Virtually all of the arguments used to justify privatizing public facilities and services have been completely debunked. 

Here are the top five myths about public-private-partnerships (PPPs): 

Myth # 1:  PPPs save money.  This was probably the first argument to be cast aside.  Unlike public sector capital projects, the cost of PPPs are always higher for three main reasons.  One, the procurement process (selecting the private partner, negotiating the contract) is expensive, and can run upwards of several million dollars for large projects. Two, private companies always build profit cushions (at least 10 to 15%) and risk mitigation costs into their budgets.  Three, private companies always pay higher interest than government when they borrow - even an increase of 1% can add millions of dollars to a project over the life of a contract. 

Also, there is much secrecy around private contracts, so it is not possible for taxpayers to get a complete picture of the financial commitments (e.g. revenue guarantees) government has agreed to. 

Myth # 2:  PPPs reduce debt.  The argument is that public debt is reduced when the private sector assumes the costs associated with a major capital project.  This is a ‘buy now, pay later’ accounting trick that tries to make government look better by keeping debt off today’s books.

Myth # 3:  PPPs transfer risk.  This seemingly compelling argument never actually played out in reality. The private sector is not in the business of risk management; they are in the business of profit making. Presented with an actual risk, private partners have been found to either transfer the risk back to government, charge a premium to continue to assume the risk, or sell or walk away from the project. Furthermore, environmental risk is never transferred to the private sector in these arrangements - a reality identified by a Director of the Canadian Council for Public Private Partnerships (see “Punchline” below).

Myth # 4:  The private sector has better access to capital.  The recent economic meltdown put the last nail in the coffin of this pro-PPP argument.  Governments can get access to more capital at lower interest rates than any private company anywhere.  (This is why it is being left up to governments to finance bailouts.)  Local governments have stable revenue sources (e.g. property taxes) and often have great credit ratings - making them amongst the most favourable borrowers of low interest money.

Myth # 5:  PPPs can fix the infrastructure deficit.  This argument suggests that the private sector can rescue us from our infrastructure deficit by shouldering the costs of repairing and replacing aging water and sewage systems, public facilities, etc.  The previous four myths completely shatter this one. 

The last myth standing:  efficiency.  These days, the pro-PPP camp has been reduced to using the more generic rationale of “efficiency.”  What they fail to tell us is that:

1. • “There is no empirical evidence of the relative efficiency of the private sector.” (Government of Canada 2006 policy paper on PPPs).
   

1. • “…there is no evidence to suggest that PPPs consistently cost less or provide better services than traditional public projects.”  (From a 2007 study conducted for the Federation of Canadian Municipalities. The link to the study is broken, but can be found by searching the FCM website).
   

The punchline.  When private companies get involved in delivering public services,  service quality and maintenance standards plummet, accountability disappears, and user costs soar.  Meanwhile, the public continues to assume primary responsibility for environmental and regulatory risk.  Don’t believe me?  Check out the chart on page nine of this presentation by a Director of the Canadian Council for Public Private Partnerships (Premier Gordon Campbell is the Honourary Chair of this pro-PPP organization).

What the private sector does best is run private companies, and what the public sector does best is deliver public services.  If it ain’t broke, don’t fix it.