Lessons Learned from the Richmond Hospital Redevelopment Project Costs more than doubled That has raised concerns about rising prices for some major capital projects in B.C.
The provincial government has launched a number of major infrastructure and health projects in recent years, each with budgets in the hundreds of millions or billions of dollars.
These initial budgets are continually revised upwards, and taxpayers bear the responsibility.
The Richmond Hospital project, originally scheduled to cost $860 million in 2020, is now expected to cost $1.96 billion. The cost of the Cowichan Hospital has climbed to more than $1.4 billion from an estimated $350 million in 2018. A second hospital planned for Surrey, originally scheduled to cost $1.72 billion in 2022, is now expected to cost more than $2.88 billion.
The province blamed global supply chain issues and rising material and labour costs due to inflation.
But some industry insiders have criticised the government's approach to business.
“Every project is over budget, and not just by a little bit, but by hundreds of millions, billions of dollars,” said Chris Gardner, president of the Independent Contractors and Business Association.
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“It's fair to say that the procurement model adopted by the government is problematic.”
Gardner said inflation and labour shortages are real problems in British Columbia, but the province has failed to address them by working more closely with industry.
Working with builders on different procurement models and sharing some of the risks associated with the project could reduce costs, he said.
Permitting and project approvals at the city or district level can also slow construction and increase costs, he said.
Community Benefits Agreement He believes union-backed contract structures implemented by the provincial government for several major infrastructure projects also pushed up prices.
“Once you limit the supply of contractors to a small portion of the workforce … that drives up costs,” he said.
“The CBA framework is administratively very complex… there are a lot of rules, a lot of red tape.”
Matt MacInnes, president of the Electrical Contractors Association of British Columbia, said the “two big drivers” of budget increases are material costs and labour costs, which are hitting both public and private projects.
He said solving this dilemma will not be easy for the province.
“It's going to be very tricky in the short term because fundamentally it's going to take time to address the supply of skilled labour,” he said.
For the government, the problem is compounded because the number of skilled contractors who can take on large projects like the ones being built in the province is already low.
“So when there’s less competition and a smaller workforce, there are challenges budget-wise,” McGinnis said.
McGinnis said because cost estimates for many projects were drawn up years ago in a very different economic environment, he expects estimates for new projects to be “significantly higher” than originally forecast.
British Columbia Premier David Eby acknowledged that costs for big projects in his province have soared but said the work must be done as the province's population surges.
“We have to deal with huge infrastructure gaps. Roads, transportation, schools, hospitals,” Eby said.
“It's going to cost more now. One thing I know is if we build it later, it's going to cost more.”
The price shock may not be over yet.
The Department of Transportation revealed last month that both the Broadway subway extension and the Patullo Bridge replacement would be delayed by a year, but has yet to say how those backlogs will affect the final price tags.
