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Procurement Perspectives: Concerns with the controversial nature of public construction

Stephen Bauld
Procurement Perspectives: Concerns with the controversial nature of public construction

No study of construction in the government context would be complete without some consideration of the political influences that impact the process.

Few areas of municipal spending are as controversial as expenditures on major construction projects for the simple reason that unless they are carefully managed, a great deal of public money can be squandered, or at least misallocated, in a very short period of time.

Even decisions not to spend can be just as controversial. Perhaps in no other area of municipal expenditure is there so little understanding of the full-life cost implications of the decisions that must be made.

Depending on such factors as assumed lifespan and the level of specifications to which a building was constructed, initial costs of a building represent only 10 to 20 per cent of its full-life cost. The cost of fitting out a building (new furniture, artwork, etc.) are in addition to the initial capital cost.

The public rightly expects that decisions regarding major public expenditures will be made soberly, with a keen eye focused on the comparison of cost and benefit, an idea that is better explained in a previous column on the laws of public procurement, as the “prudent purchaser” concept.

Most people would no doubt agree that public expenditure is not a political football and that large amounts of public money should not be spent on frivolous projects; projects that yield comparatively low benefit relative to other projects that might be built in their place; or projects that require a much higher level of expenditure than the benefit they afford.

Yet, valid as these points may be, it can be difficult to decide how to measure cost and benefit.

Nowhere is this truer than in relation to urban transportation. What is the aggregate cost of a high-speed open-road corridor cutting across a downtown area when one factors in both its environmental implications and its divisive effect on city life?

On the other hand, how much can one justify in the way of additional expenditure to put in a suitable alternative? For that matter, what is a suitable alternative?

To a very large extent, the answer to these questions depends on what one perceives to be the kind of business that should be located near the downtown core.

Ultimately, the decision concerning in which direction to proceed requires a balance of political, social, environmental, economic, engineering and financial-accounting consideration. Often, those concerns tend to be overwhelmed by rhetoric and dubious data.

For instance, despite several new initiatives in recent years, it is difficult to identify reliable information relating to public infrastructure investment to determine whether the problem of under-investment is being corrected or is continuing to worsen.

In Canada, by long political tradition, those who pay the lion’s share of any cost usually have little say in overall policy formation. Accordingly, important decisions regarding local public transportation are invariably dominated by the provincial or federal governments.

In recent years, both levels of government have shown a distinct preference for rail-based systems, although bus system improvements have also enjoyed some favour.

Buses are exposed to extensive use of road salt during the winter months, increasing the risk of corrosion. To meet these demands, Canadian transit systems responded by demanding that manufactures provide them with corrosion and structural warranties or up to 18 years — a level previously unheard of for a vehicle that can provide 80,000 kilometres of service per year.

In recent years, although both the federal and provincial governments supported investment in bus services, this appears to have become a progressively less attractive option.

Subway and light rail transportation systems (formerly called street cars) are generally very expensive in comparison to buses. Costs of installing such systems in other advanced economies do not necessarily reflect Canadian cost.

Stephen Bauld is a government procurement expert and can be reached at swbauld@purchasingci.com. Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.

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