Fallout from Klein Government mismanagement two decades ago drifts in on the winds of the Carillion collapse

Posted on January 20, 2018, 1:14 am
9 mins

PHOTOS: Winter driving in Alberta (Photo: Wikimedia Commons). Below: Alberta Transportation Minister Brian Mason and Opposition Transportation Critic Wayne Drysdale.

That Carillion bankruptcy … did it ring any bells with you? It certainly should have.

The spectacular collapse of the U.K. construction giant Carillion PLC has not just shaken the British government, it’s rattled other regional and national governments around the globe who will be left holding the bag for many of the multinational corporation’s contracts for essential services.

Among them, hospitals, P3s and highway maintenance in Ontario, transmission lines in British Columbia, and 14,000 kilometres of highways throughout Alberta that Carillon Canada is supposed to maintain. It being wintertime, and snow in the forecast lots of places, this is an essential service if ever there was one!

Of the company’s 43,000 employees worldwide, about 6,000 of them are here in Canada.

The British Government faces multiple challenges as a result of the “parastatal” corporation running up more than $1.35 billion US in debt that it couldn’t pay back when many of its contracts turned out to be losers. The bankruptcy brings the possibility of up to 20,000 British workers losing their jobs, pension funds collapsing and, possibly worst of all, a multitude of contracted-out government services grinding to a halt.

According to the New York Times – whose reporter seemed to be astonished there was even a debate in Britain about privatization not being generally a good thing – Carillion was running everything from school lunch programs to prisons to hospitals to parts of the country’s electronic spy agency. Some 450 government contracts in all, says the Guardian.

So when Carillion fell, forced into compulsory liquidation on Jan. 15, the U.K. government faced having to … act like a government! This certainly goes against the grain for the direct political descendants of the pirates of privatization led by the prime minister Margaret Thatcher.

Just to restate the obvious, this is why essential government jobs belong in the public sector – which consistently does them better, cheaper and more fairly, notwithstanding the relentless diet of propaganda about the alleged benefits of privatization and “public-private partnerships,” in which the public is left holding the bag if anything goes wrong, that we’ve been fed for decades.

As for those bells – the memory kind, not the kind you hear in an evocatively onomatopoetic carrilon in a place like Parliament Hill – cast your mind back to the mid-Zeroes in Alberta, when Ralph Klein was premier, Steve West was his dean of destruction in the provincial government, and we had all swallowed the purple privatization Kool-Aid.

In 1995 and 1996, back when Mr. Klein was doing his best to destroy public services throughout the province as quickly and as thoroughly as possible, his government decided to privatize and outsource the maintenance of Alberta’s primary highways.

How did that work out? Well, we don’t really know. When the government hired the expensive international consulting firm KPMG to do a positive report in 1997, a year after the damage was done, the consultants demurred, concluding it was too soon after the change to compare the cost and services delivered by private-sector contractors and their government employee predecessors. The anecdotal consensus among winter drivers was that conditions on Alberta highways had gotten worse.

In 2003, the Alberta Union of Provincial Employees tried to answer the same question by asking the Parkland Institute at the University of Alberta to look into it. Again, no soap.

As Lisa Prescott, author of the Parkland study, put it: “The re-organization of government ministries or their reporting and accounting practices should be accompanied by a document clearly outlining the nature of the re-organization and the steps necessary to make pre- and post-reorganizational comparisons.”

Say what? The suspicion at the time, a reasonable conclusion based on the (missing) evidence, is that someone in the Klein Government took measures to make damned sure the two systems couldn’t be compared because the comparison wouldn’t deliver the ideologically correct answer required by the market fundamentalists who ran the Conservative Party then, just as they do now.

Can this assertion be proven? Of course not. This evidence has vanished.

Meanwhile, back in present, Carillion Canada, the U.K. company’s Canadian subsidiary, is said to be plugging along here in the Great White North while things fall apart back on the Sceptered Isle.

However, that assurance from the subsidiary’s Canadian spokesperson was not actually all that reassuring. Cody Johnston told the CBC that “the Canadian leadership team is looking at how to ensure continuity.” Great! One hopes they’ll let us know if they come up with something.

Meanwhile, on the 43 per cent of Alberta’s wintry highways that Carillion is nowadays responsible for keeping in operation, everything’s just peachy … for the moment.

