Privatization If Necessary?

David Cavlovic passed on to me an article by Ben Dachis in the Ottawa Citizen dated December 18.  The thrust of the article is that we can improve transit by avoiding strikes, and we can do that by encouraging competition among service providers.

One of the major stumbling blocks in the current negotiations has been the issue of outsourcing. However, outsourcing of transit operations and maintenance can be done in a way to improve public transit, preserve the jobs of workers and ensure that the city isn’t crippled by a strike.

Ottawa should consider modest relaxations over the transit monopoly that OC Transpo has in the region. Private companies could be permitted to operate a transit route on contract to the city.

If one transit operator went on strike, another could fill the service void. Ottawa can look to a suburb of Toronto, York Region, to see that in the case of a strike by one transit provider — Viva, operated by Veolia Transportation — the rest of the operations continued normally and most riders were not left waiting at the curb.

Competition between transit companies can ensure service delivery, reduce costs and improve service. The key to all of this is transit competition — not a transit monopoly.

This is utter nonsense.  The ability of one provider to take over for another assumes that there is sufficient capacity — buses and drivers — available to operate the fill-in service.  As was well-reported in York Region, the YRT buses could not cope with the riding displaced from VIVA.  Moreover, neither system carries riders on the scale of major urban systems like Toronto’s where the sheer size of operations would make any shift between providers a daunting one.

The classic example is the U.K. In London, controlled competition has led to cost savings and an increase in passenger trips.

In Ontario, privately operated transit systems had operating costs per hour of vehicle operation 20 per cent below publicly operated transit systems. The realized gains in efficiency come a number of ways, such as lower management costs.

London (and anywhere else in the U.K.) is probably the worst possible example regarding labour costs and service provision.  England is notorious for overly generous work arrangements for unionized staff, and the savings (such as they may be) achieved there do not transport across the pond to North America.

A related issue is that many schemes to privatize segments of systems eventually led to monopolies as the larger, better-financed operators systematically bought up the smaller ones.  The problem of a single operator’s shutdown taking the whole system becomes just as real in this situation with the added problem that the negotiating team is removed from public review.

Ontario cost comparisons need to be taken with several grains of salt.  First off, the most likely services to be privatized are those that are small enough for a private firm to take them on.  They are also likely to have much less demanding operating conditions (hours, riding levels, vehicle costs) and be candidates for part-time staff with lower total wages and benefits.  Major urban systems are different, and will automatically have “higher” costs due to their complexity, level of service and the need for a much larger organization to manage and operate their systems.

The unions can bid alongside private maintenance companies for the right to maintain OC Transpo vehicles, in what is known as managed competition. When this was done with U.S. government contracts, public unions won around 90 per cent of all work that was bid out, suggesting that they will not lose much work. In fact, in the U.K., local government employees have been successful at winning contracts for private-sector work in certain services.

If public workers are going to win about 90 percent of all work offered on tender, this implies that they are already competitive or close to it.  A more important question, however, is what proportion of work was actually offered on tender?  How many private companies now exist who repair large bus fleets or subway cars? It’s not as if there is an underutilized transit maintenance industry just sitting there waiting to do work on large transit systems.  The real agenda is likely the selloff of existing public assets to a private “operator” at fire-sale prices.  Think Highway 407.

Large systems already contract out some speciality work where it makes sense to do so, and large-scale capital projects are substantially built by private companies.  The last year has been a bonanza for private transit consulting firms, and there is a queue of construction firms ready to build new lines the moment the designs are finished and the funding is available.

The labour situation in Ottawa will not be helped by sabre-rattling on privatization.  This only fuels distrust at the bargaining table and suggests that the politicians are more interested in scoring debating points than in addressing contract issues.

Santa Rides the 502

Today’s Star contains an article about yours truly.  While I’m really not one to bang my big bass drum (I will leave that to the politicians), I felt that some of you who either don’t read the Star or are further flung than its circulation territory might like to know about it.

Many thanks to Tess Kalinowski for such a flattering piece and to others for their kind, if occasionally frustrated, words.