How Canada could building transit affordably — like other countries

Transit projects are becoming more and more troublesome in Canada. But it doesn’t have to be that way. In Canada, infrastructure plans often go wildly over budget and there can be problems with the final product not functioning properly. Getting multiple levels of government involved hasn’t solved the problem and many Canadians are wondering how we can make our transit systems work again. But it’s not like this all over the world. Other countries are able to build more for less money. National Post spoke with Marco Chitti, one of the co-authors of a report that discussed the outlandish construction costs in Canada, to discover how the country might get its transit spending back on track to build systems that work. The research, Understanding the Drivers of Transit Construction Costs in Canada: A Comparative Study, published by the University of Toronto at the end of last year, found that a lot can be learned from other countries’ transit policies. “Developed nations such as Italy, Turkey, Sweden, Finland, Spain and South Korea deliver transit projects comparable to those in Canada at as low as one-tenth the price per kilometre,” the research states. “Our study contends that high transit construction costs are not an inevitability; rather, they are the result of a project delivery regime antithetical to global best practices.”  This conversation has been edited and condensed for clarity and length. What are some of the problems with Canada’s transit infrastructure or the way we’re building at this point? Well, I mean, there are many problems. There are three layers of problems. One is that we pay much more for the same thing, so it means that our unit costs are much higher. It means that for building the exact same object that would be built in another country with lower costs, let’s say France, Italy, Spain, or whatever, we have higher costs. Some of it is input costs, like labour is bit more expensive, materials are a bit more expensive. But another part is just that, the way we have regulation, like from unions, the way unions work, the way standards are applied, or the fact that our market is not really a market. The second layer of problems is that, not only do we pay more for the same thing, we overbuild. So, for the same scope, to achieve the same goal, we just overbuild everything. Our technical standards tend to be very cumbersome, many times unnecessarily, from fire safety regulations to design standards applied by engineers. They tend to have a very defensive design. So they over-design things, so nobody can blame them if something goes wrong. So, essentially, we always go for a Ferrari when the thing we would need would be like a Honda, just to make an example. And the third thing is the way we manage projects, and the way we manage risk, and the way we have started to obsess over cost overruns instead of absolute cost. We are over-padding and over-inflating budgets from day one. So the budgets that you are doing now, the tendency of the last, let’s say, 10, 15, years in Canada, has been, “Oh, since we are not very good and we get very bad press coverage for going over budget, a budget is something that you self-impose on yourself, so why not just inflate the budget from day one?” So budgets now have a lot of like contingencies, allocated contingencies, unallocated contingencies, risk provisions, and any sort of padding, like cash room that you put in the budget so you can protect yourself from cost overrun. In theory, it’s a good practice that is done almost everywhere. But everywhere else, it’s like 10, 15, five per cent of the budget, depending on the complexity of the project. In Canada, we have reached levels where this is, sometimes at the very early stages of the project, it could be 50 per cent of the budget. The only way we manage the risks that arise in case of complex projects is just by throwing money at them. The only way we do it is like, “Oh, we cannot really manage them. You cannot really reduce them through policies, through better management, through a lot of things we can do at different levels of government. We can just, like, put more money to just solve the problem afterward.” The overlap of these three layers of things is what is driving our cost levels that are absolutely unsustainable. What are some of the things we could do relatively quickly or easily and maybe change some of that? I would answer this a bit tangentially, but it’s absolutely fundamental. And the first thing is, do more transparency. One of the big problems we face, as a researcher, but everybody in the industry, is that all the information about cost — like the article you have seen, I’ve seen the cost. I’m bound by the NDA. We couldn’t use the actual cost in the article, because we’re prevented from doing it by the agency.   These costs are mostly public in other countries, you can go and ask, and they are published online. Just knowing this thing and knowing a lot of information across multiple projects would make everybody in the industry much less dumb, or much less, you know, not knowing what’s going on. And transparencies are fundamental things to make a lot of brains working around this and starting to understand, from different perspectives, what are the drivers of cost? So that’s something that really a government — like the federal government — for example, can say, “Oh, dear provinces, you want money from me to build these infrastructure projects? Sure, I’ll give it to you, but you give me back, and you share detailed information about cost and cost assumptions, so I, the federal government, can start to dig into this and start to understand what will be a standard cost, what will be a benchmark cost for some stuff.” Because nowadays the industry is completely blind, totally. The report you co-authored discusses the negative impact of local interests on transit projects, as well as the fact that the public service doesn’t tend to have in-house transit experts. How do you solve those two problems? There is