Speaking of coming up with something, Transportation Minister Brian Mason says the NDP Government is working on a back-up plan of its own, although it won’t be taking highway maintenance services back in house where they belong. Under the circumstances, sadly, this makes sense, because the Klein Government sold off the essential infrastructure for a song in 1996.

The Alberta Roadbuilders and Heavy Construction Association says its members are ready to pitch in – for a price, of course –a good deal for which Saskatchewan plates on their vehicles won’t be required.

Meanwhile, the United Conservative Party Opposition issued a news release in which Transportation Critic Wayne Drysdale was quoted huffing that “the collapse of one of Alberta’s major highway maintenance contractors is deeply concerning, especially in the middle of winter.”

Well, no one is going to argue with that, least of all Mr. Mason, I imagine.

Mr. Drysdale can’t really be blamed for what happened under Mr. Klein in 1996. He didn’t get elected till 2008, after all, and while he was transportation minister for a few months in 2015, the premier who gave him the job, Jim Prentice, wasn’t in office long enough to do much damage.

Still, it takes a certain chutzpah to come up with something like that news release when you consider who caused the problem in the first place, and who constantly sings the praises of the government that did the damage – to wit, in this order, Ralph Klein and Opposition Leader Jason Kenney.

Carillion in Alberta, the Facts
  • Carillion Canada first won a Government of Alberta highway maintenance contract in 2006, a decade after the system was privatized. It has been part of the contracted-out highway maintenance system since then.
  • Carillion currently has three contracts covering 12 of Alberta’s 30 current Contract Maintenance Areas.
  • This translates to 43 per cent of the province’s highways by road length and 40 per cent of the work by total annual value.
  • Carillion Canada’s three contracts are:
  • It is in Year 8 of a $36.8 million contract originally signed as a six-year contract. This contract was extended for an additional two years and is scheduled to end on July 31, 2019.
  • It is in Year 5 of a $19.3-million 10-year contract.
  • It is in Year 4 of a $40.6-million 10-year contract.

32 Comments to: Fallout from Klein Government mismanagement two decades ago drifts in on the winds of the Carillion collapse

  1. J.E. Molnar

    January 20th, 2018

    When it comes to all things Ralph Klein, that old adage about the “chickens coming home to roost” aptly applies — more and more with every passing day.

    Klein’s mismanagement of electricity deregulation, economic boondoggles in the millions of dollars (by trying to pick financial winners), severe cuts to education and health care and the sale of government-run liquor stores at pennies on the dollar just reinforces all the horror stories Albertans had to endure in the 90s. Even those that hold Klein up as the country’s premiere “Deficit Dragon Slayer” would be hard-pressed to admit Klein completely delivered Albertans from the shackles of our debt and deficit (both financial and infrastructure).

    If neoliberalism and market fundamentalism has taught us anything, it’s that government has a strong role to play in the economy in protecting unsuspecting consumers and service users from the harsh realities of blind right-wing ideological abuses and mismanagement. Those roosting chickens are tangible proof.

    Reply
    • Bedoich

      January 21st, 2018

      Agreed. I couldn’t erase the sardonic smile while reading Paula Simons article the other day on the result of the lengthy Alberta Seniors class action lawsuit. I really do feel badly for them; but especially bad for the 20% (guessing) who need the subsidizing, and didn’t vote Conservative their entire lives.

      Reply
  2. jerrymacgp

    January 20th, 2018

    Um, no disagreement here, except … the company’s name is Carillion, not “Carillon”.

    Reply
  3. January 20th, 2018

    A new line in Edmonton’s LRT is currently being built in south east Edmonton. Thanks to Stephen Harper’s ideology, federal funding for it was conditional on it be built using a P3* model. Thus the company that is building it will also operate it for 30 years, I believe. As a result, David might have another topic to write about in 2048.

    After some debate, it was decided to call the new branch the ‘Valley Line’. Personally I am afraid we will end up calling it ‘Harper’s Folly’.

    *Whenever I hear the term P3 I always think of how as little boys, my brother, my cousin and myself would stand around a toilet and cross swords.

