Lessons from the Richmond Hospital Redevelopment Project Costs more than doubled That has raised concerns about price increases for a number of 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, with taxpayers shouldering the responsibility.
The Richmond Hospital project, which was expected 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 was expected to cost $1.72 billion in 2022 and is now expected to cost more than $2.88 billion.
The province blamed rising material and labour costs due to global supply chain issues and inflation.
But some in the industry are taking aim at the way the government is doing 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 the procurement model the government is adopting is problematic.”
Gardner said inflation and labour shortages in British Columbia are real problems, 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 also slow construction and increase costs, he said.
Community Benefits Agreement He believes the union-backed contract structures implemented by the provincial government for several major infrastructure projects also drive up prices.
“Once you limit the supply of contractors to a small portion of the workforce … that’s going to drive 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.
Solving the puzzle won't be easy for the province, he said.
“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 capable of taking on large projects of the kind being built in the province is already low.
“So when you have less competition and less labor, there are challenges on the budget side,” McGinnis said.
Because cost estimates for many projects were drawn up years ago in a very different economic environment, McGinnis said he expects estimates for new projects to be “significantly higher” than originally forecast.
British Columbia Premier David Eby acknowledged the soaring costs of big projects in the province but said the work must be done as the province's population surges.
“We have to deal with a huge infrastructure deficit. Roads, transportation, schools, hospitals,” Eby said.
“It's going to be more expensive 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.
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