Tardy bureaucrats causing First Nations' cost overruns, report finds

Indigenous and Northern Affairs Canada paid a consultant $134,000 to answer the question: Why are construction projects on First Nations reserves so frequently over budget? The answer: Look in a mirror.

Timely findings come as Liberal government plans to fix water problems, improve schools and health

Dean Beeby · CBC News · Posted: Sep 28, 2016 5:00 AM EDT | Last Updated: September 28, 2016

An internal report for Indigenous and Northern Affairs says cost overruns for construction projects on First Nations reserves can often be traced back to slow decision-making by bureaucrats. (Frank Gunn/Canadian Press)

Projects to build schools and other infrastructure for First Nations frequently go over budget because of approval delays by federal bureaucrats, says an internal study.

The conclusion suggests many capital projects for indigenous peoples have been doomed to red ink even before the first shovel hits the ground — and well before First Nations manage the actual construction.

The findings are particularly timely. Prime Minister Justin Trudeau has promised to end boil-water advisories on First Nations reserves within five years by investing $1.8 billion, starting this year. Another $270 million is promised over the same period for health infrastructure. The Liberals also earmarked $500 million over three years for First Nations schools.

The study, commissioned by Indigenous and Northern Affairs Canada, asked why so many of the capital projects it pays for wind up with significant cost overruns.

Orbis Risk Consulting examined a sample of 19 First Nation infrastructure projects chosen from a total of 315 that had been funded by taxpayers over the last five years, half of which were for water and sewer systems.

The analysis found at least 11 in the sample had gone over budget, some by as much as $14 million. The median cost increase was almost 10 per cent.

Prime Minister Justin Trudeau has promised several billion dollars in water-related infrastructure for First Nations reserves to end boil-water advisories within five years. (Adrees Latif/Reuters)

Some of the eight remaining projects were also likely over budget, but had been downsized to stay within the funding envelope, the report said.

Orbis concluded that "the cost increases largely occurred between the planning and execution stages," rather than after a contract had been signed with a builder. Contracted construction costs and final costs were usually about the same.

The problem, the consultants found, was that feasibility studies were often badly outdated by the time the department got around to approving projects, sometimes years later. And delays in funding approval meant that existing infrastructure on reserves deteriorated, further raising costs.

Late approvals

"When delays of three or more years are experienced, factors including inflation, deterioration of existing infrastructure and engineering/project fees are likely to contribute to increased costs."

In some cases, First Nations only got a green light for projects part way through the construction season.

"Communities often hire inexperienced contractors at a higher cost because approvals are granted in late spring," the authors wrote. "The inability to re-profile funding to the next fiscal year also forces communities to pay more for winter and overtime work."

More decision making is now kept at the regional level …- Spokeswoman for Indigenous and Northern Affairs

The department's "internal approval processes contributed to delays that raised costs," says a December 2015 summary of the study.

CBC News obtained a copy of the $134,000 study under the Access to Information Act, with some detailed financial information blacked out. Nine of the projects in the sample were related to drinking water, waste-water and dams, while most of the rest were for schools, bridges and roads.

The research was ordered under the Conservative government last year, though final results arrived after the Oct. 19 election of the Liberal government, which has promised massive infrastructure spending on First Nations reserves, especially for waterworks.

Changes planned

The Orbis report also said small First Nations communities often don't have the experience to effectively oversee construction contracts, and recommends the department teach management skills on reserves — though it warns that "this approach takes time and is complex."

A spokeswoman for Indigenous and Northern Affairs Canada says the department is changing the way it approves projects in light of the Orbis report.

A fire that broke out in a set of emergency shelter trailers on the eastern edge of northern Ontario's Attawapiskat First Nation forced 70 people out of their homes. Crumbling and damaged infrastructure affects many First Nations — and federal building projects often go over-budget. (Courtesy NetNewsledger.com/Rosie Woman)

"In response, INAC has streamlined its project approval processes," said Valerie Hache. "More decision-making is now kept at the regional level to allow better responsiveness to the needs of First Nations."

Hache said that as of July 15 this year, $263 million has been allocated for 177 water and waste water capital projects. Twenty-six of those are to end boil-water advisories.

Chief Kevin Hart, a spokesman on infrastructure spending for the Assembly of First Nations, wasn't available for comment.

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