    Reply
  4. Albertan

    January 20th, 2018

    There is nothing like learning the hard way leaving us ordinary citizens holding the bag re: privatization, P3 involvement, etc. of public services, when things go wrong. Here is another excellent explanation of this “decades of neoliberalism have corrupted our capacity to think in non-economic terms.”
    “How privatization could spell the end of democracy. Before Trump and tech, never before have so many
    powerful people been so intent on transforming government into a business.”
    http://www.theguardian.com/technology/2017/jun/21/privatizing-public-services-trump-democracy
    The trouble is, and a quote from this article:
    “A profit-driven system doesn’t mean we get more for our money – it means someone gets to make more money off of us.”
    This is yet another reason why I do not vote for either the Liberals or the Conservatives, both guilty of propagating this sort of neoliberal negativity for too many years and putting the money into the pockets of their Big Corporate Friends.

    Reply
    • Farmer Dave

      January 20th, 2018

      You can add that in the early 1970’s PC’s under Peter Lougheed privatized grass cutting on all major highways which was done by government employees operating government owned equipment and sold the privatization model to Albertan’s that the money saved by doing this, Alberta will never ever need to go into deficit. I thought this was a good idea at the time. Prior to privatization highway ditches were cut frequently and looked like parks. Now we are lucky to get highway grass cutting once a year, ditches look appalling and look how often Alberta has gone into deficit since then. The private sector needs to do a better job when it comes to government contracts however they get away with scanty work because of donations they make to the Government in power. All one needs to do is look under Elections Alberta, check who donated money to which political party and one starts understanding why governments privatize and the government in power hands out contracts to their contributors. After liquor stores were privatized Ralph Klein conceded it wasn’t a cost saving to the province but a philosophy. Prior to liquor stores being privatized the province was earning $750 million in revenue and now they are earning $800 million which is very low when you consider Alberta’s population has increased by over 20% since privatization.

      Reply
  5. January 20th, 2018

    Thank you once again for your insights and some painful memories.

    I remember The Department of Highways. Alberta roads were the envy of the nation, the employees were well paid with benefits and pensions, the equipment always flawlessly maintained, the communities where they were based reaped large economic multipliers.

    Albertans have incurred many losses: everything from a world class telephone company, a highly profitable/properly operated liquor sales and distributorship, an airline, and a string of first class public campsites courtesy of “Highways” -the list is long, memories are short.

    To add injury, Albertans built a private golf course, handed it over to the old boys club, and in the final stage of Tory rule, Albertans rebuilt the golf course a second time for the old boys.

    I still hear the privatization mantra. As for the P3 models, “someone gets to make more money off of us.”

    “And I can’t wait to get on the road again.”

    Reply
    • shabooty

      January 21st, 2018

      As one who worked in that world class telephone company I can assure you that they were the envy of many. They were way ahead or their private counterparts in Ontario, Quebec, and BC. They had all digital network, individual line service, even a cell network long before Bell Canada and BC Tel. And they always returned money to the Alberta government coffers … all that and very reasonable rates as well.

      Reply
    • Chris

      January 23rd, 2018

      Not a private golf course (Kananaskis). Anybody could play there, and anyone will be able to play there again when it fully re-opens. Alberta residents even get a discount on green fees.

      The Alberta Government still makes a nice profit on liquor distribution, they only privatized the retail portion, which now employs about four times as many people and has about five times as many locations. I guess we’ll have to live with longer grass in the ditches.

      Reply
  6. Bill

    January 20th, 2018

    You have Ralph Klein confused with Jean Cretien/Paul Martin. This article is just an anti-corporate tantrum. Major journalism fail.

    Reply
    • Bill Malcolm

      January 20th, 2018

      Got your glasses on hackwards and your mind closed, I see. Here in NS, our Liberal government is buying up P3 schools at the end of contract, to the squeals of stuck pig developers who were counting on rents forever. Similarly, new four-laners are provincially financed and owned. About the only good thing the provincial Liberals have managed. Since the Liberals are generally as likely as Cons to give freebies to their business friends, one can only assume the math AGAINST privatization is obvious and are overwhelming.

      So your typical one-line pro-business “observation” can only be characterized as pure thoughtlessness and repetition of the usual propaganda we have been fed since birth, as if it were some axiom of the universe. You are too incurious apparently to investigate such matters for yourself, a typical right wing failing.

      Reply
    • tom in ontario

      January 20th, 2018

      Bill says the blogger is confused. Maybe Bill is confused. Ralph Klein was a unilingual former mayor of Calgary who became premier of Alberta. Jean Chretien and Paul Martin were bilingual prime ministers of Canada.

