Opinion Column: Chris Famous On Privatisation

September 30, 2014

[Opinion column written by Chris Famous]

I never did give them hell. I just told the truth, and they thought it was hell.” ― Harry S. Truman

What a difference an election makes.

Pre-election: “Privatisation is not part of our plan. We plan to revive this economy, to regrow Bermuda without looking at privatization.” – Shadow Finance Minister Bob Richards March 3rd, 2012

Post-election: “…the Public Bodies Reform Act will…establish the legal authority for the relevant Minister…to make various reforms to government departments, quangos, government funds, government boards and committees [i.e. abolish, merge, modify, transfer] and related legislation…” – Finance Minister MP Bob Richards March 23, 2014

Very shortly the OBA will attempt to oversell the benefits of the privatization of Bermudian government jobs and services. Let us look at some of the fables the OBA will attempt to shove down the throats of thousands of Bermudian Civil Servants.

Myth #1: Privatization saves money

Truth: Privatization often increases the costs for both government and the public.

When New York City subcontracted its Parking Violation Bureau to Datacom Systems Corp., rampant corruption was uncovered. The city took the contract back and the cost of the service was 20 percent lower.

Myth #2: Private companies do a better job than the public sector

Truth: Over 60 per cent of governments that took back previously privatized functions did so because of the poor quality of the service.

Recently, Indiana cancelled a 10-year contract it had with United Water because it was proven that the company violated industry standards, filed inadequate reports, and failed to meet deadlines. Indiana estimates that costs will decrease from $16m to $8m per year.

Myth #3: Privatization contracts go to the best company for the job

Truth: Friends and family programme often rule.

For example, the security for the London Olympic was outsourced to a private company called G4S. The original budget skyrocketed from £282m to £553m with management fees growing from £7.3m to £60m. The head of G4S was the former New Labour Home Secretary, John Reid who played an integral role in privatization.

Myth #4: The public benefits from the sale of government owned equipment and property

Truth: The sale of government owned equipment and land is often a short-term gain at the expense of a long-term loss.
For example, not only is the UK taxpayer paying the highest railway fares in Europe, the government is currently also losing £1.2bn every year because of the sale of the rail system.

Myth #5: Governments can easily replace a contractor if something goes wrong

Truth: Reversing privatization often involves huge costs.

In 2010, it was estimated that it would cost Virginia nearly $400m to cancel its contract with Northrop Grumman for IT services.

Be aware that often times privatization has spin-off negatives including:

  1. The formation of monopolies – Monopolies tend to set higher prices, like milk or trash collection.
  2. Divesting public assets – Often governments will look to privatization to raise revenue in the short-term by selling off public-owned assets to the private sector e.g. Government buildings such as the former Hamilton Police station.
  3. Lost Profits – By privatizing, governments and taxpayers lose out on the profits that are generated from key services such as Tax Collection or TCD or airport operations.
  4. Need for regulating – To ensure that there is no abuse of the monopoly power, often governments will need to invest heavily to regulate and monitor these companies to protect the citizens.
  5. Fragmentation – Often privatized services are broken up into smaller functions. This may lead to the blurring of lines regarding responsibility and accountability.
  6. Short-sighted vision – Private firms may also seek to increase short term profits for their shareholders and avoid investing in long term projects.
  7. Shareholders demands – Private firms have the added pressure from shareholders to maximize profits, regardless of job losses.

To be forewarned is to be forearmed.

“……rules such as the 60/40 ownership rules that hinder the inflow of investments.” – MP Bob Richards, February 22, 2014

Not only is the OBA planning to privatize many aspects of the civil service, it will also seek to allow foreign companies and individuals to reap the benefits.

To my unionized Brothers and Sisters of Bermuda, do not lay down and listen to the lines the OBA will spin such as “this is best for Bermuda” or “take one for the team.” Stand united, stand in solidarity, stand in opposition to Public Bodies Reform.

Public Bodies Reform may cut some costs, but it will not pay down the debt. Not one OBA Minister, MP or Senator is going to give up their government job. Why should you?

- Chris Famous can be contacted via email at Carib_pro@yahoo.com or Twitter at @ryderz777

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Comments (56)

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  1. Tony Hayward says:

    As an alternative, Government employees should just carry on getting well paid for doing nothing, until the day the pot runs dry and there is no money left to pay them.

