By Matti Siemiatycki, associate professor of Geography and Planning at the University of Toronto
Across Canada, governments are ramping up investments in public infrastructure as a strategy to drive economic growth and prosperity, improve the environment, and enhance social equity and inclusion. However, an inherent tension is that the current practice in Canada is not always supporting the optimal selection of infrastructure projects for investment or effective project delivery, especially for very large mega-projects. This represents a major risk for Canada. Weak project selection means that costly infrastructure projects may be built that do not deliver sufficient benefit to warrant their investment. And poor project delivery can result in hundreds of millions of dollars in unexpected cost overruns and construction delays that are a major source of public frustration.
In response to the challenges ahead, in a February 2016 report commissioned by the Residential and Civil Construction Alliance of Ontario (RCCAO), I proposed the formation of an arm’s-length federal institution known as the Canadian Infrastructure Investment Agency (CIIA). The CIIA would be positioned as a national centre of excellence supporting rigorous project evaluation, procurement best practices and project financing under a single roof.
The purpose of this follow-up report is to focus more specifically on the details of operationalizing a CIIA. In particular, this report identifies the optimal mandate, tasks and structure for a CIIA within the crowded constellation of government and other institutions responsible for infrastructure provision in Canada. Based on a review of the current Canadian institutional landscape and international best practices, the report concludes that the CIIA would ideally provide a “light touch” approach to improving infrastructure investment decisions and delivery at all orders of government. Further, it would be carefully structured to avoid unwanted federal government intervention into the jurisdiction of provincial and municipal governments and First Nations or costly duplication of services. The report makes the following recommendations:
1. Arm’s-Length Agency: Establish the CIIA as an independent, arm’s-length agency of the federal government, which is modeled after the mandate of Infrastructure Australia and the U.K. Infrastructure and Projects Authority. The mandate of the CIIA will be to serve as a national centre of excellence focusing on the largest-scale infrastructure projects in the country, with capital values of more than $100 million. These major projects will be of national or regional importance, have significant budgetary and societal implications by nature of their size and require special attention to ensure that they are well executed.
2. Advisory Role: Ensure that the CIIA acts in an advisory rather than decision-making or funding capacity. This structure will preserve the distinction between supporting impartial technical evaluation of policy options and political oversight of decision-making and funding allocation that is central to the Canadian democratic system.
3. Project Financing: Develop a team within the CIIA that has the technical expertise to advise the Minister of Infrastructure and Communities about the optimal model for the federal government to finance public works mega-projects that are submitted to the CIIA for review. The finance team of the CIIA can also be responsible for evaluating and maximizing the returns on any federal government-mandated asset sales.
4. Project Selection and Prioritization Support: Empower the CIIA to develop standard evidence-based project evaluation tools that any government or private sector proponent would use to assess infrastructure mega-projects with capital values over $100 million seeking federal government funding support. The CIIA would independently review the quality of the data and results of the submitted evaluation report for each proposed project, and make a recommendation to the Minister of Infrastructure and Communities about whether the project delivers sufficient benefit to warrant federal investment. The CIIA would maintain a list of national infrastructure priorities based on the results of the evidence-based project evaluations. Projects on the priority list would be allocated funding as money becomes available.
5. Project Delivery: Create a delivery confidence assessment system whereby the CIIA peer reviews the detailed delivery plans for all mega-projects receiving federal funding, and provides an assessment as to the degree of likelihood that the project can be delivered within time and budget. A traffic light system has been used to report on the results of such peer reviews internationally: green-light projects have a high probability of being delivered as planned; yellow-light projects have some areas where deficiencies are flagged for improvement; red-light projects are those where there are serious risks to delivering the project as proposed and require a major overhaul in approach or do not proceed. The federal government should study in detail the option of transferring the PPP project procurement advising responsibilities of PPP Canada into the CIIA to create a single federal institution that provides project procurement advising services to large infrastructure projects that use all delivery models.
6. Transparency, Accountability, Capacity Building: Develop the CIIA as a national hub for transparent reporting on infrastructure project evaluations and priorities, and a catalyst for knowledge sharing and capacity building across all levels of government and with First Nations. This can include the formation of a national infrastructure leaders training academy, the creation of national standards for collecting and compiling data on infrastructure project delivery and outcomes, and the hosting of a forum that brings together infrastructure leaders from different levels of government to share experiences and learn about best practices. The CIIA should also be legally mandated to post the results of all project evaluations (positive and negative) and the national Infrastructure Priority List online. The transparent reporting of this documentation would provide key information necessary for Canadians to scrutinize the project selection choices of their elected decision-makers against the CIIA’s Infrastructure Priority List.
The CIIA, as proposed in this report, will not come cheaply. Estimates based on national and international experience with similar agencies suggest that the CIIA will require federal operating funding of up to $200 million over 10 years. However, this investment pales in comparison to the $120 billion that the federal government has proposed spending on infrastructure over the same period. The formation of a CIIA will enable the federal government to maximize the benefits of their investment over the years ahead through a more comprehensive approach to project financing, selection and delivery.