Do We Have the Ear of the Government? Unlikely.

by | Oct 19, 2016 | Economics

I’d like to claim that after we wrote about the need for an infrastructure bank in Canada last week, Dominic Barton consulted with us to come up with a “blueprint for Canada’s economic future”[1] and that he took our recommendation to build “a national arm’s-length infrastructure bank.”[2] But he didn’t. Maybe he reads our blog and was convinced by our arguments. But I doubt it. Perhaps Prime Minister Trudeau was spooked that we had called the Liberals out for not delivering on their election promise. Now that’s likely.

In the news today – a proposal for an infrastructure bank for Canada.  In the blog last week – An Infrastructure Bank for Canada.

We were delighted when we learned today from Globe and Mail that Mr. Morneau and his advisory council are “looking at a more ambitious plan in which the bank would gather and prioritize large projects that could earn revenue, such as electrical networks, and that attract billions in added international investment.”[3]

“The infrastructure bank, seeded by federal money, would co-ordinate the building of large-scale projects such as electrical grids, highways, ports and transit systems, with a goal of tapping $4 from private financiers for every $1 from Ottawa, sources said.”[4]

I see a real opportunity for Canada to allocate scarce infrastructure funds more efficiently. Forget about the private financing angle – as we said last week – Canada needs an infrastructure bank not necessarily to give more, or cheaper, funds to provinces and municipal infrastructure owners/proposers but because we need to ensure the highest priority projects are built right. We need the infrastructure bank to bring an objective process that monetizes all of the costs and benefits of proposed projects. So, we think that the infrastructure bank should first be a centre of excellence for supporting rigorous project evaluation. Second it can develop and use procurement best practices.

If the focus is on standardization of the cost-benefit analysis used for project selection and design evaluation there is the possibility that smaller projects could be included too. We are partners in the Canadian Impact Infrastructure Exchange (CIIX) and believe strongly that it is smaller projects that would benefit most from the standardization an national infrastructure bank could bring.

We’ll hear more about the infrastructure bank in the next news cycle but I predict the focus will be on procurement rather than the role the bank will have in the project selection process. I predict that procurement will be in the news because people do get excited by the mention of public private procurement (PPP), some positively – promising the moon, some negatively – predicting that that the sky will fall.

If I am right and the focus is financing that will be a shame as efficient financing of a bridge to nowhere is not going to help Canada. Efficient financing of the wrong project or the right project done wrong is not what we need. We need to get the project right – making decisions about which project to fund, and doing the project right – making decisions about the best design for the project.

[1] “Advisory group offers economic prescription”, The Globe and Mail Metro (Ontario Edition), 19 Oct 2016, Sean Silcoff and Bill Curry

[2] Ibid.

[3] Ibid.

[4] Ibid.


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