Privatization costs more, provides less, and puts lives at risk

A growing global body of evidence demonstrates that privatization of public services is not the cost-saving remedy that it is made out to be. Instead, as explained by the United Nations in a 2018 report on privatization and poverty, “private finance is more expensive than public finance.”   

A report recently issued by PSAC and the Union of National Defence Employees (UNDE) on privatization at the Department of National Defence (DND) gives many examples of local Management deciding to contract out work for reasons other than cost. 

As one example, in a briefing note on why he needed to contract out cleaning work, a CFB Kingston base commander stated that public service cleaners were the preferred option to maintain cleaning of many areas, especially areas with higher security requirements. They also said that a reduction in cleaning standards was not an option, but in the absence of a clear national standard or strategy, the base was left with no option but to contract out the work. DND budgets are rigidly structured. Base commanders have limited salary-wage envelopes with which to pay public service workers. When that envelope is empty, they must turn to a much more generous contracting-out line item, even if their assessment of the needs of the base is that the work must be done by public sector workers. Further, the commander indicates that the proposal was not a cost-saving measure, and that costs would in fact increase by 35 per cent, from $4.3 million to $5.8 million for the same service. When bidding on contracts, companies must make a profit, charging more for labour, for supplies, and equipment, even when workers are paid less 

 A study at the base in 2013 clearly showed that contracting out lowered the quality of cleaning, and that previous contracting out efforts had resulted in significant skimping on quality in the pursuit of profits.  

“The cleaning standard fell far below what was required for RMCC, especially in the critical residential spaces. It was observed that in an effort to increase the profit margin the contract cleaners were using inferior or improper cleaning products which resulted in additional maintenance, environmental problems and health and safety issues resulting in unfit living conditions for Cadets.” 

Contracting costs more, reduces quality of service 

Factoring in that contracting out costs 35 per cent more than keeping the work in house, the more than $250 million spent in 2020 alone on private contractors who secured cleaning and facility maintenance contracts is more than $63 million more than what would be spent if these jobs were wholly within the public service. Given that DND has studies showing that contracting out results in “inferior results,” there is no justifiable reason to continue the practice.    

The cost of contracting out is more expensive and less efficient than using public service employees.  In the end, public dollars end up in the pockets of shareholders and owners. Companies take work out of the public service, thereby reducing transparency, creating more precarious work and leaving Canadians in the dark. How does this make sense for the good of the Canadian Forces or the Canadian public? And if such firms fail, as recently happened with the U.K. privatization giant Carillion, what is the government’s plan?  



November 13, 2020