Alberta's bid to privatize lab services wasted more than $100M: auditor general

A new report from Alberta's auditor general details the provincial government's attempt to privatize community lab services that failed to produce cost savings and ultimately saw the province spend tens of millions of dollars to buy a private company. 

The report, released Wednesday, details a lack of due diligence by the provincial health ministry and Alberta Health Services regarding the 2022 contract with DynaLife — at the time a major provider of lab services in Edmonton and northern Alberta — to take over lab services for the entire province.

The report from Auditor General Doug Wylie highlights many issues faced during the investigation, including a lack of co-operation from key officials, obstruction of information by AHS and the province, and the destruction of evidence sought by the auditor general.

“That should be chilling to Albertans — not concerning,” said Rebecca Graff-McRae, the research manager at the University of Alberta’s Parkland Institute.

The provincial government said the DynaLife contract would save millions of dollars a year, but instead cancelled it less than a year later after numerous issues with service delivery and DynaLife’s own financial problems.

The province ultimately purchased DynaLife in 2023 for nearly $100 million and absorbed it into the public provider, Alberta Precision Laboratories (APL).

Among the key findings in the report:

Wylie’s investigation found the province and AHS did not produce a business plan for the DynaLife outsourcing, relying instead on a 2019 report from Ernst & Young. That report, which estimated annual savings from outsourcing at $102 million, was later found by AHS to have a "calculation error" that reduced the savings estimate to $77 million.

That estimate was further reduced to a range of $18 million to $36 million after analysis by AHS and APL — the same amount that the AHS analysis predicted would be saved if APL delivered all services across the province.

The auditor general's report notes that this would suggest the savings were due to "having a single organization delivering all services, rather than from outsourcing to a private provider."

"I think in this case, it is really problematic that there were issues around basic measures of accountability like proper recordkeeping,” said Lorian Hardcastle, an assistant professor of health law at the University of Calgary.

In a statement from a spokesperson for Primary and Preventative Health Services, the Alberta government said it identified DynaLife’s inability to deliver adequate services “immediately following the general election” in 2023.

“That is why in June of 2023, we directed that the agreement with DynaLife be terminated and shifted services to Alberta Precision Labs, which has resulted in significant improvements to wait times across the province.”

However, CBC News previously reported that the province was aware of issues with DynaLife well before the election in May 2023, including a formal notice of the company’s insolvency position in March 2023.