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Comment by rubidium | Hacker News Reader

"For 2015, Hero Norway expects revenue of $63 million, with profits of 3.5 percent. "

Title correction: Long-time hospitality business entrepreneurs expand business into providing refugee housing and services. The business made 2.2 Million profits in 2015 operating highly efficient refugee care centers.

My guess is there would be at least that much money wasted if these centers were run by less experienced people in that business sector (e.g. the gov't). Also note: the government regulates the business.

Overall from the article, it seems like a good way to care for the refugees.

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Without access to their books, it's hard to evaluate their actual profit. But, later in the article there is this quote:

"The Adolfsens claim that theirs is 3.5 percent, but Herning calls that figure “highly unlikely. All the other refugee companies that I’ve looked at have a much higher profit margin.” She says that in handling revenue from nursery schools and nursing homes, the Adolfsens have played a shell game, shifting profits from one business within their conglomerate to another. “I wouldn’t be surprised if they were doing that for Hero as well,” she says."

Also, quick searches seem to indicate that for-profit prisons (in the US at least), an analogous industry, have profit margins significantly north of 3.5%. [1] I wouldn't be surprised if the actual profit margins for the refugee care companies, when all subsidiaries are included, are between 5-10%.

I don't know if there's a perfect solution to refugee care that optimizes spending and societal harmony, but private enterprises running the show with close government oversight (and no shell games), seems like a somewhat happy middle ground.

[1] http://www.cnbc.com/id/48675641

Their revenue and profit prior to taxes for 2014 was 549M and 27M. Corporate Tax for 2014 was 28 % so 19.4M profit after tax which gives a 3.5 % net profit.

http://www.proff.no/selskap/hero-norge-as/stavanger/tolker-f...

The point made in the article (and the comment about) is that they have a history of playing a shell game with their companies to obscure where they're actually making their money (and possible to maximize tax benefits). Without seeing their actual accounts, those numbers are meaningless as you don't know whether or not they've bought all kinds of overpriced services intended to shift revenue somewhere else, for example.

Who cares if the profit margin is even double that (10-20%). Almost certainly still cheaper than the government getting into the hospitality business, and has the benefit of not creating a permanent bureaucracy.

I am not particularly concerned with the "above-the-table" profit margin. I am concerned with the possibility that using private contractors is prone to abuse, a loss of accountability (shell games) and a race to the bottom for quality of service in a venture where human quality of life is (or should be) the primary goal. Sure, the prime contract might be locked-in to a small profit margin, but I find it hard to believe that the same owners don't have their hand in the pot somewhere lower down in the supply chain. Which would lead to them making more than the prime contract 3.5% profit margin might suggest.

Then again, it's not like public-private partnerships (or project delivery methods in general) are brand new concepts. Governments have somehow managed to get roads and schools (infrastructure) built for a pretty long time. (Not without complaints of overruns and abuse: see any megaproject in the United States.) Though perhaps there is something to be said for the qualitative difference and value of human life that distinguishes a "race to the bottom" for building a road, compared to providing temporary shelter and food for actual human beings.

I agree that it's good that a government saves itself from getting into a "non-core" business so to speak. But I think that without strict oversight from government, refugee support services could turn into yet another field where shady business practices are the norm.

I am uncertain as to why you hold the actions of private individuals in such contempt, but give the government a free pass when it is just as prone to abuse, lack of accountability and poor service. Why is one a devil and the other an angel?

In general there is a formal process that use to remedy the situation with the government that is not available with a private company. Consider getting a parking ticket. At a private lot you are ticketed in error. You call the number listed but they refuse to accept they made an error even if you have proof you paid for parking. Or if you get a parking ticket from the city you can protest the citation by mail, then if it is not overturned you can request an appeal.

You can make use of the court system for resolving torts and contract violations in both cases, whether these courts are hypothetically publicly or privately operated. Actually in the case of a public service, you may become entangled in certain complications related to sovereign immunity, depending on jurisdiction.

(There's also the surprising efficacy of vocally complaining in public. Do not underestimate a private firm's willingness to recuperate damages on its brand image.)

How likely it is that a refugee can effectively argue their complaints in a court?

edit. addendum. These kind of firms have not that much of reason to care about their brand image when it comes to what regular people think about them: their only customers are some government officials (or in car park example, people who own the park space), not the general public.

Refugees by definition have little leverage in general. I think it's a reasonable rule of thumb that any antipathy toward them will be greater expressed by the state that administrates the territory to begin with (and has various political interests to appear tough on something) than by private individuals, who are far more heterogeneous.

