RC119 JulyAugust 2025 - Magazine - Page 42
CLOSING SHOT
RESOLVING INFRASTRUCTURE
COST OVERRUNS: A LOST DECADE
by Matti Siemiatycki
EARLY A DECADE AGO, the Institute on Municipal Finance and Governance (IMFG) published my paper, Cost Overruns on Infrastructure Projects: Patterns, Causes, and Cures. The paper was in
many ways a cri de cœur, written in the language of academia.
I have always been drawn to big, ambitious infrastructure
projects, not just their technological and engineering marvels,
but the way that, if done well, they form the basis for sustainability,
economic prosperity, social equity, and a high quality of life.
Yet megaprojects have an Achilles heel: they invariably go over budget and miss deadlines. This trend represents not only a colossal waste
of money, but it also erodes public trust in the power of governments
to solve complex challenges. In my beloved hometown of Toronto, I
have seen one big ambitious project after another go sideways. In 2015,
blown budgets in the redevelopment of Union Station and the Spadina
Subway extension to York University and Vaughan were capturing the
public’s attention.
To channel my own frustration at the situation, I drew on the
best scholarly evidence then available to explain how prevalent cost
overruns were, identify their root causes, and describe solutions used
in other countries to address the problem. The IMFG paper was an attempt to give Canadian leaders a playbook to understand and address
cost overruns in a serious and evidence-based way.
In the section on the patterns of cost overruns, I showed that Toronto and Ontario were far from alone in facing mega cost overruns
on megaprojects. It was a global problem, common to big projects in
all major infrastructure sectors. The causes I identi昀椀ed, based on the
literature, were a mix of technical di昀케culties, optimism biases, and
strategically misleading behaviour by politicians to advance preferred
projects. Individuals and organizations tend to overestimate their own
skill and the level of control they have over a project outcome while
downplaying risks. At the same time, there are many incentives for
politicians and 昀椀rms to deliberately underestimate project budgets to
gain public support, receive approvals, or win a contract, as projects
are rarely cancelled once construction begins.
In proposing solutions, I emphasized that the world was in the
midst of a data revolution in which enhanced performance monitoring
and predictive analytics could detect problems early on and help improve delivery. I was a few years too early for the arti昀椀cial intelligence
(AI) revolution, but the seeds were there. I also suggested creating
systems to reward good performance by contractors, enhancing public-sector management capabilities through the creation of leadership
training programs as done in the United Kingdom, applying state-ofthe-art forecasting techniques, and selectively using public-private
partnerships that were more limited in scope than those typical of the
time.
Fast forward nearly a decade. The more things change, the more
they remain the same. The projects under scrutiny may have changed,
but alas, the situation is largely the same. Today it is the Eglinton
Crosstown, Finch LRT, and Ottawa LRT that symbolize project de-
Matti Siemiatycki is a leading expert in
infrastructure planning and policy, and a Professor
of Geography and Planning and Director of the
Infrastructure Institute at the University of Toronto.
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RENEW CANADA – JULY/AUGUST 2025
livery mismanagement. And politicians and infrastructure executives
continue to express outrage at the fact that prominent megaprojects are
late and over budget.
Few of the tangible steps recommended in the IMFG paper 10 years
ago to reduce cost overruns have been meaningfully acted upon. There is
no systematic performance monitoring or information sharing across the
sector. No structured system has been created to reward good contractor
performance in procurement. Forecasting remains opaque and project
documents are sometimes released after, rather than before decisions are
announced. The U.K.-style training academy model for leaders of major
projects has been launched in Australia and Hong Kong, but not in Canada—yet. There is industry and academic interest in developing such an
academy in Toronto, so perhaps we shall see some progress in this area.
One change is that the fully bundled, design-build-昀椀nance-operate-maintain–style public-private partnerships so popular in the early
2010s have fallen out of favour. They are too expensive, and the risk
transfer mechanisms have not held up when stressed, leading to increased costs. In many cases it has been the private sector that has pulled
back from these 昀椀xed-price contracts for complex megaprojects, 昀椀nding
that the risks of major cost escalations were simply too great.
There is considerable industry uncertainty about what will come
next. Governments are increasingly unbundling contracts into smaller
pay-for-performance packages and using models such as progressive
design-build and alliances that use joint management and deep collaboration between the parties to share rather than transfer risk. Time will tell
whether these emerging models deliver better results.
Cost overruns continue to plague large infrastructure projects in
Canada. And Canada has been identi昀椀ed as a high-cost jurisdiction for
building infrastructure, just as we are seeing the biggest building boom
in a generation.
While procurement models are evolving, Canada has not adopted
other tools and techniques to improve infrastructure project delivery and
cost certainty. For Canadians, a key question endures—when will we
stop the charade of being upset with over-budget, late megaproject delivery, and take real steps towards reform? We can only hope that in another
10 or 20 years’ time, we are not still having the same conversation.
This article is published with the permission of the institute on municipal financ e and governance (IMFG).
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