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Could an Alberta Highway Trust Company help manage contract woes?

Grant Cameron
Could an Alberta Highway Trust Company help manage contract woes?

The Alberta Roadbuilders and Heavy Construction Association (ARHCA) is making the pitch for an independent agency to be created that would manage contracts for highway and bridge construction in the province.

The group is circulating a policy paper that proposes an Alberta Highway Trust Company be set up that would procure engineering and construction services in a “transparent and business-like manner” and be fully independent from day-to-day political interference, influence and whipsaw budgets.

The ARHCA maintains that, over time, multiple factors including lack of communication, unreliable roller-coaster budgeting and unfavourable economic conditions have contributed to a breakdown of the working relationship that existed with Alberta Transportation and industry partners.

Ron Glen, CEO of the association, which has more than 700 member companies, says the trust company would reduce budget risk for the government and result in better management of the procurement process as well as predictable funding that would allow contractors to prepare for projects.

“What it means is that the highway trust company would have a guaranteed stream of funding, it would have performance targets to meet, and then it could publish what it’s going to do and give signals to the market in order to encourage investment by contractors in equipment, machinery and people.”

Putting procurement in the hands of the agency would also restore business confidence in the system, said Glen, as it would not be tied to the same hiring restraints and policies of government.

“Being outside of the mainline of government, control and authority and dictates, they’d be able to do that a bit better. They’d also be able to experiment with different types of procurement systems and be more nimble because they’re not having to put everything through central government agencies to get approval.”

The agency would operate as an arms-length or delegated authority responsible for the administration of dedicated annual funding for the construction and maintenance of provincial highways. The funding would be guaranteed by way of a performance contract with the Alberta government.

The problem with the current system, according to the ARHCA, is that spending on highway and bridge rehabilitation is too closely tied to political budgets and four-year election cycles, creating project uncertainty, funding instability and lack of accountability.

Alberta Transportation does not have multi-year control over the revenue necessary to match projects that span multiple years.

The ARHCA also maintains Alberta’s current approach forces unbalanced risk onto the industry which limits growth of the sector and hampers innovation, and the highway planning system is not transparent, leaving contractors and engineering firms to read between the lines of annual budget speeches.

Establishing a trust company at the helm would take projects and funding out of the political arena and ensure there is predictable and reliable government funding so the industry can plan future work, says Glen.

The agency would also reduce budget risk for the government and restore business confidence in the Alberta government as a preferred client, the ARHCA policy paper notes, and industry is keen to work with a reliable partner to justify risking private capital and compete head-on in fair, open and transparent procurement competitions.

The company would require a realignment of roles within the province’s transportation ministry. The agency would have a long-term performance contract with the government that sets out milestones. The agency’s board of trustees would be accountable to Alberta’s transportation minister.

Glen says the straw that broke the camel’s back for contractors was the government’s decision to cancel the procurement process for the Deerfoot Trail upgrading project, a main north-south freeway in Calgary. Companies put together consortiums to bid on the project and spent $15 million in the process, but the government cancelled the venture in 2022 because costs were too high.

“During the whole process, companies were telling them, ‘Well we don’t like the risk that you’re putting on us, you’re not going to like the cost,’” notes Glen. “Government just kept saying, ‘Bid in those things. We’re committed to it.’”

In its policy paper, ARHCA states the situation has “seriously damaged the credibility of Alberta Transportation as a business partner.”

To make matters worse, the ARHCA argues that for the last decade Alberta Transportation has been in a state of constant personnel churn, downsizing through attrition and salary caps on professional engineers.

It says to be successful, organizations must be able to transfer experience to the next generation and foster a culture of empowerment that permits experimentation and rewards personal judgment and accountability.

“Good relationships are grounded in open communication which supports mutual benefit,” the ARHCA states. “The belief in long-term mutual benefit allows individuals to explore options and push the envelope of solutions. This trusting exploration can be quickly poisoned should one of the parties perceive their willingness to partner is being taken advantage of.”

Glen says the ARHCA is now making presentations to government ministers and representatives of the other political parties in hopes of convincing them that the trust company is the way to move forward.

“We’re not asking for a response yet because we know it’s new and it’s challenging. The perspective is to try and get conversation about these kind of things going so that we can get some of our concerns addressed.”

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