Dispelling Myths about Ontario’s Licensing Contract

Blog, Crown Corporations, Ontario, Public Sector, Role of Government, Shaun Fantauzzo (historic), Uncategorized

August 31st marks the tenth anniversary of the ‘privatization’ of Ontario’s drivers license testing centers. In 2003, Ontario’s Progressive Conservatives voted to contract licensing services out to Britain’s Serco Group, which it would be responsible for presiding over road tests, vision tests, and written examinations. The contract was awarded for $114-million and Serco Group generated revenues well in excess of $500-million over their decade-long tenure. This is great news for Serco’s shareholders and some might even argue that it’s great news for Ontarians (or at least their government).

However, there is a considerable faction of individuals that are disgruntled about Ontario’s ‘privatization’ efforts, namely the unionized workers that preceded the Ontario’s Ministry of Transportation services transfer. Rightfully so – of the 750 individuals employed at the Ministry of Transportation’s licensing bureau before Serco began its term, less than 500 remain, many of whom have been cut down to part-time and have lost their benefits. In addition, many young drivers complain about Serco’s high failure rate and the variance of difficulty between different testing centers. Clearly privatization has failed Ontarians… or has it?

This is something I call monopolization disguised as privatization – when a government contracts (or as some misguidedly refer to it, ‘privatizes’) services to a private-sector company, locking out competition. For instance, Canada’s big three cellular companies have a monopoly on cellular services, although it is of a different nature: Bell, Rogers, and Telus have successfully lobbied Parliament to draft legislation making it much harder for smaller competitors to provide better services to Canadians, and allowing the big three to charge higher quality prices for lower quality services. As a result, Canadians and Ontarians have begun voicing their concerns about the vices of privatization and the injustices of the free-market, without realizing how closely related our economic and political realities are to corporatism than capitalism. It is thus important to distinguish between the two. In a competitive market, companies must provide high quality services for an affordable price or else consumers will take their business elsewhere – there is always another business willing to provide a service for a lower price and if not, it creates an opportunity for entrepreneurs to enter the market. However, when a corporation secures a contract from the government to provide a service, there is no incentive to satisfy the customer, as there are technically no other competitors.

The new contract, set to being on 1 September 2013 and valued at $207-million, features for a second time Serco Group with the addition of Plenary Group, both of which will work as a consortium to provide testing services for Ontarians. This is hardly a competitive structure as much as it is a cartelization. The private sector is undoubtedly capable of licensing drivers in a much more efficient and low cost manner than a government contractor.

In the very same manner as the Swiss health care system (which is consistently ranked among the best health care systems in the world), the provincial governments could set standards and requirements to be met by service providers and allow them to compete among one another. Not only would it eliminate wasteful government bureaucracy, but it also provides an incentive for service providers to deliver high quality services at reasonable prices. There is no reason for such a system not to work – driver’s licenses are no different than insurance policies or medical certification and there is no shortage of capital that can be used to provide Ontarians and individuals from other provinces with the services necessary for obtaining a license to operate a vehicle. However, I am not suggesting that Ontario privatize its licensing services – instead, I am merely defending the free market by demonstrating the difference between privatization and monopolization disguised as privatization.