In 2007 a boat with 100+ Haitian refugees made it to South Florida. The refugees were immediately detained, then sent to Krome Detention Center (no women) and Broward Transition Center (men/women/children). However, between the 2 facilities there were not enough beds and the remaining were put up in private motels. Even in Miami/Fort Lauderdale Florida, where our main industry is tourism, I think the private motels were far more cost effective than the existing Government infrastructure/detention facilities. And the people making the most money? The contractors of the detention facilities making 1,000'sx profit margins on things like phone cards, sandals, and vending machine food stuffs.

As a side, my legal clinic represented the Haitian refugees who were children in asylum/visa hearings pro bono.

Thanks for helping represent the refugees pro bono :)

It isn't. A similar situation has arisen in Sweden and immigrant housing in government owned facilities are significantly cheaper than private run ones.

Please provide figures and sources to back up your claims. (I'd love if the comment you're replying to would do the same as well).

You're very certain for someone who certainly have not checked first.

In 2010, Norway spent on average $11,800 per year per refugee or asylum seeker in government operated centres. This amount covered lodging, health checks, nursery, and co-pay on dental and medical services. I don't know how much of that is the lodging, but it's nowhere near the whole amount.

The prices stated in the article adds up to $11,315 to $27,375 for just the lodging.

That doesn't necessarily mean that it is bad as a way to deal with rapid increases in the required capacity.

It's better to compare the costs in kroner, as there's 30% exchange rate difference between 2010 and 2015.

Privatizing prisons hasn't created a permanent "bureaucracy", but it's created a just as permanent government funded industry.

> (and no shell games)

A massive pipe dream.

Norway has already seen the kinds of shenanigans that can come from private "service" providers on government contracts.

a couple of years back a chain of private schools were found to be siphoning off funds that was earmarked the students. This by setting up companies on Luxembourg that acted as service providers for the schools.

Exactly. The government was going to spend money on refugee housing and services anyway. If the brothers can provide suitable accommodations cheaper than anyone else can they deserve the profits.

Except it's not cheaper for the government or the taxpayer.

It is vastly cheaper. When the influx was at its highest the government had to buy all rooms in hotels in order to house the refugees.

It is cheaper for short time periods. As you yourself notes: It's cheaper when it competes with hotels.

It is absolutely not cheaper than government run asylmottak (asylym centres/reception).

As an option for short/medium term handling of overflow it is reasonable, as it makes no sense to build more permanent spaces if the refugee flow then quickly subsides. It also makes sense to pay private providers reasonable amounts above cost to shoulder the risk of changes in volume.

But if the base level is expected to stay high for a long period of time, the government have demonstrated very clearly it can run these kind of centres cheaply.

At least in Sweden the company run homes are a lot cheaper than the municipality run ones...

Interesting, this comment says the exact opposite. https://news.ycombinator.com/item?id=10851727

Yea the headline has more than a tad bit of click bait to it. It sounds like they're raking in money hand over fist but profits of 3.5% seem entirely reasonable for the work they're doing (and pretty low as for profit industries go).

It's not the money waste. It's the power vacuum that opened up where people established themselves as the good and others as evil.

Big money in being an "anti-racist". Anyone pointing out that you charge 1600 per hour while living/owning in the most exclusive (homogeneous) parts of Stockholm (Gamla Stan) is obviously a racist.

Obviously none of this shit is related to any form of civil rights issue.

I think you're being downvoted for being aggressive and having a political agenda, but you do have a good point. Of course, we want to spend money to help people in need — but what happens when the people we hire with this money start to charge us a premium for excessive, and completely unnecessary expensive care? $31 to $75 per person per night seems a little bit costly, yes.

But at the same time, I'm can imagine that they can have actual need for that. May be they need to live near all the official organizations and embassies because they will spend a lot of time there? This would explain "exclusive parts of city", for example. May be not. But anyway, it's always better to be more open to opposite point of view and imagine arguments for it.

"31 to $75 per person per night seems a little bit costly"

Is it? Looks like it includes everything: food, housing, electricity/water, cleaning, admin of frequently changing guests, ...

If they can really provide everything for people for $31/day, there are welfare systems that could switch to save money...

Oh, I must have missed it. Then it certainly looks reasonable.

