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The Runaway Costs of Government Construction Projects

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13 minute read

From the C2C Journal

By Gwyn Morgan

Ottawa’s post-pandemic $300 billion spending orgy was coupled with the pompous claim to “Build Back Better”. As it happened, most of that spending was recklessly borrowed – stoking inflation – while Build Back Better was a dud, was discarded in embarrassment and, if recalled at all today, is told as a sick joke. Far too many planned projects now sink into a quicksand of political haggling, regulatory overkill, mission creep, design complexity and, if built at all, bungled execution. Looking at specific examples, Gwyn Morgan presents the lamentable results: far less is actually getting built across Canada, nearly everything takes forever and – worst of all – costs routinely soar to ludicrous levels. Added to that, Morgan notes, are woke-based criteria being imposed by the Trudeau government that are worsening the vicious cycle.

Not so long ago, a $10 million government infrastructure project was regarded as a significant expenditure. Nowadays, $10 million doesn’t come close to funding projects as simple as a firehall or new police station. Here in the Victoria region, a new firehall in the District of Saanich, originally budgeted at $25.6 million, has jumped to nearly $45 million over four years – and construction has barely begun. The facility will support 10 firefighters. In the Langford District, the estimated cost of a new RCMP building is an incomprehensible $82 million – and of course, nothing has actually been done yet, so this price tag will surely soar. Just north of Victoria, the cost of what was to be a simple flyover eliminating a dangerous left turn across the busy Patricia Bay Highway has spiked from its original estimate of $44 million to $77 million.

These cost increases seem big to us here on “Fantasy Island”, but they would amount to a rounding error in mega-city Toronto. The Ontario Line, a 15.6-kilometre light-rail transit line connecting the Science Centre to Ontario Place, was budgeted at $10.9 billion when first announced in 2019. A series of updates have seen the cost balloon to an estimated $19 billion – an increase of more than 70 percent – with the completion date pushed out by four years to 2031. Expect more cost increases to be announced.

These are just a few examples of municipal and provincial cost increases and overruns. The story is similar from coast to coast, with no project type or size in any municipality or province immune to an unsettling syndrome that seems to prevent nearly anything from being planned cost-effectively and then delivered on budget. Obviously, the total for all such projects planned or underway across Canada is immensely higher – surely in the tens of billions of dollars.

Mismanagement syndrome: From simple firehalls to subway sections to straightforward software, governments at all levels have lost control of costs. Replacing a small firehall in Saanich on Vancouver Island (top left and top right) will cost nearly $2,000 per square foot or $4.5 million per firefighter; the pricetag for Toronto’s planned Ontario Line (bottom left) has zoomed from $10.9 billion to $19 billion; and the notorious ArriveCAN (bottom right) consumed $54 million to deliver an $80,000 software tool. (Sources of images: (top left) District of Saanich; (top right) rendering courtesy of hcma, retrieved from naturally:wood; (bottom left) Metrolinx; (bottom right) WestJet/Facebook)

Now for the project mismanagement champion of all. Statistics Canada data show that federal capital infrastructure project expenditures totalled $24.1 billion in the period 2018-2021 (the most recent year for which figures are available). Given that Ottawa bureaucrats are famous for mismanaging virtually every project (think of the notorious ArriveCAN app, whose development blew through $54 million to yield a buggy software tool that private-sector geeks could have cranked out for $80,000), there can be no doubt that a lot of those billions were to pay for overruns resulting from a combination of sloppy design specifications and poor execution.

But now the Trudeau government has added costly “social justice” specifications to federal procurement requirements, including participation by ethnic minorities, disabled persons and diverse genders, plus other elements of woke ideology. These elements were clearly demonstrated in what I’ll call “The Great Helicopter Hangar Saga”. The following is a recollection from sources I know to be completely reliable.

The Canadian Forces’ 443 (Pacific) Maritime Helicopter Squadron’s hangar had been located adjacent to the Victoria Airport for many years. In November 2004, the Department of National Defence (DND) announced the award of a $1.8 billion contract for 28 Sikorsky CH-148 Cyclone helicopters, of which a number were to be based on Vancouver Island. A new hangar was required, which seems reasonable. DND engineers designed a facility that would meet the squadron’s needs at an estimated cost of roughly $18 million. Then they handed the project to Public Works and Government Services Canada. That’s when the project entered an ephemeral space resembling the old sci-fi TV series The Twilight Zone.

