Bad budgeting, politics partly to blame for Toronto's ballooning infrastructure costs
One potential remedy is called the “optimism uplift,” which means budgeting for the fact that initial cost estimates are likely too rosy and adding a certain percentage upfront.
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A professor has some recommendations for Toronto City Council on how to keep the cost of infrastructure projects from ballooning out of control.
Mostly, Matti Siemiatycki says, it’s a matter of political will.
“There are clear political reasons why politicians, civil servants, private-sector promoters, underestimate the cost of their project upfront to get them approved and once they’re approved, the costs go up,” said Siemiatycki, an associate professor in the department of geography and planning at the University of Toronto.
“Toronto certainly has a checkered past with cost overruns, especially in recent years,” he said, noting projects like the Spadina Subway extension, the Union Station overhaul and renovations at Nathan Phillips Square.
“But this is isn’t just a Toronto problem, it’s a global problem.”
Siemiatycki wrote a paper for the Institute on Municipal Finance and Governance about how infrastructure projects all over the world are delayed for the same reasons. Technical complications—unexpected soil conditions or extreme weather events, for example — often cause cost overruns and delays, but political problems are equally at fault, he said.
Low-balling the cost of projects in order to get them approved happens everywhere, he said. Sometimes, a rush to get something started means there hasn’t been proper planning by the time shovels hit the ground. In those cases, Siemiatycki said, delays and overruns are inevitable.
Bad budgeting is harmful for the democratic process because it skews which projects get built, he said. And, when cost overruns become routine, people get cynical and become less supportive of building new infrastructure.
One potential remedy is called the “optimism uplift,” which means budgeting for the fact that initial cost estimates are likely too rosy and adding a certain percentage upfront, he said.
Governments should also select contractors with a solid record for delivering what they promised, instead of going with the cheapest bidder.
In some cases, governments can opt for public-private partnerships where private companies assume risk for overruns. But, he warned, that’s only cost-effective on the largest of municipal infrastructure projects, he said.
Politicians and planners have to acknowledge how pervasive the problem is, study it and build that knowledge into a good planning process, he said.
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