One of the arguments people make in favor of using public-private partnerships for infrastructure projects is that the private sector can design, build, operate and maintain a project cheaper than the government can. No so fast, according to the auditor general for the Canadian province of Ontario.
Auditor General Bonnie Lysyk studied 74 infrastructure projects and found that Ontario taxpayers actually paid $8 billion more for PPP, or P3, projects than they would have if the government had designed, built, operated or maintained the projects in-house.
“About $6.5 billion of this is due to higher private-sector financing costs,” Lysyk stated Dec. 9 in a press release.
Public-private partnerships in Ontario fall under the title of Alternative Financing and Procurement (AFP). Risk is a big factor for determining whether a project is funded or operated through AFP, according to the province.
Lysyk says the province can do better in estimating cost overruns and determining the financial risks.
“Overall, value for money could probably be achieved on some projects if they were delivered directly by the public sector and had strong provisions for managing risk and provided incentives for contractors to complete projects on time and on budget,” Lysyk stated in the report.
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