Paying losing P3 bidders is standard practice: expert

An expert on public-private partnerships says the money paid to losing P3 bidders ensures the best quality bids and provides increased value for taxpayers.

Opposition says big companies can afford to absorb the costs

The Rosewood school under construction in Saskatoon is a P3 partnership. (Government of Saskatchewan)

An expert on public-private partnerships says the money paid to losing P3 bidders ensures the best quality bids and provides increased value for taxpayers.

The comments come after it was revealed the Saskatchewan government paid $5.6 million during the 2015-2016 fiscal year to companies that bid on government work and lost. The opposition says the payments aren't necessary.

But Timothy Murphy, a project finance lawyer with McMillan LLP, says paying losing bidders is standard practice for P3s.

"What you're trying to do in a P3 is produce as robust a market and as robust a competition for the project you're putting out to tender," Murphy told Sheila Coles on CBC Radio's Morning Edition Wednesday.

"Usually you want to have people spend a lot of money producing a very competitive tender."

Trading for ideas

According to Murphy, putting together a quality bid often takes millions of dollars and thousands of hours.

"The judgement is made that if we have two or three bidders who might spend millions of dollars putting together a competitive bid, we're more likely to get a better one so it's better value to taxpayers if we pay an honorarium to those who lose," Murphy said.

Paying an honorarium on losing bids with good ideas can also act as a trade for the intellectual property contained in the bid, Murphy explained.

"If I'm on the government side, I can sort of introduce some ideas... without worrying about being sued by a losing bidder," he said.

Opposition still objects to honoraria

NDP finance critic Cathy Sproule says she isn't convinced paying losing bidders ups the overall quality of bids.

"I think that's something that the construction companies would certainly pitch as a justification for getting those payments," she said.

NDP finance critic Cathy Sproule remains unconvinced of the wisdom of paying losing P3 bidders. (CBC News)

The opposition still stands with the belief that big multinational corporations bidding for P3 can afford to put together their bids, she said. 

"Every time a bid comes in, people don't get paid for not winning," Sproule said. "It's a very high level and these are very large companies who pay the price to bid. That, I think, would be much fairer in this circumstance."

With files from the CBC Radio's Morning Edition and Stefani Langenegger