1 Reply Latest reply: Mar 6, 2015 9:12 AM by pbrean@crystalus.ca RSS

    Can we put together a picture of how large infrastructure project costs compare across countries?

    C4D Enthusiast
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      Here is a Bloomberg piece I came across that refers to the rather fantastic escalation of costs for large infrastructure in the US, implying that cosy-relations between designers and contractors and limitations on what public agencies can do to contain costs, paired with a judicial system that favors the private contractor, leaves the higher costs to be borne by tax payers.  A classic principal agent problem that has spun out of control, it would seem.  It suggests that countries with a common legal tradition, such the UK, the US and India, are particularly prone to this problem.  Interesting reference to Spain as a better performer in this regard.

       

      http://www.bloomberg.com/news/articles/2012-08-26/u-s-taxpayers-are-gouged-on-mass-transit-costs

        • Re: Can we put together a picture of how large infrastructure project costs compare across countries?
          pbrean@crystalus.ca C4D Enthusiast

          This is an interesting and topical issue, particularly given the impetus to engage private sector capital, resources, and expertise to help close the infrastructure funding gaps in developed and developing countries alike. Canada has a strong track record -- both at home and internationally -- in the P3 infrastructure space, with project partnering at the federal, provincial, and municipal levels of government.  Nevertheless cost issues persist.

           

          For a Canadian perspective on the matter, please see:

          www.auditor.on.ca/en/reports_en/en14/305en14.pdf

           

          The main issue in the public audit report in Ontario (the largest market for infrastructure in Canada) is not regarding cost overruns, but rather the higher borrowing/capital costs incurred by P3 projects versus government funding.  The audit concludes that these higher P3 borrowing costs are significant.

           

          In considering P3s in developing countries, the cost differential will likely be much less, given the relatively higher borrowing costs of local government, and especially if the P3 is funded via public bonds and suitably back-stopped/secured.