Public Works decided the hangar needed to be able to “sustain operations” in the event of a magnitude 8.0 earthquake – an incomprehensible decision for several reasons. First, 8.0 on the Richter Scale is seven times larger than the most severe earthquake ever recorded on Vancouver Island. Second, the severity of earthquake damage at any given location depends on its subsurface. Buildings sitting on soil and gravel suffer much more damage than those built on bedrock because the soft material changes from behaving like a solid to behaving like a thick liquid, amplifying the ground’s shaking. The Pacific Maritime Helicopter Squadron’s hangar was located on solid bedrock. That alone made it highly earthquake-resilient.

But the Public Works technocrats were oblivious to those facts, or didn’t care. Instead, their design demanded steel piles driven into the bedrock at a cost of $8 million. That alone reportedly delayed the project by two years. Cross-bracing of the interior wall openings added more millions. When construction of the actual building finally began, government bureaucrats specified more office space, locker and “administrative security” facilities than what the DND had considered necessary, adding more costs.

Then came the woke-related costs. In determining the contract award, Public Works required First Nations involvement both as subcontractors and in the workforce, extensive gender diversity and complete disabled access. Elevators were ordered equipped with Braille at the control buttons plus voice recognition – along with full wheelchair accessibility. Members of the military joked that all these extras must be for the “blind and disabled pilots”. By the time the new hangar was handed back to the military, the DND’s $18 million project had skyrocketed to a staggering $155 million.

Braille for blind pilots: To base some of the Royal Canadian Air Force’s new CH-148 Cyclone maritime helicopters (above, performing in-flight refuelling with a navy frigate in the North Atlantic) on Vancouver Island, federal Public Works bureaucrats took a reasonable $18 million Department of Defence design and transformed it into a $155 million fiasco reflecting Ottawa’s diversity obsessions and wokist ideology. (Sources of photos: (top) Lockheed Martin, retrieved from Navy Recognition; (bottom) The Lookout)

In July 2019, Phillip Cross wrote an inciteful column for the Financial Post entitled, “Why governments keep screwing up major infrastructure projects”. As Cross put it, “Prominent studies of domestic and international public infrastructure projects found cost overruns averaged between 45 and 86 percent.” Why? In Cross’s view, a big part of the problem is that “public projects suffer from a lack of accountability. Governments evaluate projects not according to the performance-based criteria of the private sector, but by their conformity to rules and processes.”

Cross’s points are well-taken and illustrated by circling back to our Saanich Firehall example. The new facility’s 23,476 square feet will incur a construction cost of over $1,900 per square foot (assuming the new $45 million budget is big enough). That is six to nine times typical construction costs for commercial buildings which, as this report shows, average $200-$300 per square foot. And while a firehall may well be a bit more sophisticated and hence costly to build than, say, a retail strip mall, the Saanich firehall’s costs are also wildly out of proportion to any class of construction, as the fascinating accompanying chart shows. As you can see, it lists a range of $415-$485 per square foot for emergency services buildings. Even technology-heavy, highly customized construction categories like hospitals and data centres come in at no more than $805 and $1,055 per square foot, respectively. Clearly, something is seriously wrong in Saanich and many other locations across Canada.

Outrageous by any standard: The ballooning construction costs of recent public-sector projects are many times higher than 2022 averages for all categories – even in a high-cost market like Vancouver. (Source of graph: Statista)

This evidence of dysfunctional project mismanagement comes at a time when public infrastructure spending is at record levels, dominated by the Justin Trudeau government’s $33 billion 2023-24 infrastructure project budget and sure to be made even more dysfunctional and costly by the Liberals’ surreptitious implementation of woke ideology. When will Canadians awaken and rise up against a government that defies the values of honesty and openness our country was built on?

Gwyn Morgan is a retired business leader who was a director of five global corporations.

Source of main image showing Vancouver’s Broadway Subway project: BC Ministry of Transportation and Infrastructure; retrieved from ReNew Canada.

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conflict

Trudeau pledges another $3 billion to Ukraine, including $4 million for ‘gender and diversity’

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From LifeSiteNews

By Clare Marie Merkowsky

Prime Minister Justin Trudeau has sent Ukraine over $13.3 billion, including $4 billion in direct military assistance since 2022.

Prime Minister Justin Trudeau is sending another 3 billion taxpayer dollars to Ukraine, including $4 million for a “gender and diversity” initiative in the embattled country. 

On February 24, Trudeau’s office announced $3.02 billion in funding for Ukraine as it continues its war against Russia, including millions of taxpayer dollars to promote “gender-inclusive demining.” 

