Ontario Auditor General Bonnie Lysyk's revelation on Dec. 9, 2014, that privatization has cost the province more than $8 billion should come as no surprise: she's the third Ontario auditor general in a row to debunk claims that P3 privatization schemes save money.
Each of the Ontario's last three auditors general have found that privatization proponents have artificially inflated the costs of public delivery in order to make their schemes look good. And this is not just an Ontario problem. Quebec's Auditor General and a forensic auditor in BC have all come to similar conclusions when examining P3 privatization schemes in those provinces.
In Ontario and Quebec, the numbers game is played by artificially inflating the value of the risk faced by the public sector if infrastructure projects are publicly delivered:
Lysyk found “no empirical data supporting the key assumptions used by Infrastructure Ontario to assign costs to specific risks.”
Her predecessor, Jim McCarter, audited part of the Air Rail Link to Pearson Airport and “saw no evidence that the estimates of the risks of delivering the spur under traditional procurement were based on actual experience of similar, traditionally procured transportation projects.”
And before that, Provincial Auditor Erik Peters, found “cost estimates for the government to do the project were overstated by a net amount of $634 million” when auditing the Brampton Civic Hospital P3 privatization scheme.
In Quebec, the Auditor General found the justification for two Montreal P3 privatization schemes was based on “inappropriate” and “unfounded” assumptions.
Partnerships BC found another way to artificially inflate the cost of public delivery. A 2009 report from two forensic accountants found that the future cost of government borrowing had been artificially inflated.
The frequency with which these numbers games get played when P3 privatization schemes are being proposed means they can’t be dismissed as isolated examples. They are part and parcel of privatization.
These numbers games mean we're paying more than we have to for infrastructure, but there are other costs as well. The privatization schemes' lack of transparency and accountability means we are unable to get key information about how the services we're paying for are being run. At best, this secrecy makes it difficult to find out if the privatization schemes are actually providing the services they are being paid to provide. At worst, it means multi-million dollar scandals such as those uncovered in the McGill University Health Centre P3 privatization scheme have resulted in multiple fraud charges.