When the federal government first announced it was doubling down on infrastructure spending in the 2016 Budget - $60 billion in additional funds over 10 years for the construction of new transport and energy systems - one could feel an increase optimismfrom Canada’s construction sector. After all, more money for infrastructure spending should translate into more available contracts for everyone to bid on and create more employment opportunities in the sector, right?
Well, so far this appears to be true - at least as far as overall employment numbers in the sector go. According to Statistics Canada’s Labour Force Survey, November 2017, employment in the construction sector was up 16,000, enjoying its second straight month of gains. But more importantly, that latest boost in employment brought the year-over-year gains in the sector to 50,000 jobs (or an increase of 3.6 per cent). Sounds like the feds’ plan to build employment through infrastructure investment is working, but it may have some issues. An additional $60 billion over 10 years is a lot of money to add to the funds already earmarked for projects, and that additional injection of cash may be creating a bottleneck for getting the funds where they need to go.
According to recent articles by various news outlets across the country, the federal government is experiencing delays in getting funding for infrastructure spending out the doors of the federal treasury, about $2.14 billion worth of delays. The articles are based on a report that states that of the $5.3 billion that Infrastructure Canada had planned to spend in its last fiscal year (ended on March 31, 2017), that approximately 40 per cent of those funds were not spent. According to an article by the Toronto Star, about $1.48 billion of the $2.14 billion that was not spent was earmarked for “various large-scale projects, representing about 90 per cent of what the government expected to spend on things like new transit and water systems.” The Liberals argue that they are managing the flow of money to projects (which, of course, is expected of them); while the opposition critics have argued that the frozen funds are symptoms of a larger problem related to the federal government’s long-term infrastructure program. To be fair to the feds, some project delays (and therefore, spending delays) are completely out of their control. Some of the projects they pegged for funding have been delayed due to labour issues and bad weather.
And since payment is often not released until projects are completed, the money has nowhere to go. And when projects are completed, the federal government sometimes requires receipts from cities and provinces before releasing funding, which creates additional delays. That said, it sounds like there may be a piece or two missing from the Liberals’ infrastructure program’s spending chain for getting the funding where it needs to go in an efficient manner.
With such a significant increase in funding earmarked for projects, perhaps more resources are required at various government levels to get all these receipts where they need to go? Whether its an increase in administrative staff at the municipal, provincial or federal levels, improved software programs for processing receipts, or an overhaul of the entire workflow processes for funding releases, the federal government may need to figure out quicker methods to get the money in the hands of the right people so it can hit its spending targets.
Despite the slower pace to the release of funds, the feds’ infrastructure plan does appear to be helping the construction sector’s employment levels move in the right direction. And if the employment levels are moving in the right direction, then contracts are being awarded. And if contracts are being awarded, then the equipment purchase orders and rental orders are being submitted.
Here’s to a prosperous 2018.
A bottleneck of infrastructure bucks?
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