Improving Infrastructure Investments

BY RON GLEN

TRADE-ENABLING INFRASTRUCTURE NEEDS TO BE PRIORITIZED

Canada West Foundation’s (CWF) “From Shovel Ready to Shovel Worthy” report, published in 2022, found that disjointed, politicized approaches to funding our trade infrastructure is harming Canada’s global reputation as an investment destination and trading partner.

Governments are too often tempted to invest in “shovel ready” projects that lack strategic value and ignore routine maintenance on roads that thousands of Albertans rely on every day. The CWF report concludes that ad hoc infrastructure funding tied to annual budget and/or election cycles is a poor infrastructure investment strategy.

With Alberta now in its election year, the Alberta Roadbuilders and Heavy Construction Association (ARHCA) is urging government to heed the warnings, and advice, contained in this report.

In our submission to the Alberta Government’s Budget consultation, we asked government to abandon its ad hoc funding approach and commit to predictable and sustainable investments in Alberta’s public infrastructure. Our association believes this is essential to not only support our economy, but also to protect our highways from further deterioration.

Albertans support investments in highways because they create jobs and benefit the economy. And yet, the province’s own data shows that a decade of deferring repairs has created a costly infrastructure deficit that looms large for the taxpayer and threatens our road network’s economic and safety performance.

What needs to happen is simple: government must publish a transparent list of improvement projects, commit to appropriate predictable funding, and hold administrators accountable for meeting their goals. Funding decisions ought to be tied to clearly stated objectives.

Procurement Must Be Fair

One other change must be made. And that is to fix the government’s broken procurement model. Over the past decade, governments have become overly sensitive to criticism of reasonable cost escalation. This has resulted in an increased reliance on procurement models that provide cost certainty, such as design-build-finance-operate-maintain (DBFOM) public-private procurement mode. However, shifting the owners’ risk to the design engineer and contractors comes at a premium price. Governments must be prepared to pay this premium cost... or stop, retool programs, and accept the oft stated goal of allocating risk to the party most capable of managing each specific risk. Including maintenance and financing in procurement can work well in some circumstances, but as Alberta found out last summer on the Deerfoot Trail Free- way Program, it can predictably fail when owners ignore warnings of cost premiums due to the design of the RFP.

Albertans deserve a more nimble, efficient, economical, responsible, and transparent system of approving, budgeting and procurement that will ensure that failures, such as the Deerfoot Trail Freeway Program cancellation, will not be repeated. We need to return to a business model of partnership where all parties invest in communication and relationships so that government decisions are fully informed.

Finding Solutions

In addition to highlighting issues that need addressing, the ARHCA has spent considerable time and effort contemplating solutions.

Our research paper called “The Case for an Alberta Highway Trust Company” not only documents the problems, but also offers a solution. In our proposal, the Trust Co. would have funding guaranteed by contract with the government and sufficient scheduling and procurement independence to achieve outcomes based on engineering determinants rather than annual budget surprises and election cycles. The Trust Co. would strive to be a superior, preferred client. One that is a knowledgeable owner, understanding and accepting owners’ risk, provides reliable vision, and plans that incentivizes appropriate industry investment in people and equipment.

ARHCA is proposing the creation of the Trust Co. as a vehicle to provide financial stability necessary for efficient management of Alberta’s the $70 billion highway asset. This arms-length provincial corporation would create and deliver on a transparent highway improvement plan and project list based on engineering determinants. The current procurement and project management employees from Alberta Transportation could staff the new corporation to ensure knowledge transfer. The Alberta Highway Trust Co. would publish a priority list, as well as a long term 20-year strategy with a rolling three to five year detailed plan.

What makes our proposal unique is that the Trust Co. would have a contract with government as “owner” for annual payments to fund the plan approved by government. Guided by a board appointed by government, The Trust Co. would be accountable to the owner but keep politics out of its day-to-day decisions. This model will allow procurement methods and schedules that encourage industry to invest, innovate and compete for the privilege of building Alberta.

Lastly, as a business with a long-term contract, the Trust Co. could issue bonds to Albertans who want to invest in Alberta’s infrastructure. Government could also invest intermittent resource windfall revenues in the Trust Co. to protect Albertans from future tax increases to pay for future repairs. Too often, public discussion of funding roads gets sideswiped by talk of toll roads. There are other options, and Albertans are proven leaders in developing innovative financial approaches to problems.

This approach addresses the key concerns of ARHCA members in providing: reliable and consistent funding, transparently communicating a list infrastructure projects, and offering a fair procurement process.

Albertans deserve better than deteriorating roads and projects that can’t pass go because of procurement red tape. But to do better, serious change must lie ahead.

Ron Glen is president of the Alberta Roadbuilders and Heavy Construction Association. The ARHCA Alberta Highway Trust Co. policy paper is available at fixourroads.com.