maintain the
community partnerships and business relationships developed in the P3 schools.
6. Conduct a Comprehensive Audit of the P3 School Planning venture, providing
a thorough backwards-analysis of the 39 P3 school projects assessing the hard
lessons, community impact, costs and benefits to the public.
7. Develop a New Set of Provincial Guidelines for Identifying P3s, including clear
performance standards and metrics, optimal size, exceeding a minimum threshold
of between $40 million and $100 million; risk transfer assessment; and competitive
market conditions, likely to produce at least three project bids.
8. Establish Criteria for Evaluating Progress in Reinventing School Planning and
Management process, utilizing assessment resources and tools from the latest
research in public sector management reform, including VfM analysis and P3
screening instruments.
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ResearchGate has not been able to resolve any citations for this publication.
This article develops some theory on and examines the implementation and performance of Canadian public-private partnerships (P3s). It focuses primarily on infrastructure projects and addresses three questions: 1) What goals do governments expect to achieve through Pas? 2) How effective are Pas likely to be at delivering value to governments and citizens? 3) What lessons can be derived from the use of Pas? The article reviews the government's intended social goals for Pas and evaluates how effective Pas have been in fulfilling them. It then formulates a more comprehensive framework and outlines a "positive theory" perspective of Pas that takes into account the divergent goals of the partners - profit maximization goals of private-sector participants and the political goals of the public sector. The article evaluates and summarizes the findings and implications of ten Canadian Pas. The appropriate test of success, from a social (normative) perspective, is whether Pas have lower total social costs, including production costs and all of the transaction costs and externalities associated with the project. The ten case studies indicate that the potential benefits of Pas are often outweighed by high contracting costs due to opportunism generated by goal conflict. These costs are particularly high when construction or operating complexity is high, revenue uncertainty (use-risk) is high, both of these risks have been transferred to the private-sector partner, and contract management effectiveness is poor. In infrastructure projects, it rarely makes sense to try to transfer large amounts of risk to the private sector.
This article seeks to put the “public” back in public values research by theorizing about the potential of direct citizen participation to assist with identifying and understanding public values. Specifically, the article explores eight participatory design elements and offers nine propositions about how those elements are likely to affect the ability of administrators to identify and understand public values with regard to a policy conflict. The article concludes with a brief discussion about potential directions for future research.
Northeast Kings Education Centre 6-12 126
  • Kings Kingston
  • Co
Kingston, Kings Co. Northeast Kings Education Centre 6-12 126,415 Aug.15.21 $32,393,412 $32,393,412 $62 $40,251,024 $26,106,915 $19,644,029 $45,750,944 $5,499,920
References Altshuler Innovation in American Government
  • Kings Canning
  • Robert D Co Alan
  • Behn
Canning, Kings Co. References Altshuler, Alan, and Robert D. Behn (1997). Innovation in American Government. Washington, DC: Brookings Institution.
Scotia Learning Centres Inc. v. The Queen, Province of Nova Scotia Record of Proceedings in Hearings
Arbitration Records (2003). Scotia Learning Centres Inc. v. The Queen, Province of Nova Scotia. Record of Proceedings in Hearings held in Halifax, NS, April 16, 17, 18, 19; June 24, 25, 26, 27, 28; and July 3, 4, 2003.