      Reply
    • Hana Razga

      January 20th, 2018

      Nope, first came Ralph Klein, then Paul Martin used Ralph’s song book to do the same across Canada…..been there. And you have no idea what you are talking about.

      Reply
    • January 20th, 2018

      Major troll-bot fail. Try presenting some evidence and arguments. If you can. Which I very much doubt.

      Reply
    • John

      January 21st, 2018

      You should probably explain your assertion or be ignored.

      Reply
  7. David

    January 20th, 2018

    I suppose one of the risks of privatization is that the company can go broke. Ralph probably did not think about this much, if at all, when he decided to privatize road maintenance.There are a number of other risks too, but the common thread is that many of them end up with the government holding the bag when things go awry for the private company providing essential public services.

    If it costs the government more to find other service providers (because it no longer owns the equipment) at an inconvenient time, such as mid winter, that will be a cost borne by the public purse. I doubt there will be any way for the Alberta government to get the British company to reimburse it for such additional costs as it is now broke.

    Of course this is a much bigger mess in the UK where the company does much more than clear the roads. Comparatively, Alberta is perhaps like the tail of this big international dog and I doubt they intentionally went broke in the middle of winter which was a more inconvenient time for us, if they even thought about our plight. Our concerns and problems will not register very highly in the UK where the company has a much bigger mess to deal with, so we will probably have to sort things here out by ourselves as best as we can. I suppose that is another argument against selling off essential services to far away large multi national corporations who might not have a clue where Alberta is. At least the privatization of lab services to an Australian company did not go ahead.

    Reply
  8. Magda

    January 21st, 2018

    Whenever a politician goes into raptures about the glories of the private sector, look at their resume to see if they’ve ever spent anytime in the private sector. People who actually have a business background are much more realistic about results. Klein, Kenney, Harper, Scheer, Fildebrandt, et al have had minimal time actually working for a living.

    Reply
  9. Farmer Brian

    January 21st, 2018

    Why is always the fallout from Ralph Klein? Look at what happened in Alberta after Peter Lougheed retired. After he retired Alberta’s debt went way up. Why are problems today always blamed on Ralph Klein and never on Peter Lougheed? Was the rise in debt after Peter Lougheed all Don Getty’s fault? Now there is no doubt that P.E.T.’s National energy program drove a lot of companies and employment out of Alberta and this certainly hurt the bottom line but I personally believe it is wrong to always blame Ralph Klein when the years following Peter Lougheed’s retirement were very bleak in Alberta yet his legacy in never critisized.

    Reply
    • Farmer Dave

      January 21st, 2018

      Farmer Brian, Ralph balanced the budget by not spending any money on infrasture (schools, hospitals, highways, bridges and maintenance of Government infrasture such as hospitals, which of these could you do without) . And government was earning a huge amount of money because natural gas prices were a least triple what they are today. Peoples lives were not taken into consideration by Ralph’s cuts (such as now, 8 new badly needed schools have been built, the most since 1913). Today we are paying for these infrasture cuts Ralph made. A monkey could have balanced the budget the way Ralph did.

      Reply
      • Lars

        January 21st, 2018

        It wasn’t a monkey, though, it was Stockwell Day.

        Oh…

        Reply
      • Farmer Brian

        January 22nd, 2018

        So I am curious Farmer Dave did you look at the price of oil in Ralph’s time? Natural gas was certainly higher but it wasn’t until 2001 that the price spiked for one year then went back down, the price of oil from 2000-2003 sat between $20-30 dollars a barrel. In 2004 oil rose to $40 dollars a barrel, middle of 2005 it was $60 and by the middle of 2006 $75 and Ralph retired near the end of 2006. Ralph certainly did benefit from higher natural gas prices but he only had the benefit of good oil prices in the last 2 years of his tenure. He did leave behind a $17 billion sustainability fund that was frittered away by successive governments. As for infrastructure, Ralph was a victim of his own success. Alberta’s population grew quickly attracted by the availability of good paying jobs and low taxes and certainly put a strain on the existing infrastructure. As for your assertion that a monkey could have balanced the budget, I would say it must be time for another simian takeover lol because our present government has no idea about how to balance a budget!!

