The use of public-private-partnerships (PPPs) to build and operate public services is a relatively new practice in Canada - a reality that makes it difficult to find neutral and objective information about the short- and long-term impacts of these deals.
This may be about to change, as academics and independent auditors start to assess these partnerships. Recent reports released by Auditors General in Quebec and Ontario sharply criticize the use of PPPs.
Here are but a few examples of PPPs that didn’t work:
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1)Ontario’s Auditor General found that, had Brampton’s Civic Hospital been built and operated publicly rather than under a public–private-partnership, government could have saved almost $100 million on the cost of design, construction and provision of non-clinical services, and another $200 million on interest (government can access financing at lower rates of interest).
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2)The citizens of Hamilton Ontario suffered disastrous consequences when their water and wastewater treatment systems were privatized in 1994. A private company obtained a 10-year operating contract in return for promises of local economic development, new jobs and cost savings. Instead, what citizens got was a 50% cut in the local workforce within 18 months, a spill of 180 million litres of raw sewage into the harbour, the flooding of 200 homes and businesses, and major additional costs. Over the 10-year period, the private contract was sold four times – with two companies now bankrupt (one of them a subsidiary of Enron) – making it impossible for city officials and citizens alike to know who to contact in case of problems. In 2004, the city reverted operation of its water and wastewater treatment back to the public sector - partly in response to public outcry and environmental degradation, and partly because the private operator was asking for a re-signing bonus of $26 million over the annual operating costs of $13 million. One year later, the publicly operated facilities had saved the city at least $1.2 million.
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3)Canada’s Auditor General found that the Confederation Bridge linking Prince Edward Island to New Brunswick cost $45 million more than it would have had it been built publicly. The private consortium that has a lease to operate the bridge for 35 years gets paid through tolls and public lease payments. In the first year, tolls increased by $8 per car. The Auditor General found that the financial risks of the project were not transferred to the private company, but were left the responsibility of the public. Also, the government was found to have inflated the costs to have the bridge publicly built, making the PPP seem more cost effective than it is.
Want more examples? How about Victoria’s own arena, which cost taxpayers millions in cost overruns due to chronic delays. Or the Sea-to-Sky highway that will cost taxpayers an extra $450 million.
Also, this well-referenced document lists 100 Canadian and International PPPs that were flawed, failed or abandoned.
