The update to the Quebec Infrastructure Plan (PQI) last March shows another significant increase in the infrastructure asset maintenance deficit (AMD). This issue continues to preoccupy the Public Policy Committee (PPC) of the Association of Quebec Economists (ASDEQ).
Public infrastructures in good condition – transportation networks, schools and hospitals – contribute to Québec’s economic performance and to the Québec government’s ability to deliver the services promised to the population.
Understanding AMD
The AMD represents the value of the work required immediately to restore public infrastructure to acceptable condition. The AMD is a dynamic measurement: the work carried out in a year to reduce it reduces it, but the wear and tear of time and the deterioration identified by new inspections increase it. Despite significant increases in the budget allocated to the PQI in recent years, the AMD has doubled, from $17.6 billion in 2017 to nearly $35 billion in 2023.
Two simple facts explain this paradoxical situation. First, the amounts allocated to maintaining existing assets were insufficient in 2017, and have been for several years.
In addition, from 2017 to 2022, the government’s budgetary choices have prioritized the construction of new infrastructure rather than the upgrading of existing infrastructure.
As the table below shows, the amounts allocated to adding infrastructure grew four times faster between 2017 and 2022 (121%) than those allocated to maintaining existing assets (30%).
INFOGRAPHIC THE PRESS
Spread your fingers on the table to view it in full screen mode.
Inflation in construction costs is catching up with us
The increase in infrastructure budgets has had a direct impact on the construction industry. The much greater number of calls for tenders has led not only to a significant increase in hours worked, but also to pressure on contractors, architects and engineers. Unsurprisingly, cost inflation in the industry has accelerated.
The Société québécoise des infrastructures (SQI) observed that inflation in the construction costs of institutional buildings exceeded general inflation by more than 2% annually between 2017 and 2021.
This inflation gap has increased sharply in 2022. The cost overruns for the renovations of the Maisonneuve-Rosemont hospital and the repair of the Louis-Hippolyte-La Fontaine bridge-tunnel are just spectacular examples.
INFOGRAPHIC THE PRESS
Spread your fingers on the table to view it in full screen mode.
This inflation shows that the demand for jobs has now reached and even exceeded the capacity of the industry. This problem cannot be solved by budget increases which would only amplify inflation in the industry. This inflation also has a direct impact on the AMD by increasing the cost of work needed to restore existing infrastructure. It also makes it more expensive for businesses to invest in their facilities to improve our competitiveness.
The government now seems concerned about this situation. Until recently, the SQI predicted an annual increase in construction costs of 5% by 2027. The Quebec Ministry of Finance, now responsible for these forecasts, hopes to see construction inflation fall back to 2% from by 2024 like general inflation. No expected change in supply and demand for construction work has been cited to justify these new forecasts.
Urgency to correct the shot
The government has allocated most of the new investments in the 2023-2033 QIP to asset maintenance. This step in the right direction will be insufficient to stop the growth of AMD. There is an urgent need to delay projects for new infrastructure, and reallocate the sums saved to the rehabilitation of existing assets.
Given this situation, and as the CPP had already recommended, all projects for new infrastructure should also be subject to rigorous cost-benefit analyzes to determine whether the need justifies the proposed solution, and to find the appropriate solutions. less expensive replacements. As the CPP has already indicated, this recommendation should obviously apply to the third link project in Quebec. The CPP can only note once again the absence of such studies for the new version of this project made public recently by the government.
As summer approaches, many will choose to travel to Quebec. We will thus have the opportunity to see with our own eyes why the road network accounts for approximately 60% of the overall AMD of infrastructures in Quebec. Have a nice summer anyway!