        Reply
        • Farmer Dave

          January 22nd, 2018

          Farmer Brian you are partially correct however you should do your research. You are correct about the price of oil however Alberta was selling it’s natural gas at around $9.00 US per MMBTU and collecting a lot of money from this. It was so good Ralph (Ralph thought that natural gas prices would continue going up) decided to give the oil & gas sector a sweet heart deal and dropped the Alberta oil royalty from 30% on a barrel of oil to 5% (kind of like the sweet heart deal that a hand full of ranchers get from the grazing reserve leases in Southern Alberta from the government). Premier Stelmach and Notley both tried to bring the oil royalty in line what it should be and almost got lynched, I know because I have had some dealings with both the oil sector and ranch sector, and both are primarily from southern Alberta and both wanted to lynch Stelmach and Notley. So here we are today trying to deal with Ralph’s caused deficit. Farmer Brian what did you do with your Ralph bucks?

          Reply
        • Keith McClary

          January 23rd, 2018

          “As for infrastructure, Ralph was a victim of his own success. Alberta’s population grew quickly attracted by the availability of good paying jobs and low taxes and certainly put a strain on the existing infrastructure.”

          So, this was a good thing? We now have a large population while our lucrative conventional oil is in terminal decline. No more gushers. The tar sands are so expensive to produce and ship that all but the tiniest royalty makes them unprofitable. We can’t even afford a safe highway to Fort Mc.

          Reply
          • Farmer Dave

            January 23rd, 2018

            Keith if your view that tar sands are expensive to produce then why did Enbridge construct three new pipelines and Williams build two new pipelines to carry crude in the last eight years, some of them crossing my property? I doubt that these companies would build anything that is to expensive to produce or ship.

  10. Brent

    January 21st, 2018

    Born in Saskatchewan, Alberta was always the envy. Opportunity was plenty. As I turn 40 this year I have seen that melt away. I Remember some of my friends receiving a cheque for $400 just being Albertan on a long weekend in 2005. I seriously don’t understand the idea of privatization. You think you are getting the same service. (You aren’t.) I worked in both public and private healthcare. It’s always a paired down version usually involving less employees and you’re treated like a barcode… Probably a small savings to the government at first. Then becomes more and more expensive and worse and worse working conditions working conditions. You may be saving a few bucks on the tab but now you have less workers paying tax and less tax being paid by the lower wages of the private company. Governments are supposed to protect its people. Keep business in check. Not be corporation’s b*tch.

    Reply
  11. Political Ranger

    January 21st, 2018

    Gov’t vs Corps: “better, cheaper and more fairly” are a function of competence. Competence of a person and the system or organisation they work within.

    We can quibble about what is “essential” but the fact is gov’t should be managing services that corps should not. Beyond that, it’s competence – can you deliver?
    Some people are just incompetent; some of them work for corps and some of those in senior positions. There is plenty of incompetence in gov’t, at all levels, including legislative, as well.
    Believing that corps are better, cheaper or more fair than gov’t is just another far-right corporatist fantasy, it’s not true.
    Believing that just handing over the work to a corp will result in better, cheaper and more fair outcomes is just plain foolish. Those foolish people are incompetent and should be replace asap.

    Reply
  12. Keith McClary

    January 23rd, 2018

    FARMER DAVE: (There was no REPLY link under your comment for some reason.)

    The royalty rates are lower because of higher costs:

    “Crude bitumen is worth less than crude oil because bitumen is more difficult to refine than lighter crude, and it does not naturally flow through a pipeline. Diluent is added to allow bitumen to flow through pipelines to market. The cost of removing impurities and adding diluent is considered in the royalty calculation.”

    “Royalty rates can be different, depending on whether the Royalty Project is in the “pre-payout” or “post-payout” phase. The pre-payout phase is the period before an oil sands project has reached payout. Royalty rates are lower to account for high initial investment costs and long construction times.

    Project payout occurs when a project’s cumulative revenues equal or exceed its cumulative costs. Royalties are typically higher in the post-payout phase.”

    https://www.alberta.ca/royalty-oil-sands.aspx

    Reply
  13. Jale

    January 24th, 2018

    I always remember Mr. Klein and his famous “Shoot, Shovel, Shutup” phrase with the mad cow meat trade debacle. Seems there are two kinds of people in the world, one like Klein who oversimplify or one like the majority of people posting here who are objective thinkers who tally various sides to a argument and check facts. I wish I knew more people in the world like I see here.

    Reply

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