But still, I think you agree that we should be able to have a discussion about this without (1) being called "racist" and at the same time (2) being open to possibility that this money is really required.

it has been long argued in many circles that many welfare/assistance programs could be better administered by private companies. entrenched government services have no incentive to improve and how some governments budget they may have actual disincentives to improvement.

does sound like these guys are doing a good job. the best part is that when the need changes they will likely adapt or move into a new business whereas a government support structure would be hard to dismantle

the sad part is that some government officials apparently think profit making in this industry is wrong and that is a very bad sign because once you go down that road no business is safe

I don't think it's the government per se thinking that; they'd probably be happy for someone else to take care of the problem for them, especially if that someone can do it well.

But people, on the other hand, well, that's a different thing. Copenhagen interpretation of ethics is strong in all cultures. The thought that someone is making money on helping is unbearable to many, even if there is no comparable non-profit alternative.

As far as I can tell, this is more expensive than long term government run asylum housing in Norway (hard to compare directly as the costs given for government provision includes a lot of additional costs, but using basic measures for things like nursery provision etc. it'd be extremely unlikely that the actual housing component ends up above even the lower ($31) of those levels).

It may still be an ok deal if the contracts are short term, as there's obvious issues now with forecasting how the refugee stream will be even in the near future, and it's worth quite a bit of money to make someone else shoulder most of that risk.

> the sad part is that some government officials apparently think profit making in this industry is wrong

I haven't seen that. I have seen people question whether some people are profiteering from a difficult situation. This is seen as sort of a national crisis that it would be immoral to take excessive profits from, and there's been others that have e.g. offered up free or significantly discounted hotel rooms and similar (though the cynic in me sees "fantastic high value PR coup" when reading about some of them) that makes it easy to see even relatively modest profit-taking as too high.

I'm politically pragmatic. My agenda is things that work. Very much like PAP during LKY.

I see a lot of shit that doesn't work and obviously I'll fall to one side of it - which happens to be far right as of today.

Perceptions of "being aggressive" is pretty much on par with with my current torque to the right. You're reading too much into it and overvalue interpretation of tone.

My example was a Swedish lawyer that helps 30 years pretend to be 13. He charges 1600 per hour and of course lives in the most secluded and homogenous areas while he calls non-white critics for racists. You have to understand that this can't be sustainable... at all.

I don't mean financially, I mean the concept of black and white notions, especially with sensitive subjects like racism. Though I don't think this particular person is stupid enough to think like that. He knows he's making bank and will make sure to milk it as long as he can.

I actually would have preferred him to be stupid instead of criminally evil.

What about this part?

"Just outside Oslo, a savvy entrepreneur named Ola Moe recently rented a vacant hospital for $10,000 a month, did minimal upgrades, and began charging the government $460,000 a month to house and feed 200 refugees."

It looks to me that Ola is making a killing here.

Sure, if you overlook the part that he is housing and feeding 200 refugees.

He isn't. The tax payers are.

Of course, the tax payers are showing up and feeding everyone and staffing the place. So it's free money, right? No work involved at all. Not like he's doing a ton of work and creating value, then charging for it...or anything.

Until they aren't, at which point the building is still a liability even if it is empty.

It's also common to overlook that just because there is a house already bought, doesn't mean people can live in perpetually without someone having to spend money. Houses require constant maintenance. Floors won't clean themselves, plumbing won't fix itself when it breaks, etc. Even if people had alternative food and water sources, you can't house them in comfortable conditions without expending money on maintaining those conditions.

except that he's now also responsible for feeding n refugees at a food cost of y per day. (it looks like n in this case is 250)

Include also the cost of x beds, water, toilet facilities, general staff, operating costs of kitchen facilities, cutlery, dishwashers.

The profit on the difference between $10k and $460k is not $450k.

$460k / 30 days in a month = $15k per day.

$15k / 250 refugees & asylum seekers = $60 / refugee per day. (fed, watered, sheltered, & safe)

From the article, the profit is likely 3.5% of $460k or roughly $16k/month.

Note also that Norway is, in general, an insanely expensive country so $60 gets you less than it would in most countries.

He/She is paying wholesale not retail prices for the everyday household items.

True, but those would most likely scale (but not perfectly) with the consumer price. Higher tariffs and transportation costs for example.

It's $75/day/refugee just for food, water, utilities and other misc. expenses. I doubt that he/she is running this facility as a 5 star hotel to charge this high from like $30/day/refugee to the rate above.

If he could profitably charge $75/day and run it as a 5 star hotel in Norway, he should run a hotel as he'd be wildly successful if he could offer what would be bargain basement prices compared to his competition.

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