ReNew Canada has produced the Top 100 Projects report for the past six years. The listing of Canada’s 100 biggest projects (ranked by project value) is an industry touchstone—a look at how some of our megaprojects are funded and, perhaps of more interest to our readership, which firms are working on them.
This year, we decided to take a much closer look at what this report says about the infrastructure industry in Canada—and what it doesn’t it say. By inviting some of our top key players to an exclusive roundtable and showing them an advance version of the Top 100, we were able to get valuable feedback about the nature of this report and the state of Canada’s infrastructure industry.
A group of ten of the top key players assembled last September. They debated whether or not future Top 100 reports will feature smaller projects, or perhaps bundled projects. They argued for a new version of our Top 100 featuring municipal projects, often overlooked due to their size.Certain sectors may be underrepresented due to smaller project sizes, while others are left out altogether (for instance, oil and gas projects). The choices our editorial and research team made have created a report that downplays some of Canada’s political, social, and environmental priorities and highlights others. Though, as Morrison Hershfield’s Jim Lew pointed out, no matter what projects we choose to include or exclude, this year’s report doesn’t reflect decisions made this year. “[Looking at this report] is like looking back in time,” said Lew at the roundtable. “These are the outcomes of political decisions made a decade ago.”
Every year, some sectors dominate the list. Transit and transportation always account for a significant number of projects, and this year was no exception. Hydroelectric projects increased this year, accounting for 12,631 MW of the 20,930 MW coming online due to projects on the 2013 Top 100. Of course, half of that 12,631 is thanks to a bump of refurbishments in British Columbia. (This inforgraphic shows all energy coming online in the 2013 Top 100.)
While some sectors are picking up, others are slowing down. Carl Bodimeade, senior VP at Hatch Mott MacDonald, said it seems that social infrastructure projects, such as hospitals, are less dominant this year compared to previous years. Last year’s report listed 18 hospitals; this year there are 10. “They seem to have been supplanted by energy and transportation projects,” said Bodimeade.
As CH2M HILL’s Peter Mallory pointed out, that’s a normal industry ebb and flow, modified as needs rise and fall in every sector over time. “It will vary significantly by sector. One sector will get caught up, and then the focus will be on a different sector,” he said.
There are, however, other factors that may contribute to a sector’s diminishing presence on the list. Hagen Materne, SNC-Lavalin’s VP of strategic development, said the dwindling number of social infrastructure projects on the list may be a product of shrinking project size. “I think a lot of the social infrastructure is going to head down in value.”
“There will be fewer of those big, billion-dollar projects on the whole,” said Materne. Those projects get difficult to manage over time, and Materne thinks governments are starting to break them down into more manageable pieces. “That draws the bigger highway infrastructure projects up on the list,” he said.
Mallory said the same slowdown is happening on big water and wastewater projects, especially in eastern Canada. Much like the health care sector, most big projects have now been built. Plants in Ontario’s Halton, Durham/York, and Ottawa regions were major undertakings, but work of that scale won’t be needed again for a while. “The big secondary wastewater operations are pretty well all done in Ontario,” said Mallory. “Where we’re seeing water show up is on the coasts.”
Mallory said the other factor temporarily slowing down water projects may be the rising popularity of public-private partnerships (P3s) as a delivery model. “P3 Canada is one of the only sources of funding for municipal infrastructure projects right now,” said Mallory. That means owners with little to no experience with this type of contracting are pursuing it to get at 25 per cent federal funding. “Municipalities that decide to pursue the model for the first time will have a major delay while they learn how to do it and go through the process including an up front business case analysis.”
P3s, smaller projects, and bundling
Materne said massive P3s may soon give way to smaller ones, which would also affect future lists. “Infrastructure Ontario is pushing municipalities, colleges, and universities [to pursue P3s]. They’re going to pull the project value for the P3s down to the $50-million range.”
Danny Giacomel, EllisDon’s VP of P3s, agrees. “The definition of a P3 will evolve over the next couple of years. The original model is going to be slowly modified to suit a more small-scale project.”
“We’ve seen some of the biggest projects in the world financed in the last few years,” said Charles Orolowitz, president of Delcan’s infrastructure business group (Canada and international). “Right now, Europe is going through hard times, and the United States may be in a recession next year. Is there going to be money to continue financing all of these projects? If not, the current trend of [developing] bigger projects may reverse to smaller projects.”
