Lawsuit undermines key claim about P3 privatization schemes

Reports by Auditors General in 4 provinces have suggested that the savings P3 privatization schemes provide by transferring risk to the private sector are overstated.

Ottawa (12 April 2016) — The $330 million lawsuit launched against the hospital and the Quebec government by companies involved in the McGill University Health Centre for cost overruns undermines a claim that is central in any defence of P3 privatization schemes.

According to the privatization industry, when P3 privatization schemes are used, it is the private sector that is supposed to pay for any cost overruns. In fact, it's the only justification for P3 privatization schemes. Even cost comparisons prepared by companies profiting from privatization show that borrowing costs and administrative costs are higher for P3 privatization schemes.

“This lawsuit makes a mockery of the claim that P3 privatization schemes transfer risk to the private sector,” said James Clancy, National President of the National Union of Public and General Employees Union (NUPGE).

25% cost overrun

The McGill University Health Centre was supposed to cost $1.3 billion. Now the corporations involved in the P3 privatization scheme are trying to get an additional $330 million — a 25 per cent increase in the cost.

Auditors General in 4 provinces have questioned risk transfer

Reports by Auditors General in 4 provinces have suggested that the savings P3 privatization schemes provide by transferring risk to the private sector are overstated. In Ontario, the Auditor General found that, “no empirical data supports the valuation of the cost of the risks.” To have corporations involved in a P3 privatization scheme suing a government for a 25 per cent cost overrun provides strong evidence the Ontario Auditor General was right. 

Canadian Council for Public-Private Partnerships (CCPPP) gave McGill University Health Centre P3 privatization scheme a gold award for finance

In 2010, the Canadian Council for Public-Private Partnerships gave the P3 privatization scheme at McGill University Health Centre a gold award for finance. Even after a bribery scandal, 9 people charged with fraud, an Interpol warrant, and this lawsuit, the project is still described as award winning on the CCPPP website.

"When a major lobby group for the privatization industry gives a gold award for finance to such a flawed project, it is hard for privatization supporters to claim that it is just an 'isolated example,'" said Clancy.

Problems and the need for audits show issues not limited to one project

As usual, privatization supporters have attempted to dismiss the lawsuit as an isolated problem and claim that P3 privatization schemes still work. This argument ignores the mounting evidence across Canada and internationally that these schemes are fundamentally flawed.

Whether it is sewage on the floor of the birthing unit at the P3 McGill Unversity Health Centre or locks prisoners can disable at the Toronto South Detention Centre P3, significant problems with construction are commonplace. And when there are independent reviews of the cost and benefits of P3 privatization schemes — as opposed to those funded by the privatization industry — the findings are negative.

NUPGE 

The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 360,000 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

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