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Lawrence National Centre for Policy and Management

Moving Canada’s Economic Infrastructure Forward

  • Jan 17, 2019
Moving Canada’s Economic Infrastructure Forward

The Centre's first infrastructure discussion paper examines the six macro risks to delivering the ambitious infrastructure agenda in Canada. 

Executive Summary

Building and renewing Canada’s public and private economic infrastructure has gained widespread support and significant fiscal and financial commitments, but the pace of actual investment and delivery continues to lag. Furthermore, the process for selecting, procuring, and building strategic transformational infrastructure seems to be plagued by delays, questionable decisions, and cost overruns. In the context of today’s infrastructure challenges and economic realities, it is imperative that government and business leaders support the right projects, at the right time, for the right price, with the right partners, and paid for by the right users.

Taking a risk-based approach and relying on carefully reasoned analysis, the Lawrence Centre has identified six categories of risk that must be addressed in order to meet the infrastructure requirements of Canada’s 21st-century economy. These six types of risks are just as important as any project-specific risks inherent in complex infrastructure initiatives, and as such, require decision-makers’ attention:

  • Political and regulatory risk relates to the political and regulatory processes that can potentially increase the project cost and unpredictability of infrastructure projects, causing concern for investors, construction firms, and others in the infrastructure supply chain. Stability in government decision-making and leadership, combined with a predictable regulatory framework, is of paramount importance in mitigating this risk.
  • Governance risk arises from the multiple public and private sector players involved in complex infrastructure projects. Competing priorities among levels of government and the lack of transparency about project-selection criteria among the various funding programs results in suboptimal project decisions. In the case of the private sector, failure to deliver on commitments presents enormous challenges.
  • Funding and financing risk relates to the source of funds during procurement and the optimal use of financial instruments. Governments need a more balanced approach to funding infrastructure from the tax base and through user-pay mechanisms. There are numerous approaches to financing, including public-private partnership (P3) models, which can transfer or share the risks related to cost escalation, delay, and revenue generation.
  • Industry capacity risk encompasses the timely availability of critical inputs such as construction firms, engineering and design firms, equipment and materials supply chains, project management capacity, and general labour supply. Depending on the scope and scale of projects, the demand for highly skilled labour may vary considerably.
  • Innovation and technology risk refers to risks associated with the adoption of new technologies and methods. These risks include leveraging emerging technologies, improving asset management practices, and incorporating innovative design and adaptability into new and existing infrastructure assets.
  • Environmental sustainability and climate change risk relates to the need for broader consideration of the impact of climate change on infrastructure assets and how to incorporate environmental sustainability through a design and building process that is “climate smart.” Achieving long-term resiliency of infrastructure in the face of climate change will become increasingly important.

Against this background, the Lawrence Centre hopes to engage a range of stakeholders to find ways to advance Canada’s economic infrastructure agenda. We hope this paper will stimulate discussion and generate innovative and practical ideas and advice on overcoming the six major risks to building the infrastructure that Canada’s economy and communities will need going forward.

Download the full document here.