Infrastructure spending will play a big part in the economic recovery from COVID-19. Construction projects get people working, flow money to local economies, and create assets that serve communities for years. With the uncertainty caused by multiple daily announcements on COVID-19, any additional stability and certainty governments provide could be more impactful than committing significant new dollars. It can also provide a catalyst to transform a sector that has historically lagged on productivity.
In the short-term, governments must limit damage to infrastructure companies from an economic slowdown. Canada’s construction companies rely on winning projects to stay viable and keep cash flowing to smaller suppliers.
It is a difficult balancing act. Most governments have kept construction sites open, with additional guidance on keeping sites safe, requiring more inspections. Contractors must continue to provide the very best workplace safety conditions and equipment to repay that trust with employees, government, and the public.
As construction work shrinks, cashflow is an acute concern. Public agencies can help by maintaining existing payment schedules or front-loading project payments as happened in 2008 with programs like the Knowledge Infrastructure Fund. Governments must also collaborate on project selection, and not let inter-jurisdictional politics get in the way of rolling out funding. Smaller projects do not require the same level of scrutiny as billion-dollar plans and can be audited later to ensure money gets allocated and is well spent.
Planning, design, and procurement can still move forward to have projects ready for construction when the time comes. Public agencies could also consider bundling projects or prequalifying bidders as they already do in Ontario and Vancouver, respectively, so contractors can focus on building, not bidding.
Perhaps the most effective stimulus would be to reach a quick resolution around pandemic-related costs and delays on projects currently underway. Once normal life resumes, the possibility of the virus rebounding will also hang over future infrastructure projects and make it difficult to price work and get insurance. Governments need to play a strong leadership role here on both counts.
The current spirit of collaboration may provide an opportunity for Canada to grapple with some of the industry’s structural challenges. Last year, New Zealand’s Prime Minister Jacinda Ardern launched a national Construction Accord to bring the sector together in a shared commitment to work towards a safer, more productive, innovative industry. A similar shared national vision could help Canada.
An ongoing source of uncertainty is the cyclical nature of construction, with spending rising and falling with political cycles. This hinders companies from hiring and investing in people and equipment. The U.K. and Australia addressed this through comprehensive audits of the state of their infrastructure to develop multi-year infrastructure plans and annually updated project pipelines. Projects could be categorized to shift resources in a severe climate event or health crisis.
Our infrastructure agencies can use the recovery period as a chance to overhaul procurement processes to cut out unnecessary requirements and move away from the lowest-price model. We know this breeds confrontation, invites poor quality, and hinders innovation. More projects could use innovative approaches, including public-private partnerships, and evaluate bids against how assets will perform over their lifetimes to deliver better value.
This crisis has showed construction is still powered by paper and long overdue for widespread digitization. Once Toronto stopped issuing construction permits, it was only a matter of time before projects ground to a halt. Finland issues 95 per cent of building permits digitally. The problems highlighted by the reliance on paper and physical inspections can provide inspiration to reimagine all the processes involved in construction.
Providing certainty is the foundation companies are looking for. Government action to help cashflow and quickly resolve contractual issues would be most impactful in the short term. Longer term, there is an opportunity to transform the sector to make it more resilient and efficient, and to get more impact from funding already committed.
Genevieve Young is the president of Global Public Affairs. John Allen is a vice-president at Global Public Affairs. This article was originally published in The Hill Times on April 22, 2020.