    • Silver Lining says:

      FYI
      The government worker that I am married to (and many others) does not get paid well! Therefore, your statement does NOT apply to those who work very hard with their bare hands everyday, have their pension suspended, have a pay cut in the form of a furlough day and bring home less than a summer student at a reinsurance company (which I once was – so I know this personally). Meanwhile, the groceries cost more and so does the lights bill.

      Now, I can not speak for the other part of the government sector who sit behind a desk all day and get paid significantly well to tell lies and oh… advocate privitisation!

      • Rhonnda aka Blue Familiar says:

        I have no doubt that there are government employees who work hard day in and day out (I know a couple myself) and it must be frustrating to them to hear the generalisations that are bandied about day in and day out. So kudos to those who do the work and stick it out regardless of the unfair, across the board, criticisms that are around.

        But at the same time, there are those of us in the private sector who work hard day in and day out, make less than Government workers, have not had a increase in years, deal with the same increasing costs as everyone else, and have agreed to more than one unpaid day a month in order to keep their jobs because they know finding a new job would be nye on impossible.

        When it comes down to it, we’re all in this little tiny boat together and we should try to stop generalising and stereotyping. Bermudians fall on the full spectrum, from well off not needing to work, to those with nothing and unable to find work, and the circumstances behind those positions vary.

        I honestly don’t know if privatisation of some services would be good or not. It would depend upon so many factors that I can’t begin to decide. But I do think that it’s an avenue that warrants examination.

      • Tony Hayward says:

        I apologise for the generalisation, it’s just incredibly frustrating trying to do your job when you see other staff asleep under their desks.

        I could save $0.5M at a stroke by getting rid of one particular department which does nothing, and no-one would notice, plus halving the size of HR, who are massively top-heavy.

        We were asked for suggestions, those suggestions were made and ignored, but to suggest there isn’t a problem is to ignore the bigger picture.

    • JustAskin2 says:

      I disagree. It is a fact that government civil servant jobs generally get paid less than the private sector jobs.

      • Creamy says:

        And yet private businesses do things for less cost. They pay their employees more, as you point out, yet they save the taxpayer money.

  2. Curious says:

    With this logic why do we have private companies at all? Govt is so good at allocating resources and running companies we should nationalize everything!

    • hmmm says:

      Chris has an agenda, and that agenda is all about promoting Chris.

      This is a schoolboy type report looking at cherrypicked corruption, mismanagement, heavy industry and fraud cases.

      So because people cheated we shouldn’t privatize????? Makes no sense Chris.

      Scaremongering BS Chris. You need to stop trying to play Bermudians we see through you.

      • Truuufff says:

        Exactly! Anyone with Google can find hundreds of instances where privatization didn’t work. Any idiot knows that! Such a stupid article. Waste of time. Seriously Chris? Find something more procductive to do with your time. How about volunteer somewhere?

      • Unbelievable says:

        The agenda with this “opinion piece” is about removing the OBA than actually helping Bermuda.

      • BermyL says:

        Agreed. The logic behind this article is laughable and anyone with internet access could hand pick a few stories that support their position. Privatization may not be the be all and end all but to dismiss it outright without acknowledging that the current situation is unsustainable simply undermines the author’s credibility.

  3. Claudio says:

    The Emissions control at TCD is privatized… No one seems to complain about that? It appears to be running fine and efficient.

    Please tell us what your plans are to deal with the CS? If not privatization then what?

    • Global Citizen says:

      How do they even make money? (genuinely asking because i dont have a car)
      How important is the service they provide?

      • mj says:

        @global citizen—good question—The emissions control gets their money similar to how the insurance companies get money from us..It is legislated that we have a displayed licence in our cars..This licence comes after your car has been tested and you have paid your insurance first! SO before your car can come on the road you must go to an insurance company and pay for a years supply of insurance then the emission control determines whether your car is suitable to be on the road before you go in to tcd and pay for the sticker of display within your vehicle…So they get paid through a backdoor legislation that says we must follow these proceedures before being allowed to travel on our own roads! Privatisation is no problem as long as government stays out of it but government decides to give power to certain private companies which I have a problem with including paying obligatory insurance to private persons and they get to keep the bounty! just because it provides jobs doesn’t make it right, the way government gives them permission through legislation fr us to be prosecuted if we default a private company funds! i.e. if found diving wothout insurance one can be subjected to a fine up to $1000,00.

