This text is part of the special section Municipalities
Between 2020 and 2022, municipalities in the province have faced a 26% increase in the cost of construction contracts through competitive bidding, according to a study by Aviseo Conseil, carried out on behalf of the Union des municipalities of Quebec (UMQ).
While inflation and supply issues stemming from the COVID-19 pandemic have, among other factors, contributed to this increase, the study The Impact of Rising Construction Prices on Quebec Municipalities reveals that the beginning of the increase dates back to 2016.
This observation was established following the analysis of public data from the electronic tendering system (SEAO), the consequences of which are felt on municipal budgets. Over the past year, 80% of municipalities have been forced to postpone projects, mainly due to the high cost of tenders.
The cost of rising
The mayor of Rimouski, Guy Caron, estimates that three-quarters of the proposals following the City’s calls for tenders are “far superior to the estimates that were initially made”.
His administration, for example, had to postpone the work required for the roof of the town hall, the bids greatly exceeding the budget and the forecasts of the town hall.
Although they spare no one, inflation and its consequences on construction costs are particularly hard on municipal budgets. “Our costs are rising [et] we do not have revenues that increase significantly, whereas the Government of Quebec and that of Canada, when there is inflation, [obtiennent] additional revenue that comes from sales tax, personal or corporate income tax,” he explains. The vast majority of municipal revenues come from property tax.
Without the postponement of projects and other measures put in place by the City of Rimouski to control costs, the mayor considers that it would have been necessary to resolve to increase property taxes from 10% to 11%.
In question
According to Jean-Pierre Lessard, partner and co-founder of Aviseo Conseil, the increase in construction costs is the result of multiple factors: the increase in competition, that of the price of raw materials, the scarcity of labor work or even a “somewhat constraining” lack of flexibility in contracts, which he attributes to the legacy of years of abuse, corruption and collusion in the Quebec municipal world.
He also underlines the role of provincial programs intended for municipal infrastructures, often thought of in the short term, “whereas if we had a vision, for the municipal sector, much more in the long term, with predictability, the municipalities could take the time to put together their files and spread their needs out over time,” he believes.
The “program effect” would therefore contribute to the increase in construction costs. An increase which could, moreover, have a positive effect: push municipalities to “have infrastructure plans over several years”, he argues, which would reduce costs in the long term.
Forecasts and recommendations
The good news for municipal budgets is that, “according to the information we currently have, the pressure should be a little less strong for 2023 and 2024,” says Jean-Pierre Lessard, who still invites elected officials to “stay alert”.
Indeed, while certain determining factors in the rise in construction costs are not likely to change any time soon, such as demographics or poor maintenance of certain infrastructures, procurement is easier than it was, and the price of materials is likely to stabilize, he believes.
While waiting for the upturn, municipalities can turn to the recommendations of the final report of the Aviseo Conseil study, one of them being to promote collaboration between municipal stakeholders and those from other levels of government. .
A collaboration that will be required during the negotiations of the next fiscal and financial pact, between the Ministry of Municipal Affairs and Housing, the UMQ, the Quebec Federation of Municipalities (FQM), the City of Montreal and the City of Quebec , which should take place in 2024. On the menu of the negotiations, “the stakes around the increase in construction costs will be very important”, foresees Guy Caron.
This special content was produced by the Special Publications team of the Duty, relating to marketing. The drafting of Duty did not take part.