Why construction costs on public infrastructure projects are skyrocketing

B.C. has a big problem. The cost of building many large public infrastructure projects across the province is soaring out of control. But now a new study provides a practical solution, and a more plausible explanation on how we got here.

Too many large-scale public projects in B.C. are over budget, and not just by a little but a lot. The Trans-Canada Highway widening, the replacement for the Pattullo Bridge and the new Cowichan District Hospital are billions of dollars beyond original estimates, and all at the public’s expense.

The B.C. government blames the shocking overages on inflation, global supply chain issues, labour shortages and construction complexities. But there’s more to it than that. The province has chosen to stick with a bad policy that makes today’s fiscal challenges even worse.

Research by the Cardus think-tank provides valuable insight into how a labour policy aimed at giving under-represented groups, including Indigenous peoples, more training and work opportunities in construction has done just the opposite. Good workers and companies are instead being excluded, and public construction costs are going way up.

Cardus’s case study focuses on the Cowichan District Hospital replacement project, the most controversial of six projects being built under the NDP’s restrictive labour policy. It’s a policy Cardus aptly describes as “fundamentally flawed.”

First, this project is a whopping 63 per cent over original budget estimates with a price tag of $1.4 billion — a figure that will likely keep climbing. The Cowichan project has “some of the highest cost overruns among large infrastructure projects in British Columbia,” according to Cardus. It finds these massive overruns were likely exacerbated by a provincial labour policy that reduces the pool of available workers and contractors.

Since 2019, the NDP government has allowed only contractors whose workers belong to building trades unions to bid on and build many taxpayer-funded projects, including the new Cowichan hospital. That means 85 per cent of B.C.’s construction workers are excluded because they belong to other unions or choose not to be unionized. These workers are barred from projects that their tax dollars help fund for one reason only: They are not carrying the “right” union card.

When B.C.’s finance minister says labour shortages are partly to blame for $559 million in cost overruns at the new Cowichan hospital, she knows full well how to fix it. With the stroke of a pen, her government could open up public projects to all qualified workers and companies rather than shutting them out during the most acute labour shortage in our history.

That’s a move that could have saved the government a lot of embarrassment. Back in 2022, a highly qualified Indigenous contractor was denied a permit to continue working on the Cowichan project because his Cowichan Tribes workers refused to affiliate with the building trades unions. The very people this policy was designed to help were shut out. To save face, the Eby government was forced to grant a one-time policy exemption, allowing their work to continue.

It’s no surprise that Cardus recommends that the NDP government overhaul or scrap this terrible piece of public policy. B.C. is the only province in Canada with a policy like it.

Across Canada and around the world, other governments recognize the benefits of construction competition. It results in a higher number of bids that lower construction costs by an average of 21 per cent. In B.C., that translates into major savings that could be used to hire more doctors, keep emergency rooms open or pay down the province’s record deficit.

As B.C.’s Oct. 19 election fast approaches, the NDP government will have a hard time justifying a labour policy that’s so regressive and out of sync with today’s fiscal realities.

Dan Baxter is regional director B.C. at the Progressive Contractors Association of Canada.