Public-Private Partnerships Are a Deal With the Devil

Recent experiences with public-private partnerships in Canadian cities, like Ottawa’s light-rail disaster, reveal how the model prioritizes profit over quality, leaving citizens with higher costs and worse services.

Recent experiences with public-private partnerships in Canada have revealed how disastrous the model can be. (Andrew Lahodynskyj / Toronto Star via Getty Images)

For those still unconvinced that public-private partnerships (P3s) are a bargain with the devil, recent experiences with P3s in various Canadian cities ought to seal the deal. The Ottawa case study is a doozy. To tackle downtown traffic congestion from bus overload, the city attempted to build out its light-rail. Because of the P3 model deployed, disaster ensued: lawsuits, sinkholes, trapped workers, delays, layoffs, scathing reports, malfunctioning doors, transit riders hopping a fence to escape the station, system failures, faulty trains, and more. And the Edmonton case isn’t a ringing endorsement of the model either. Ditto Toronto’s Eglinton Crosstown LRT.

The premise of a P3 is that the public shoulders an outsize cost burden and shifts profits to the private sector on major projects — typically infrastructure. Deficit and debt hawks will tell you that the arrangement is a godsend, since it helps reduce public debt. But in the end, someone pays, and it’s always the user, which is to say the citizen, resident, or visitor who is left with higher costs and worse service. These projects often suffer from delays, exceed allocated budgets, and result in poor outcomes, all while lacking adequate democratic accountability.

In 2022, the Ottawa Light Rail Transit (LRT) inquiry documented the disastrous development and roll out of the light-rail in the city. The inquiry criticized the P3 model, noting “the P3 model caused or contributed to several of the ongoing difficulties on the project.” The project was an utter mess, and once the LRT launched, it was plagued by delays and breakdowns. As the inquiry notes, the P3 approach played a significant role in the botched project by boxing out the public. “For example, whereas the City traditionally had a hands-on, leading role in projects, given the lesser role it played under this model, the City was left in a position where it had limited insight or control over the OLRT1 project,” it says.

In the wake of the Ottawa debacle, the Ontario New Democratic Party called for an end to P3s, saying “We see that the true results of P3 projects are a brutal lack of transparency to the public, conflicting interests from partners, and less control by a city over massive infrastructure plans.” The report drew the attention of officials with the Ottawa Hospital and Infrastructure Ontario, raising concerns about the P3 hospital in Ottawa. Unfortunately, the project was already committed to the model.

Edmonton’s experience with P3s isn’t a ringing endorsement of the model, either. In August last year, Mayor Amarjeet Sohi called for a review of the city’s large projects and P3 use after years-long LRT development delays. He claimed the model “was forced upon the city” by the federal government. As CBC reported, the feds “would only contribute money to the project if the city entered into a semi-private delivery model.”

The Canada Infrastructure Bank (CIB) is a federal monument to the belief that P3s are the answer to the country’s building needs. While there is a need for a federal infrastructure funder, the semi-private model represents an abdication of the state’s role in doing public things by and for the public. The entrenchment of P3s through the CIB means higher costs for private financing and service delivery — and, one can expect, worse service to boot.

One argument for P3s is that they can mitigate risks for the public. As the LRT report notes, “the City was able to offload the geotechnical risk to RTG [Rideau Transit Group].” The report points out that when a sinkhole covered under the contract terms emerged on Rideau Street, “the City saved costs of over $100 million because it had transferred the geotechnical risk to RTG.” Of course, it remains an open question whether a different model or approach would have prevented the emergence of the sinkhole in the first place. Moreover, the report raises concerns that the P3 model led both the city and RTG to prioritize their liabilities, legal rights, and responsibilities instead of ensuring a reliable LRT system. Notably, the executive summary of the report observes that “the delivery model chosen by the City left the City with little control over RTG’s work.”

Ottawa’s LRT P3 was a “design-build-finance-maintain” contract — which is exactly what it sounds like. The private builder was responsible for designing, building, financing, and maintaining the LRT for a set price. In this model, the builder’s motivation lies in meeting the contract terms, ensuring the design, construction, and maintenance are done in a way that recoups their investment and maximizes profits. A perceptive observer may already discern the inherent risks in this setup.

An apocryphal quotation about free-market cost cutting is attributed to astronaut John Glenn. The quote has appeared in various forms. In one iteration, when asked how he felt ahead of becoming the first American to orbit Earth, he replied, “I felt exactly how you would feel if you were getting ready to launch and knew you were sitting on top of two million parts, all built by the lowest bidder.”

The P3 model’s fundamental problem lies in its lack of public-spiritedness and focus on the common good. It is profit-focused. Moreover, it is focused on maximizing profit. That is a recipe for designing, building, delivering, and maintaining poor, expensive projects and services. And no amount of recommendations, shame, or inducements will change its nature. The fundamental logic of the model ensures bad outcomes.

And yet we’ll have to learn and relearn this lesson time and again. Governments are terrified of deficits and debts subnationally. In part, they’re right. Unlike the federal government, provinces and territories and cities have fewer tools and revenue-generating capacities. Moreover, years of neoliberal austerity in the 1990s and early 2000s led to federal governments cutting funding and downloading responsibilities to provinces and cities. Indeed, municipalities got the worst of it because they were abandoned or overburdened by both federal and provincial governments. Combine that with the long-term centrist and right-wing war on the idea that governments can and should do things, and the relentless capitalist pressure on states to shovel contracts and subsidies their way, and you get the rise and dominance of P3s.

It’s well beyond time to ditch P3s. The Ottawa LRT inquiry won’t be the last of its kind, nor will the messes in Edmonton and Toronto. The fight to end the model requires governments to step up and accept that big public things ought to be fundamentally public all the way down. But that only works if all levels of government are willing to spend the money to undertake projects themselves, and that struggle is a long way from being won.