“Canada will provide critical financial and military support to Ukraine in 2024, including new financial support for Ukraine to meet its balance of payments and budgetary needs and stabilize its economy,” a press release promised, without explaining why it’s Canada’s role to prop up Ukraine’s economy.   

Within the 2024 funds, Trudeau promised $4 million to promote “gender-inclusive demining for sustainable futures in Ukraine.” However, the government failed to explain what gender or diversity have to do with demining, and how it is in the interest of the Canadian taxpayer to fund ideologically driven initiatives in foreign countries. 

“This project from the HALO Trust aims to safeguard the lives and livelihoods of Ukrainians, including women and internally displaced persons, by addressing the threat of explosive ordnance present across vast areas of the country,” the press release said.  

“Project activities include conducting non-technical surveys and subsequent manual clearance in targeted communities; providing capacity building to key national stakeholders; and establishing a gender and diversity working group to promote gender-transformative mine action in Ukraine,” it added.  

Additionally, $1.5 million is being given to the Geneva International Centre for Humanitarian Demining to “enhance the capacity of Ukrainian mine action institutions to implement effective and gender-responsive mine action operations, develop country-appropriate information management solutions, and lead efficient mine action donor coordination platforms.”  

Since the Russia-Ukraine war began in 2022, Canada has given Ukraine over $13.3 billion, including $4 billion in direct military assistance.   

Trudeau’s ongoing funding for Ukraine comes as many Canadians are struggling to pay for basics such as food, shelter, and heating. According to a recent government report, fast-rising food costs in Canada have led to many people feeling a sense of “hopelessness and desperation” with nowhere to turn for help. 

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Alberta

Canadians in three provinces will spend roughly the same on debt interest as K-12 education

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From the Fraser Institute

By Grady Munro and Jake Fuss

From 2008/09 to 2023/24, the federal government is projected to have run deficits every single year, with no interruptions. This has resulted in federal net debt (total debt minus financial assets) increasing by $603.6 billion (inflation-adjusted).

For more than a decade, Canadian governments have increasingly relied on borrowed money to fund their excessive spending habits. However, as debt has continued to pile up so have the costs associated with this debt—namely interest costs. A recent study shows that in some of the largest provinces, governments now spend nearly as much or more on debt interest costs than on K-12 education.

Since the 2008/09 financial crisis, governments across Canada have fallen into the habit of utilizing debt to fund their spending habits. For example, consider the federal government.

From 2008/09 to 2023/24, the federal government is projected to have run deficits every single year, with no interruptions. This has resulted in federal net debt (total debt minus financial assets) increasing by $603.6 billion (inflation-adjusted). Conversely, from 1996/97 to 2007/08, the federal government actually lowered its net debt by $348.1 billion (inflation-adjusted). Clearly, there’s been a shift in the government’s approach towards debt accumulation.

This is not simply a federal problem, as provinces have also seen their debt burdens rise as well. Cumulatively, provincial and federal net debt has increased by $1.0 trillion (inflation-adjusted) from 2007/08 to 2023/24.

Government debt carries costs, primarily in the form of the interest payments, which represent money that doesn’t go towards paying down the actual debt amount, nor does it go towards providing government services or tax relief. And since governments must utilize tax revenues to pay interest, taxpayers are ultimately on the hook for servicing government debt.

But how much do Canadians actually pay in debt interest costs?

Using data from the most recent fiscal updates, a new study compares combined (federal and provincial) debt interest costs for residents in three of the largest provinces (OntarioQuebec and Alberta) with what those provinces expect to spend on K-12 education in 2023/24. The study utilizes combined debt interest costs because Canadians are ultimately responsible for interest costs incurred by both the federal government and the province in which they live. The following chart summarizes the comparisons from the study.

As is clear from the chart, combined interest costs for residents in these provinces are nearly as much or more than their province expects to spend on K-12 education in 2023/24. Specifically, combined interest costs are $31.5 billion for Ontarians, which is only $3.2 billion less than the province will spend on K-12 education in 2023/24. Combined interest costs for Quebecers ($20.3 billion) will actually exceed the $19.9 billion the province will devote towards K-12 education. And combined interest costs for Albertans are only slightly lower than the $8.9 billion that will be spent on K-12 education.

In other words, taxpayers in Ontario, Quebec and Alberta are paying nearly as much or more to service federal and provincial government debt than they are paying to fund K-12 education in their province. This budget season, it’s important to remember the costs associated with growing government debt.

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