Exclusive: The feds bought a pipeline for $5B. How did the cost balloon to over $30B?
Exclusive: The feds bought a pipeline for $5B. How did the cost balloon to over $30B? | Globalnews.ca
How a pipeline project, purchased by the Trudeau government, went from an initial estimate of $5.4 billion to $30.9 billion, potentially leaving Canadian taxpayers on the hook.
Here's their checklist:
THE IRON LAW OF MEGAPROJECTS
Performance data for megaprojects speak their own language. Nine out of ten such projects have cost overruns. Overruns of up to 50 percent in real terms are common, over 50 percent not uncommon. Cost overrun for the Channel Tunnel, the longest underwater rail tunnel in Europe, connecting the UK and France, was 80 percent in real terms. For Boston’s Big Dig, 220 percent. The Sydney Opera House, 1,400 percent. Similarly, benefit shortfalls of up to 50 percent are also common, and above 50 percent not uncommon.
One may argue, of course, as was famously done by Albert Hirschman, that if people knew in advance the real costs and challenges involved in delivering a large project, nothing would ever get built — so it is better not to know, because ignorance helps get projects started. A particularly candid articulation of the nothing‐would‐ever‐get‐built argument came from former California State Assembly speaker and mayor of San Francisco Willie Brown, discussing a large cost overrun on the San Francisco Transbay Terminal megaproject in his San Francisco Chronicle column:
News that the Transbay Terminal is something like $300 million over budget should not come as a shock to anyone. We always knew the initial estimate was way under the real cost. Just like we never had a real cost for the [San Francisco] Central Subway or the [San Francisco‐Oakland] Bay Bridge or any other massive construction project. So get off it. In the world of civic projects, the first budget is really just a down payment. If people knew the real cost from the start, nothing would ever be approved. The idea is to get going. Start digging a hole and make it so big, there’s no alternative to coming up with the money to fill it in [emphasis added].
Rarely has the tactical use by project advocates of cost underestimation, sunk costs, and lock‐in to get projects started been expressed by an insider more plainly, if somewhat cynically.
Maybe there needs to be the introduction of new mechanisms to deal with assessing the cost of very large projects.
It's not possible. This is a function of the complexity of big projects, not some nefarious politicking. That is even if you completely remove any politicking out of the equation, large complex projects will still be grossly misestimated, likely on the lower side. Also I would discount anything coming from CATO.
What will the budget overrun be to establish that new mechanism?
Standard practice already dictates that you double the estimate, and then double it again. Aside from the Opera House, there are no real surprises in the examples given. 90% accuracy is good enough, no? Cost starts to outweigh the benefit if you want to reach for 100%.
Because it's being made by private business, and they love love LOVE that sweet government money
All to buy votes in Alberta that, as a person who lives here, I guarantee he will never get. What a horrible, absurd waste...
Electrifying the GO rail network was supposed to cost like $25B, which is why the McGuinty liberals abandoned the project. About a quarter of Canada lives in the cities serviced by GO.
I mean... This is basically just a subsidy to Alberta's economy, right? It's to quell all the bitching and moaning about how the federal government doesn't spend money on Alberta.
While other cities get transit systems and housing projects funded, Alberta gets a pipeline. Sure, sucks for Alberta, but this is what Albertans want.
30 billion??? Fucking hell.
Imagine all the social housing we could've built with that money instead.
What a waste of public money. And SO MUCH money.
Justin got it so Albertaskatchetoba would like him again.
He was wrong.
He's still wrong.
In fact, they will use it to hate him forever, for he flies the wrong flag.
We probably could have bought more oil with $30 billion than we will ever sell with this pipeline.
Right???
Depends on how well pipeline building skills translate to home building skills, I guess. There isn't anyone accustomed to building houses that is free to build more. They are booked up for years to come. Money only helps if what you want to buy is available for purchase.
If a sealed tube will suffice as a home then you may be on to something!
The market isn't static. If you throw money at an industry, it grows. Existing people in that industry start their own businesses, or expand, and new people get training in the field.
I think you're incorrect here, especially when the amount of money in question is on the scale of $25 billion (5.8% of Canada's total 2023 budgetary spending ($432.9 billion)). I'm not an economist, but I'm willing to bet that sum of money, if redirected towards the 'housing crisis,' could make an appreciable difference in addressing that crisis. As you point out, increasing the skilled labour force would be a priority. Subsidized training, retraining, relocation, and focused immigration initiatives are all low-hanging fruit options and ones that would have many collateral benefits for Canada/Canadians as well.
https://www.canada.ca/en/treasury-board-secretariat/services/planned-government-spending/government-expenditure-plan-main-estimates/2023-24-estimates.html
Comme on man. You know that's not how I meant it.
I understand there aren't enough construction workers or resources to go around right now, but if we stopped building giant luxury condos for rich investors to leave empty and built community or social housing instead, we'd probably have the resources.
And with that amount of money, I'm sure plenty of companies would volunteer.