        • mj says:

          oops–driving without

          • hmmm says:

            The required 3rd party insurance ain’t for you Mr Selfish. It’s to protect anyone you cause damage to. Otherwise their stuck without and are left with the only legal recourse to sue you succesfully in the courts, where you’ll lose a whole lot more than the cost of an annual insurance policy.

            • Voter (original) says:

              We got struck by an insured bike, it waste bike riders fault and proven so in court, and the insurance company won’t pay….

            • Carlton Smith says:

              Nonsense. There is no law forcing insurance companies to honour claims, which they summarily dismiss at their leisure, leaving the same problem at hand AFTER being paid to specifically for that purpose!

              • hmmm says:

                Depends, if you were speeding or drunk, then why would insurance company pay for your neglect.

                Read the policy !!!!!

    • hmmm says:

      Wasn’t that the PLP who did that ?????

    • aceboy says:

      The TCD example should be a good one for HypoChris Famous.

      Not one vehicle has failed the emissions test….heck they don’t even bother sticking the tube up the muffler any longer. But they charge everyone for the test.

      In general privatisation works far better than a bunch of civil servants who have no “skin” in the game. The problems generally arise when you have people who are friends with those in government, get the contracts and soak it for all it is worth…ala TCD.

      • Toodle-oo says:

        I haven’t been ‘piped’ for 3 years now but still get charged the separate ‘emissions testing fee’, as does everyone else.
        Now there’s a scam if there ever was one .
        The only vehicles that have ever failed never got emissions tested.
        They were simply cars or trucks that were , visible to the naked eye , smoking excessively.

        I’d love to see the minister of transport have the b@lls to speak up on this BS .
        We’re all being had .

  4. #catchup says:

    Thank u for a very informative column Mr. Famous..

  5. Sandgrownan says:

    Plus, the wonderful new hospital was funded by PPP, the most underhanded and nefarious privatisation strategy ever devised.

  6. sebring says:

    Government needs to fine all land owners that do no cut their hedgeing if you walk up on Longford road the side walk is covered by bush making pedestrians walk on the narrow road where speeding cars race between harbour and middle road daily!(speed bumps please!)some bush that covers all one side of the road on the opposite side of purvis has thorns and can poke a person or kid in the eye ! so called wooded arears clean them up nothing more tan rat breeding grounds! all the fancy homes in the middle road área a Little wind and the branches come down on the road causing a danger to anyone on a bikes in particular.

    why should our tax monies go toward the payment of cleaning up the shrubs and ill landscaping of private properties !

    gov Bermuda needs money how about taking some of the staff that will be without from the post offices closure into a new dep that monthly travel bermudas road and fine property owners that have shrubs,bush, tres in excess of twelve inches to the road side 500 dollars ! not only will that make the government a pretty penny to help with the local debt but will make Bermuda that much nicer and a hell of alot safer!!!1

    • Sandgrownan says:

      Ah, but as ex-postal workers, this won’t happen if it’s raining

  7. serengeti says:

    Let’s look at these so-called ‘myths’.

    # 1: NYC Datacom happened in the late 70′s. Is that the best example he can find?
    # 2: I can’t find any reference to this cancelled Indiana contract anywhere. Can he post a link so we can understand what happened there?
    # 3: GS4 lost Pounds 70m on the Olympic contract. Presumably that’s a loss that the UK government would otherwise have taken had the contract not been given to a private company. In any case, it wasn’t “privatization”. There was never a public body doing Olympic Security. The name of the then-CEO was Nick Buckles, and he resigned over the losses made by the private company.

  8. Sandman says:

    The wonderful thing about privatisation is that it inspires people to find solutions to problems.

    When a service is government run, and the costs are high, the civil servants can shrug their shoulders and say that the government has tons of debt anyway, so what’s a few million more to add to it.

