The revelation a hospital redevelopment in Richmond has more than doubled in cost is raising concerns about the rising price tags attached to a slew of major capital projects across B.C.
The provincial government has launched multiple major infrastructure and health projects in recent years, each with budgets in the hundreds of millions or billions of dollars.
Those initial budgets are increasingly being revised upward, with taxpayers on the hook.
The Richmond Hospital project, estimated at $860 million in 2020, is now forecast at $1.96 billion. The cost of the Cowichan Hospital has climbed from a 2018 estimate of $350 million to over $1.4 billion. And a planned second Surrey hospital, estimated at $1.72 billion in 2022, is now expected to cost more than $2.88 billion.
The province has blamed the rising cost of materials and labour, amid global supply chain issues and inflation.
But some in the industry are pointing the finger at the way the government is doing business.
“Every single project is going over budget, and it’s not just by a little bit, it’s hundreds of millions, billions of dollars,” said Chris Gardner, president of the Independent Contractors and Business Association.
“It’s fair to say that the procurement model government is using is broken.”
Gardner said inflation and B.C.’s labour shortage are real problems, but that the province has failed to respond by working more closely with the industry.
He said collaborating with builders on different procurement models and sharing some of the risks associated with projects could bring costs down.
Permit and project approvals at the municipal or district level are also slowing down builds and increasing costs, he said.
Community benefit agreements — the union favouring contract structure the province has implemented for a number of its key infrastructure builds — are also pushing prices up, he argued.
“As soon as you limit your supply of contractors to such a small segment of the workforce … that is going to increase costs,” he said.
“The CBA framework is very complicated administratively…. There is a lot of rules, a lot of red tape.”
Matt MacInnes, president of the Electrical Contractors Association of B.C., said the “two big drivers” behind budget increases were material and labour costs, which are hitting both public and private projects.
Solving that riddle, he said, won’t be easy for the province.
“It’s going to be very tricky in the short term because at a top line, it’s going to take time to address the availability of skilled labour in particular,” he said.
The problem is worse for the government because the pool of skilled contractors with the capacity to take on the type of massive projects the province is building is already small.
“So when you have reduced competition and reduced labour it will cause challenges when it comes to budgeting,” MacInnes said.
With many projects’ cost estimates laid out years ago in a radically different economic climate, MacInnes said he expected to see new project estimates come in “considerably higher” than their original forecast.
Official Opposition and BC United Leader Kevin Falcon said ballooning budgets were eating up funding that could be spent on programs.
“This is billions of dollars in overruns that could go to portables, and treating mental health and addictions,” he said.
B.C. Premier David Eby acknowledged the surging costs of the province’s marquee projects but said with the province’s surging population the work needs to get done.
“We have a massive infrastructure deficit we have to respond to. It’s roads, it’s transit, it’s schools, it’s hospitals,” Eby said.
“It’s going to be more expensive now. There’s one thing I know, it will be even more expensive if we build it later.”
The cases of sticker shock are likely not over.
The Ministry of Transportation revealed last month that the Broadway subway extension and the Pattullo Bridge replacement would both be delayed by one year, but has yet to speak to how those backlogs will affect the final price tag.