That may be true for P3s, but Mallory doesn’t think the Top 100 list—the total value of which has increased every year—will get smaller. “I think there’s lots of big infrastructure work that needs to be done and that will keep going.”
Some sectors are already making less of a mark on the list than others, simply because the majority of projects have always been too small to make the list. There are only five water/wastewater projects on this year’s list (see page 20), but it’s not for lack of investment in that sector. “A $700-million project for water or wastewater is a big project,” said Bodimeade. “There are no $2 billion or $7 billion [water] projects out there [in Canada].”
Some suggested that bundling, a trend has been a prediction more than a reality for several years now, could put smaller projects on the list. While there have been a few bundled projects on the list—case in point, the Alberta Schools P3 (number 33 on the 2010 Top 100)—it’s not yet common enough to make an impression on the list.
That may change. Mallory said the City of Toronto already favours managing several projects as one. With so much underground conveyance work to do, the City recently bundled approximately 40 projects—about $150-million worth of work—into one program. “One of the reasons they did it was to streamline the procurement process. Those 40 separate projects would have taken them ten years; whereas one program can take five.”
As it stands, these programs don’t qualify for the Top 100. However, if more of the traditional Top-100-style projects were delivered through one program—as one contract—that rule would change.
“I think provincial governments are on the cusp of releasing some pretty significant bundles of projects,” said Giacomel, “especially in central Canada, maybe even over the next year or so.”
According to Giacomel, part of the delay to achieve that type of bundling, at least the provincial level, is that provincial governments have yet to figure out how to navigate these projects. “How exactly do they bundle them, and how do they proceed with these types of projects?” he asked. The answers are not yet there.
As the organizers of the 2015 Pan Am Games in Ontario can attest, it’s no easy task delivering more than 20 projects that span multiple jurisdictions and involve several owners and proponents. While the Athletes’ Village in Toronto’s West Don Lands is being delivered as one bundle of projects (it doesn’t make the Top 100 list as so much of it is commercial development), there are related projects scattered across the province. While the aggregate total of the stadia, aquatic centres, velodrome and other associated infrastructure is $674 milion, because each project is being delivered through individual contracts to separate players, it’s not a true bundle—at least not for the purposes of the Top 100.
What does the report say about Canada?
Beyond what does and does not count as a single project for the purposes of the Top 100 report, the Pan Am projects bring up another issue. Organizers call it one of the biggest investments in sporting infrastructure in Canadian history. It represents, not just a significant investment in a certain sector, but a political and economic decision that the Province of Ontario made.
In this way, the lack of smaller projects also contributes to a partial misrepresentation of Canada’s priorities.
Bodimeade provided another example, this time in the water/wastewater sector. New federal regulations relating to wastewater will actually have the biggest impact on smaller municipalities and along the coast rather than large plants on the Great Lakes, he said. “It’s going to be a big capital investment, but it’s going to be spread across a number of small municipalities.” These upgrades represent environmental and political priorities, but they may not make future lists.
It’s not just size that knocks some projects off the list. In fact, some projects that don’t make the Top 100 are the biggest in Canada. Our research team decided back in 2006 not to include the oil and gas sector in the Top 100 report, partly because those projects don’t fit ReNew Canada’s definition of public works, but also because of their scale. These projects are so massive that they would dominate the Top 100, pushing projects from other sectors off the list, or at the very least out of the Top 20. Oil sands development expenditures for western Canada alone reached $45.3 billion in 2011.
The decision to exclude oil and gas and mining projects has meant other projects remain on the list. However, it has created a list that’s heavy on transit and energy. “If people didn’t know Canada and just looked at this list as a representation, they wouldn’t know we were a resource extraction, export commodity country. If you look at the country, we make most of our money exporting. Yet there’s no ‘Fort McMurray’ on this list. What you see is very urban; there’s a lot of urban mobility.”
Lew recognized that there is a heavy power contingent on the list, mitigating some of what he sees as gaps, but still very few of the ports or other gateway infrastructure that represent Canada’s role as a major exporter of natural resources. “The Eglinton Crosstown isn’t going to get potash to China,” he said.
