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“This report shows why NUPGE and its components are fighting for a Five-Point-Plan to protect public services,” said Clancy. “The requirements for openness and transparency in the Plan would make the kind of numbers games that added $8 billion to Ontario’s infrastructure costs impossible.”
Ottawa (12 Dec. 2014) — The 2014 Ontario Auditor General's report shows how cost estimates were manipulated to make P3 privatization schemes appear cheaper than publicly managed infrastructure projects. This was done by producing very high estimates for savings from transferring risk to the private sector.
When only costs like construction, financing and administration were included, the public option cost much less. For the 74 projects in which Value for Money (VFM) assessments were prepared, the report found public delivery was $8 billion cheaper.
“A lot of people who've seen Ontario P3 privatization schemes up close knew there was no way they could be cheaper than public delivery. The auditor general has proved them right," said James Clancy, National President of the National Union of Public and General Employees (NUPGE). “The Auditor General's report also tells us exactly how the P3 privatization numbers game is being played in Ontario.”
“No empirical data” to support Infrastructure Ontario's claims about transferring risk
Instead Infrastructure Ontario justifies using P3 privatization schemes by claiming that transferring risk to the private sector will save money. The auditor general’s report makes it clear this claim isn’t based on hard evidence.
In her report, Auditor General Bonnie Lysyk said that “there is no empirical data supporting the key assumptions used by Infrastructure Ontario to assign costs to specific risks.” Instead, she found Infrastructure Ontario base their claims on “difficult to verify” estimates from consultations.
Costs counted twice to make public delivery appear more expensive
Two of the costs included, when calculating the savings from transferring risk get counted twice for public delivery. This makes the cost comparison even less accurate. The auditor general estimated that, for the 74 projects she looked at, double counting made public delivery appear $4.9 billion more expensive than it really was.
Audits in three provinces found numbers games to favour P3 privatization schemes
This is not the first time an auditor general has found that figures were being manipulated to make public procurement appear more expensive. Two previous auditors general in Ontario came to the same conclusion when auditing specific projects as did Quebec's auditor general. In British Columbia, a forensic audit of P3 privatization schemes also found the cost of the public option had been made to appear artificially expensive.
Role of the privatization industry not addressed in report
What the auditor general didn't mention is the consulting firms doing the VFM assessments have a huge stake in P3 privatization schemes. Companies hired to prepare VFM assessments also advise contractors bidding on P3 privatization schemes, so more P3s mean more business. The companies hired to prepare VFM assessments belong to the Canada Council for Public-Private Partnerships, a group promoting P3 privatization schemes.
This is not an isolated case. Increasingly, those making decisions about whether or not public services should be privatized have a financial stake in the outcome. One example would be the number of board members of Infrastructure Ontario who are employees or retired employees of companies that profit from privatization.
Report shows transparency and accountability needed
The Auditor General’s report is a powerful reminder that the reason governments can get away with privatizing public services is the secrecy and lack of accountability that surrounds privatization schemes. If the public got the full story about things like P3 privatization schemes, they would be outraged.
“This report shows why NUPGE and its components are fighting for a Five-Point-Plan to protect public services,” said Clancy. “The requirements for openness and transparency in the Plan would make the kind of numbers games that added $8 billion to Ontario’s infrastructure costs impossible.”
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The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 340,000 members. Our mission is to improve the lives of working families and to build a stronger Canada by ensuring our common wealth is used for the common good. NUPGE