The very rapid increase in infrastructure spending is contributing significantly to the overheating observed in the construction industry in Quebec.
Hours worked in the non-residential sector thus increased even more rapidly than in residential construction. These pressures on the labor force combined with the significant increases in the price of materials therefore translate into strong inflation in the cost of the work. In 1975, the report of the Cliche commission1 had already highlighted the need to align the volume of infrastructure work with industry capacity. It is high time to remember that.
During the pandemic, much was said about the effervescence in residential renovation, which data from the Commission de la construction du Québec (CCQ) confirms with 15 million hours worked in 2021 more than in 2015 in the residential. It is less well known that hours worked in the non-residential sector increased by 40 million hours during the same period, more than double the increase in the residential sector.
This is largely the result of the doubling of annual investments in the Quebec Infrastructure Plan (PQI) between 2016 and 2022. In addition, the government has committed to adding another $7.5 billion over 10 years to the PQI budget.
Unsurprisingly, the increase in hours worked in construction has been accompanied by worsening labor shortages. The pandemic and the war in Ukraine have also weakened supply chains in the global economy, leading to intermittent reductions in the supply of various products.
The result: significant price increases since January 2020 for several building materials, including 19.1% more for concrete, 79.3% more for steel, 88.3% more for copper – according to October 2022 data from the Société québécoise des infrastructures.
Quebec must remember
This is not the first time that Quebec has experienced galloping inflation in the construction industry. In the early 1970s, the Government of Quebec launched the construction of the large James Bay hydroelectric complex and the City of Montreal obtained the hosting of the 1976 Olympic Games, while other major works, including the extension metro, are already in motion.
Thereafter, the costs exploded and labor relations in the industry degenerated until the ransacking of the facilities in Baie-James. The Cliche commission was then set up to investigate the exercise of freedom of association on construction sites. Recommendations addressed to the government specifically aim to improve work planning and coordination between work providers.
Here is an excerpt from the 1975 report of the Cliche Commission: “Chapter 16 on manpower policy: The Commission recommends 1. That the Treasury Board and the Office of Planning and Development of Quebec (OPDQ) coordinate the planning of the government’s construction work as the client by anticipating the time for construction, taking into account the availability of labour; 2. That government departments and agencies plan their construction work for five years; 3. That the municipalities of large agglomerations, such as Montreal, Quebec, Trois-Rivières, Sherbrooke, Chicoutimi and Sept-Îles be required to communicate to the government the five-year plan for their construction work; 4. That the Government of Quebec reserves, by law, the power to delay or modify the work schedule referred to in recommendations 2 and 3; 5. …; 6. …; »
The Quebec public sector in the broad sense is still today the largest work provider in the non-residential construction sector.
As before, the construction industry is struggling to keep up with demand. It has the challenge of finding labor and has no control over the inflation of material prices. The various government and municipal announcements are increasing the pressure on the industry’s limited resources. Today, there is still no formal mechanism in place to prevent the Quebec state, municipalities and Hydro-Quebec from engaging in inflationary competition.
It is urgent that the government remember the messages of the Cliche commission. He must quickly draw up a detailed portrait of the major works planned by all the public contractors over a period of at least five years. The current cost explosion shows that the government will probably have to delay the schedule of certain projects so that the overall volume of infrastructure work matches the capacity of the construction industry. Faced with these choices, the government will have to give even greater priority to rehabilitation projects for existing infrastructures rather than new constructions.