It says something about how resigned we have become to inflation when A) $7 lettuce is seen as a bargain and B) a government construction project goes $559 million over budget and we barely shrug.
Almost ignored in the provincial government’s cheery financial update last week was word that the cost of the soon-to-be-built Cowichan District Hospital has soared from $887 million last year to $1.446 billion today.
To repeat: That’s a jump of $559 million, just over 60 per cent. Oh, and as the Vancouver Sun’s Vaughn Palmer reported, the target completion date is now in 2027, not 2026.
To put the increase in context, it is greater than the entire annual budgets of the ministries of environment, agriculture, labour and mental health and addictions combined. It would have paid for (speaking of blown budgets) five Johnson Street Bridges.
Even with the hole yet to be dug (excavation of the site isn’t expected to start until early January) the estimated $1.446 billion cost of replacing the existing, 55-year-old Duncan hospital with one in North Cowichan is now almost twice as much as the capital region’s $775 million sewage treatment project or the $789 million price tag on the proposed Royal ÎÚÑ»´«Ã½ Museum that a public backlash forced the New Democrats to abandon this spring.
In the past, this sort of overrun would have sent people off their nuts. Don’t forget that the Fast Ferry Fiasco of the 1990s, in which the construction cost of three problem-plagued vessels more than doubled to $460 million, played a big role in the NDP getting blown out of the water in the election of 2001.
In our new pandemic world, though? Out-of-the-blue calamities come at us like the winged monkeys from the Wizard of Oz, spending plans get washed away like a Coquihalla bridge and we just say “of course they did.” Then we fix the screen door to keep out the locusts that we’re pretty sure are coming next.
Last Friday, Finance Minister Selina Robinson spoke of “supply chain challenges and labour shortages” affecting all manner of capital projects in both the public and private sectors (though she didn’t bring up the union-only community benefits agreement covering this one).
Thursday, the Health Ministry elaborated. It attributes $488 million of the Cowichan hospital increase to “changes in market conditions and increased construction costs due to global inflation, labour shortages and ongoing global supply chain disruptions,” plus an 18 per cent increase in the size of the planned building “to ensure enough space is available for important health services and the safe flow of patients.”
Much of the rest of the new spending comes down to rising costs for furniture, medical equipment and the like.
Then the ministry said this: “The cost increases on this project are particularly acute due to the project timing, relative to increasing global costs.”
No kidding. It’s like pulling into the gas station with an empty tank just as they jack up the price. The obvious question becomes: Why is the province taking on capital projects now? Conventional wisdom says government should build its hospitals, schools and bridges when the construction industry is at the bottom of the roller coaster, not the top.
Deferring projects can come at a cost, though. Note that the McKenzie interchange that opened in 2019 was on the books as early as 1989 but got shelved in part by an NDP capital spending freeze in 1996. By 2000 the estimated cost of building the interchange had risen to $17 million. Work didn’t actually begin until after then-prime minister Stephen Harper, hunting for votes in the run-up to the 2015 election, committed $32.6 million of federal money to the project. By the time all was done the spending had hit $96 million.
Besides, nobody is talking about shelving the Cowichan hospital now, not this far into the process. The Health Ministry argues the facility is needed now. The population of the Cowichan Valley has doubled since the existing hospital was built in 1967. The new one — 201 beds compared to the current 134, twice as many ER spaces, more operating rooms — can’t come soon enough.
As for the cost, we’ll just have to eat it. Like $7 lettuce.
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