Yukon’s capital costs are out of control

The Sept. 13 edition of the News described Jesse Winter's difficulties in trying to determine, over a six-month period, how well the Government of Yukon spends money on capital projects. From what I know about building construction project

COMMENTARY

By Charles McLean

The Sept. 13 edition of the News described Jesse Winter’s difficulties in trying to determine, over a six-month period, how well the Government of Yukon spends money on capital projects. From what I know about building construction projects, the short answer is poorly. This has held true for all political stripes, so the parties shouldn’t be pointing fingers at each other.

This is largely why I haven’t bid directly on Yukon government design contracts for about six years – few people in government care about cost effectiveness, running a project well, or getting a good result. They routinely exceed the original budget by significant amounts.

I just couldn’t take the absence of care on the part of the government anymore. Essentially, the territory fails to give direction, watch over the project and say no when it should.

The fact that the government wouldn’t provide simple, detailed and definitive numbers kind of speaks for itself, doesn’t it? Instead, you got the run-around.

You wrote that they told you part of the difficulty in providing answers was the government “often doesn’t know what it will have to spend.” Oh, please. Every project that comes out for design has a construction budget associated with it. Before you go shopping, you should know if you’re looking at Chevs and Fords, or Mercedes.

I’d guess that there may be some deliberate obfuscation going on, so the situation doesn’t look as bad as it is. Your article stated that the territory claims 75 per cent of building projects were within budget. Maybe that’s the escalated, “we didn’t want to spend that much,” budget.

Let’s give an example. You were given a contract value for the Tantalus School of $11.1 million and a completion cost of $11.5 million. That sounds pretty good, unless you know that the original budget in the design request for proposal was $7 million. A whopping 65 per cent overrun paints a different picture, doesn’t it?

I don’t have figures handy for all the projects you list, but surely somebody in government should realize that curving glass walls, curved hardwood radiator covers, unique roof shapes and other features all add up.

The territory’s initial design budgets have often been reasonable – it’s the lack of management at later stages where it goes awry. There can be some valid reasons for cost escalation, but if the scope of the project is accurately defined, the site investigated, all those good things done … well, you should end up close to where you started.

Let me give you an inside look at how costs grow. First, a reasonable budget is established for construction. Then design starts, nobody pays sufficient attention to good value, and the cost swells. Rather than make a course correction, the budget grows. By tender, the budget may have been revised a couple times and is now “the new black.”

The tender comes in over budget for a variety of reasons that I’m not going to discuss here, and the accepted bid becomes “the new black 2.0.” By the end of construction, the cost has continued to grow, and the final number often becomes “the new black 3.0,” and is the budget of record. Then you can say that you were within budget.

I sure wish my personal budgeting could work like this. Of course, it’s not my money that’s being wasted … oh, wait, it is.

We’re a rich little place, a lot of people work for government, and nobody cares enough. If they did, the politicians would have to crack down on the bureaucrats who are largely responsible for this situation.

Instead, the politicians don’t know enough about how this works to control costs, and they believe what briefing notes tell them. In fact, many bureaucrats shouldn’t be called project managers, but briefing note writers, as they mostly process a project, not manage it.

There’s some fallout from this mess. First Nations, in learning how to manage projects, look to the Yukon government for an example. Some First Nations assume that a project is supposed to come in about 30 per cent over budget. That’s a bit sad, and it’s unnecessary.

That’s a generalization, of course. We recently finished the Champagne and Aishihik First Nations’ Da Ku Cultural Centre. The initial design budget about five years ago was $12 million. It tendered under budget, and even after adding 20 feet to the assembly hall during construction and some other changes, finished at $12.7 million. That’s how it’s supposed to be done, and I’m pleased that our team of designers and the First Nation personnel were able to accomplish this. Everybody was paying attention.

What is the Yukon government doing to make it all better? It’s adding more layers of management, rather than fix what they have. The new trend is for the territorial manager to manage a private sector manager, who then is supposed to manage the job. Confusing? Yes. Effective? Doubtful. Costs more? Sure. Design/build is another way of passing the work and responsibility to somebody else.

Maybe we should start thinking about what could be bought with this wasted money. Lots of hospital equipment might be a start. Or how about giving us the equivalent of the Alaska oil cheque, and pass out a couple thousand bucks to everybody every year? That’s a lot more democratic than allowing a lucky few to tap into the waste stream.

Charles McLaren is an architect who lives in Whitehorse.