Ontarians need to re-evaluate the fundamental role of government in the provision of some public services. We need to harness private sector investment and innovation in ways that protect the public interest. Alternative service delivery (ASD) could hit the sweet spot in many, many areas.
Do the math. Ontario’s debt is approaching $300 billion. The province will have to double the pace of reductions and cut spending by $2.5 billion a year in order to meet deficit targets. Meanwhile, an aging population and growing skills shortages require new and expanded services.
Add it up, the result is a fiscal paradox. How does the Ontario government support new and growing demands on public services while tackling the deficit and debt?
History demonstrates that across the board cuts don’t lead to long-term savings. Additional borrowing just crowds out future program spending and tax hikes could hurt our economic recovery. A greater private sector role in delivering public services must be part of the solution.
The private sector has what governments need right now — money for necessary capital investment and upgrades, as well as new technologies and business processes.
Greater private sector involvement can also unleash productivity improvements. We know that private sector managers face clearer incentives and market signals that are simply less urgent among public sector managers. This includes clearer incentives to enhance worker productivity, to continuously examine supply chains for efficiencies, to introduce new technology, and leverage economies of scale and scope.
Two caveats. First, ASD is not a panacea for government’s fiscal problems. And second, there are many areas where ASD may be incompatible with the public interest. As a first step, government should conduct, in partnership with the private sector, a system-wide audit to examine the services in which ASD can lower costs and/or improve productivity.
There are countless successes from around the world that demonstrate the potential of ASD models.
Since Australia shifted its training system for the unemployed to an ASD model, the average cost per unemployment case has decreased by 65 per cent.
By shifting a portion of health claim processing to the private sector, the citizens of B.C. can now expect their calls to be answered. Before the shift, more than 50 per cent of citizens’ calls were met with busy signals.
One of the largest federal agencies in the U.S. has migrated 25,000 mailboxes to the cloud, and in doing so has cut its email costs in half.
The list goes on.
ASD is not new in Ontario. Private and not-for-profit clinics are offering routine procedures such as cataracts and colonoscopies at lower cost and higher output.
That said, some hard lessons have been learned through high-profile ASD snafus, including ORNGE, Highway 407, and cost overruns in numerous private-public infrastructure partnerships.
However, case studies show that these failures are typically a result of poorly designed contracts that weakened government oversight and its capacity to set policy direction and protect the public interest.
Properly structured contracts harness the capital and innovative capacity of the private sector while ensuring proper government oversight. We recommend, for example, performance-based contracts, the publication of before/after results, and that government actually builds the capacity to effectively monitor and oversee private sector partners.
Like it or not, government in this province is going to need to evolve and will look dramatically different in the future. Harnessing private sector innovation is not the only solution to Ontario’s fiscal problems, but would help resolve the fiscal paradox.
Original Article
Source: thestar.com
Author: Josh Hjartarson and Ted Wigdor
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