The decision to do a long-term private deal to build and maintain the new Kingston rehab and mental health hospital suggests the McGuinty government is ramping up its efforts once again to engage in major privatization of Ontario’s infrastructure.
In Ontario the P3 brand – P3 representing “private-public-partnerships” – has been repeatedly damaged by deals that have clearly not been in the public interest.
There is a Mike Constable comic that shows the private partner eating the public partner – a likely accurate analogy to the present situation.
Ontarians are still vexed by the giveaway of Highway 407 north of Toronto, one of the most expensive and profitable toll roads in the world. The folly of public-private partnerships was visible to all when the McGuinty government found they didn’t even have the power to limit rate hikes on the toll road.
Let’s not forget the government tried to rebrand the P3s as “alternative financing and procurement” projects (AFP) – a moniker that failed to get any traction, especially when the Canadian Council for Public Private Partnerships continued to place these projects on their website as P3s, not AFPs.
Ontario has far more P3 projects underway than all other provinces combined.
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Ontario has moved much faster than other provinces in establishing private contracts to design, build, finance, maintain and sometimes operate public infrastructure projects. Despite many warnings, the province appears to have dismissed evidence that shows these kinds of arrangements can be poor value for the public purse.
Now researchers at the University of Toronto have put a price on what the average public-private partnership (P3) costs compared to traditional public procurement – 16 per cent more.
The new research, highlighted in Sunday’s Globe and Mail Report on Business (ROB), looks specifically at 28 Ontario P3 projects worth more than $7 billion. At a 16 per cent premium, that means the projects in the study would have been about $1.12 billion less had the government tendered these contracts under traditional procurement rules. Or about what it would cost to build three Peterborough hospitals.
Most of this additional expense is based on the higher cost of borrowing for the private sector, although about 3 per cent is additional transaction costs, one of the reasons why so many law firms belong to the Canadian Council for Public Private Partnerships.
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