Fundamental projects, such as a potential port for Iqaluit, Nunavut, while too small to make the Top 100, reflect the direction Canadian policy is taking. There’s a huge mineral play in the Nunavut area right now, one of several northern developments in the works. But that’s not represented on the Top 100.
The $800-million Canpotex Potash Terminal in Prince Rupert, British Columbia, did make the list (number 58), as did $650-million worth of development at the Prince Rupert Container Terminal (number 74).
But Lew says the two ports and minimal rail on the list are still dwarfed by other projects, for example, roads or transit.
Angela Iannuzziello, national transit market sector lead for AECOM in Canada, sees it slightly differently. She pointed out that while oil and gas pipelines and mines aren’t on the list themselves, the supporting infrastructure related to these operations are. Those supporting projects also say a lot about Canada’s political climate and the industry’s direction.
“Beyond resource development, there’s a whole other emphasis on social infrastructure and economic development around the communities that are located near [oil and gas] projects,” said Iannuzziello.
“We’re giving more and more prominence to those areas, and I think that’s the important piece, as opposed to just the strict pipeline.”
Mallory agreed that the projects in the oil and gas sector are so massive that there could be dozens of Top-100-scale projects associated with them. One such project, a potentially $2-billion, 49-kilometre arctic railway connecting to untapped mineral deposits in Baffin Island.
Canada in a global context
A country’s political climate goes a long way toward determining what the construction landscape looks like. And, while it’s true that the report doesn’t represent Canada as a country with a strong natural resource sector, it does show that we’re doing transit and transportation well—and that may be attractive to international readers. “Certainly in the transportation and the transit fields, our American clients are looking at the P3 projects that we’re delivering here in Canada,” said Iannuzziello. “A lot of those transit projects that are on this list are being looked at in terms of how we’re delivering them, how is it that we’re successful, how it is that we can address traditional concerns of political leaders—because that’s really where the biggest barrier is in the States, and outside the largest urban centres in Canada, to doing a lot more of these projects.”
In fact, Canada does megaprojects well in general, not only in the transit sector. In contrast, Materne says the United States is in dire need of water and highway infrastructure. “You’re talking about bankrupt municipalities needing water systems; they’re desperate for it, yet have no method to do it. Comparatively, Canada’s doing really well and is amazingly well organized.”
That said, the threat of European and U.S. recessions has some participants worried that there won’t be money available for the type of Top 100 megaprojects we’ve seen in the past.
But maybe, as Materne speculates, spiraling debt elsewhere will push bigger projects forward in Canada. It has already attracted foreign players. “It’s brought the Spanish, the Germans, and the English,” he said. Iannuzziello said difficult economic conditions elsewhere are pushing investment into Canada. “Some domestic companies that are investing overseas may come home and invest in some of our projects.”
Bodimeade agreed: “The slowdown in the United States has helped immeasurably, but also brought a lot of competition into our market in Canada.”
“It does bring the competition here,” said Materne, who wondered which companies are winning P3 contracts these days. “I’d love to see some stats on how they’re faring.”
Orolowitz isn’t worried about foreign bidders taking over the list. “I think you need both foreign and local companies. The foreign companies still need local contractors or consultants and vice versa. So it’s not going to become any harder for local companies to get involved in a P3 project like Montreal’s Champlain Bridge. But the positioning and role of local companies could be very different.”
“We’re talking about a globalization of the infrastructure market,” said Bodimeade. “The larger projects are attracting firms from around the world. And we can compete equally as well in their markets, too. We have an incredible capacity, and Canada is looked upon as a leader in the P3 market.”
Beyond just P3s, Canada is seen—for better or worse—as a country with a thriving construction industry, one with a promising pipeline of projects. “This list, for our country’s size, is spectacular,” said Materne. This year, we added 49 new projects to the list. That’s $63.6 billion worth of new construction across the energy, transit, transportation, buildings, airport, port, and water/wastewater sectors. And, while Materne said there’s no specific sector his company is watching, there are certainly major projects on the horizon. “The Ring of Fire and the development of the northern region of the province of Quebec are massive generators of highways, roads, bridges, et cetera. Those projects will start populating this list over the next 20 years,” he said.
Future lists may include smaller projects, or bundled projects delivered as one program, but one thing is certain, they will continue to include new projects in a variety of sectors.
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