    When it is contracted out on a fixed charge basis, that contractor has the fear of god put into him/her that if costs can’t be reduced they will make no money, will possibly go bankrupt, and government will terminate and award to somebody else. If efficiencies are there to be found, they will find them. If efficiencies can’t be found, then it is the contractor who suffers the loss, not the taxpayer.

    As for those greedy contractors who are successful enough to make profits… – what that means is that the contractor has found a way to provide the service more efficiently than government could. They will make their profits and, when the contract comes up for renewal, government can say, “look, you made 15% profit last year, so that means we can cut what we pay you by $x million, and you will still make a 5% profit”. Over time, the service will become more and more efficient and cheaper for the taxpayer.

    The system relies on government employing top quality procurement experts. It is well worth the investment to do that as, over time, it can save the taxpayer an absolute fortune.

    • Portia says:

      Correction Sandman – the costs aren’t really being reduced by the private entity, they are simply passed along to the taxpayer who now pays more for whatever goods or services was being provided by Government. No company is going to operate a service at a loss. And the way companies DO cut costs is by cutting staff and benefits. To keep costs down, the private entity will likely rely on heavy Government subsidies (similar to what is happening with the BTA). So we either pay more through Government or we pay more at the gate. Either way, the taxpayer loses.

      • Toodle-oo says:

        It’s highly unlikely a private company will shoulder such outrageous things as a pension like the superannuation gift , or starting with 3 or more paid weeks holiday a year. Or allowing how many months of sick leave a year allowed to accumulate ?
        And they’ll probably shun hiring union members too because they can’t afford them .

        So , who says it’ll be more expensive to privatize ?

      • Creamy says:

        That almost the exact opposite of what Sandman said.

      • hmmm says:

        Subsidy cost less tax revenue (payroll) recouped is less than cost of GOVT to do it. So that saves the taxpayer over the long run.

  9. 32n64w says:

    “Not only is the OBA planning to privatize many aspects of the civil service, it will also seek to allow foreign companies and individuals to reap the benefits.”

    Exactly where has this been confirmed? Or are you simply creating issues and pronouncements out of thin air again in the hopes of supporting another poorly constructed opinion piece?

    • hmmm says:

      Scaremongering by Chris.

    • Chris Famous says:

      The profitable Airport operations is up for privatization.

      How many Bermudians you think will be in a position to purchase that operation?

      • 32n64w says:

        Where is the RFP? Please provide a link.

        Furthermore how does one alleged privitasation suddenly translate into “many”?

        Interestingly a significant portion of airport operations are already handled/outsourced by/to the private sector including security, ground services, catering, etc. so really you’re only talking about operations which isn’t a particularly capital intensive business as the vast majority of the services are employee driven.

        The major cost factors are infrastructure related currently covered by departure taxes that would likely become revenue for any entity tasked with the alleged management contact.

        In addition the Givernemnt would likely receive a rental fee without any of the related operational headaches so they could instead rely upon a recurring revenue stream to fund other important aspects of the Government including social services.

        By the way, now that we’re on the topic of privitasation, what are your thoughts on the no-bid PLP contact in favour of BECL? How about the Hospital PPP?

        Do you prefer taxpayers should be deprived of receiving value for their money in favour of an inflated cost structure?

        • seriously says:

          And those companies that have been outsourced to the airport treat all there staff like slaves. 350 every 2 weeks who can survive off of that. This is why we have a union to show people that we have a right to fight for workers abuse.

      • Edmund Spenser says:

        The BIU!

      • Creamy says:

        Maybe if they didn’t insist on 14 weeks of sick leave a year and carry over any you don’t use, their jobs would be more secure.

      • LiarLiar says:

        Half of the airport operations have been outsourced/privatized for years now. BAS-SERCO anyone? Or the private jet terminal.

        Where was your outrage over these occurrences as well as the Global Hue privatization, the recycling pick-up privatization and the TCD operations privatization?

        Why didn’t you make a single peep of a noise when your team privatized all these functions plus more?

      • .._ says:

        additionally, privatizing the management of the airport does not equate to privatizing the ownership of the airport.

  10. On de Hill says:

    This is one way of looking at it, albeit through a negative lens. One fact conveniently left out is that if we don’t reduce our government personelle costs, the government will be completely bankrupt in no time. This is a reality we do not want to experience. I suggest Famous read Larry’s column asap!

