4. Responsible Funding of Infrastructure Projects – Cautious Use of /Avoiding Public-Private-Partnerships (P3s)
We at ActivatED have great concerns regarding the path towards privatization of public services. One tool used to implement privatization by governments are Public-Private Partnerships or P3s. In a traditional sense, governments hire private companies to design and build infrastructure projects. Meanwhile, the government finances the project; after when the project is completed, the government operates and maintains the infrastructure. On the other hand, with most P3s, the government hires a private company to finance, design, build, operate and maintain the public infrastructure.
We realize that P3s come in all shapes and sizes. However, generally, we believe that control of public services and infrastructure is paramount to prudent fiscal, maintenance, and operational management. We ardently disagree with the notion that private companies should be allowed to make a profit off of infrastructure that would conventionally be publically owned, operated, and maintained. Case studies and research from around the world have clearly shown that when implemented on infrastructure projects, P3s have cost governments more money. In Ontario, P3s have cost the government on average 16% more (McKenna, 2012). The reasons why it costs more are fairly simple: 1) When a private company borrows capital to finance a project, it usually has to pay higher interest rates compared to what rates the government would have to pay. 2) Because private investors require profits from the project, the necessity of a profit adds another cost. 3) P3s have more of a lengthy and complicated bidding and contracting process, which increases the final cost of implementing a project (Murray, 2006).
In addition, P3s more often than not result in degraded service, lower pay for workers, and “have fundamentally been about giving private investors and financiers high returns with low risks, at the long-term expense of taxpayers and the public” (Sanger & Crawley, 2009). Our services and infrastructure need to be as transparent, effective, and accountable as possible and most P3 contracts do not accomplish this. P3s should rarely be used as a substitute for responsible governance and oversight.