this idea of cutting the public service, or just, like, firing people, and it’s way cheaper to go to private sector and just buy things out of the shelves. Might be true for some stuff, but it’s not really necessarily true for infrastructure projects, because the reality is that a lot of the decision that needs to be taken for this process, you need to consult the public, you need to get permitting. The private sector is not the best position to do this kind of stuff. The policy of voiding the public sector of all the competency, the capacity of doing stuff, that is something that started in the ’80s and ’90s in Canada, and it’s now completed. It really made the public sector, let’s say, a dumb buyer. Because you need to be an informed buyer. You buy a house, you buy a car, you buy whatever, you know, you just become your own expert. And when it’s on the small scale of individual choices that’s good. (On) the scale of the government to have someone that, when the consultant comes with different solutions for the tunnel ventilation for a subway, or very specific stuff that are big drivers of cost, and they cannot really choose, and they cannot really say if the private sector is pushing too far, because they don’t want to take responsibility or act in bad faith, or maybe not necessarily in bad faith, but being very defensive about their design, they can’t really push back. Each agency has their own design guidelines. Everyone does their own thing in their own little corner. Very little meaningful sharing of experience and capacity. And there is this habit of not deciding, and this is a pretty much in the culture of the public sector nowadays. And I don’t know how you change this. I mean, I know you need politicians that empower the public service and do not just use them as — when something goes wrong, they blame them — because that’s how the political side has been behaving lately. I think it’s important to build state capacity, a very different levels, agency levels and the federal level. And what about local concerns that can change a project? That’s, again, a problem of politics. Changing the status quo will make some people upset. That’s sort of a fact of life. Politicians need to take the responsibility. I mean, at the end of the day, it is always the taxpayers’ money. But, you know, the principle is, it’s not from my budget, the city budget, it’s not from the provincial budget. So they tend to be generous. If someone, the mayor, the premier of a province, take the responsibility of saying, “We are going with this solution, even if it has more impact, because it’s the only one we can afford.” There are some cases of doing this, you know, like for the Canada Line in Vancouver. At a certain point, they need to be within this $2-billion budget. They need to do it absolutely before the Olympics of 2010, they did have a lot of disruption in the city, but they were probably one of the last reasonably priced infrastructure projects we had in Canada. What are other countries doing that we should consider copying? A lot really, in the weeds of like, at the way you you handle procurement, the way you handle benchmark prices and so on. For example, Italy, is absolutely transparent about costs. Transparency really helps a lot for all the actors to benchmark themselves against others and to put the collective brain out to better solve the problems. And this is something that culturally in Canada, it would be very hard to have. There is a lot of resistance in the industry and the public sector. The French are extremely good at project management. So let’s copy the French for project management. Like, there are lots of little stuff here and there. There’s nothing like a silver bullet solution, that you can just, “OK, let’s copy those people.” They will need a collective effort from the industry to be less insular and look less at the United States, which is the curse of Canada, because the Americans are absolutely terrible at handling large projects. So we really should forget about the Americans and look at everybody else, whether it’s Europe, Asia or any other place. There’s not a single thing, but it’s really being curious about what the others do. Are you optimistic Canada can solve these problems? Let’s say I’m optimistic in the sense that I see that there is a conversation starting now. I think we have reached the point where the cost is so absolutely insane that most politicians at every level are getting scared. They think they are allocating ludicrously high budgets, but they are not going to pay for much at the end of the day. And this is really hindering Canada, and especially in the economic situation that we will face in the future with a hostile United States, you know, trade war and stuff like this. I think there is sort of, rethinking a lot of stuff. And this is the good thing, because really, we are in the phase of, we need to acknowledge that we have a problem. Until four or five years ago, it was me and a bunch of other weirdos talking about this kind of stuff, and now it’s a more generalized discussion that they see emerging at every levels. The thing that makes me a bit less optimistic is that we are still at the “Oh, there is this problem. What should we do?” And even if the research is much more advanced, like for us, research of the portrait of the problem and the thing we can act upon is getting more clear, the more we research, the industry and the political side is still pretty much, “We don’t really understand what’s the problem,” and trying to look for a silver bullet, a single solution that will fix this without a lot of pain. There would be a lot of pain. There will be a lot of changes in the industry, in the political way of doing, if you want, prices to, I don’t say to go down to European levels, because this will never happen, I don’t think so, but at least levels that we can afford with the current resources we have. This is the latest in a National Post series on How Canada Wins. Read earlier instalments here.

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