  11. Coffee says:

    It is evident that between three and six hundred people will lose employment thru The Public Reforms Actt 2014 and the rest will either lose benefits or have them sharply reduced .
    As a citizen of this country I prefer that the government make the same amount redundant and keep the departments as is .
    Internal mayhem will result in the implementation of any transfer of government wealth to private enterprise .
    Instead of building on the promise of 2000 jobs , the UBP/OBA seeks to disenfranchise 3000 hard working loyal citizens of various educational levels .
    When the PLP comes back to power in the next election we will only return these entities back to the people , for the people come hell or high water at great cost . So UBP/OBA stop wasting peoples time and money .

    Take the emotion out of the decision and really think about it … I see total destruction of the Bermudian middle class .

    • Creme Brûlée says:

      If the PLP comes back into power next time or ever it will be a mute point as there will be nothing left worth running.

    • LiarLiar says:

      Oooohh….I can’t wait until the PLP hands these entitites back to the ‘people’ along with the $350mn annual budget deficit which will increase the $2bn debt even further that they contributed to.

      Those two figures alone will destroy the middle class that begun under the financially incompetent PLP. The civil service does not create wealth as it is solely funded by the provate sector.

      Well done Coffee! You are another PLP economic genius showing their non-understanding of our economy or economies in general. Absolutely brilliant! Coffee for the next PLP Min. of Finance.

    • Rhonnie aka BlueFamiliar says:

      Just an observation…
      If you take the emotion out of things, you’d stop hanging on to party politics and focus on what’s the right direction for everyone.

  12. Just a matter of time says:

    The number of staff have increased with this current Govt. Maybe the Govt can stop paying exorbitant rents to the tune of millions a year to the owners of these private businesses who are not among the hue and cry of the ‘kill the civil service rhetoric’. Hmmm. I would bet my last dollar that the more profitable parts of Govt will be, yet again, given to the same small wealthy group running things on this here island. No one talks about the inefficiencies of these targeted profitable sections of Govt. Guess they are somehow ‘different’ from the rest of the civil service. There’s always a distinction. Good job Chris!

  13. Another Rant says:

    Another typical Chris Famous rant.

    Chris, we can’t pay for all the government services. I know your party loves to promise infinite government spending with no plan on how to earn the cash. What do you suggest we do to avoid the well going dry?

  14. Declan Harrison says:

    I could read any further past his one single example of why privitaztion didn’t work with respect to parking meters in NYC. This was not an example of privitization v. public control but rather a lesson in what happen when thieves operate, and thievery doesn’t care if its private or public, although thievery has always tended to flourish more in the public sector.

  15. Opinions are like...... says:

    You know what they say about opinions…. Privitasation began with TCD under the almight Dr. Brown….. Deal with it….

  16. bluebird says:

    SO why is it that eveyone wants a Goverment “JOB”Just look at the number of applications.And watch how manny people JUMP in for the seat in SANDS.
    Now lets see….$750Million dollars per year for the Goverment “PAYROLL”
    And they only have 8,000 on the PAYROLL.Now divide 8,000 into $750MILLION dollars.
    This year the Goverment only had to “BORROW” $236Million dollars to keep the Goverment Going.
    We have a “DEBT” of $2.5Billion and paying $10Million per month interest on that.
    Civil servive pension $1Billion dollars “UNDER” funded.
    Goverment pension $2Billion dollars “UNDER”-funded.
    Mr Famous is Famous for thinking that money does grow on trees.

  17. Taylor Dane says:

    Governments at best run Bussiness poorly. It is not their mandate to innovate. They are generally the effect rather than the cause. Government needs to follow The Lord Carington model: #1 provide a safe inferstructure #2 have a court that honors contracts., and get out of the way and let the innovators inovate.

  18. LiarLiar says:

    Why does Mr. Famous refuse to answer his crticis concerning the privatization, and his non-objection, that the PLP embarked on during their reign?

    If you are such a ‘straight up guy’ that doesn’t mince words, then can you please provide an explanation as to your absence of opinion when the PLP privatized/outsourced several Government operations (i.e. TCD, Airport, recycling pick-up etc).

    What is the difference these days Famous?