46% of Saskatchewan highway contracts late last year
Some contractors delay highways work for 'business reasons'
It's a massive job keeping Saskatchewan's 26,000 kilometres of highway from crumbling and, as CBC's iTeam has learned, the government is having a difficult time keeping up.
Almost half of last year's highway contracts were completed late, according to government officials.
The Ministry of Highways awarded $387 million in construction and repair work in 2012-13. Of the 125 projects, 57 of them, or 46 per cent, did not finish on time.
The ministry says sometimes projects are late because contractors purposely defer government work in favour of more lucrative private work.
Deputy minister of Highways and Infrastructure Nithi Govindasamy says he is reviewing the late contracts to see what can be done to reduce them.
"It's a major concern of mine," Govindasamy said. "So it's a major priority of mine in terms of dealing with that situation."
The amount of work completed behind schedule has almost doubled over the past three years.
In 2010-11, 26 per cent of contracts were late. That number rose to 32 per cent in 2011-12, and to 46 per cent in 2012-13.
Bad roads lead to safety concerns
People in south eastern Saskatchewan say construction delays aren't merely inconvenient. They can also put people at risk.
“That's a real concern for us as well as just the safety of being able to travel in and out of the communities here," explains Ross MacDonald, a rancher who lives near Lake Alma.
MacDonald, who sits on the South Central District Planning Committee, says there's an urgency to get roads fixed in a timely way.
He points out that there's been a dramatic increase in heavy truck traffic on the roads because of the booming oil industry, often leading to large and dangerous potholes.
“The roads just weren’t designed for it, so they’re deteriorating a lot more quickly than any sort of repair effort,” he said.
Industry blames the weather
The association that represents highways contractors in Saskatchewan blames a string of unusually bad weather.
Shantel Lipp, president of the Saskatchewan Heavy Construction Association, says flooding during those years meant that a lot of scheduled highways work had to be postponed.
"What you're dealing with is more or less a ripple effect." Lipp said.
The government agrees that damage from recent flooding has diverted industry’s attention.
The ministry points out that in 2011-12 and 2012-13 it spent $70 million in emergency flood repairs, which forced companies to delay other highways ministry projects.
Contractors defer highways work for 'more lucrative' contracts: government
In an interview last November, highways assistant deputy minister Ted Stobbe told CBC that sometimes contractors delay government work for "more lucrative" opportunities.
"So they know what the penalties are, they know what the consequences are going to be, but they elect for business reasons to do something that extends our contract," he said.
Stobbe, who has since retired from the ministry, said this is inconvenient for the government and for taxpayers, but it's understandable from the contractor's perspective.
"There's no law that says that they can't take other work," Stobbe explains. "And they have to run their businesses in a fashion where they're going to make money, right? That’s why they're in business."
Still, the Ministry of Highways has recently changed the rules in an effort to discourage companies from taking this approach.
In 2012, after a review, it decided to increase the penalties, known as "liquidated damages" from a maximum of $1,100 per day to $2,000 per day.
"We do have to give it some time before coming to a judgment as to whether or not it's working," Govindersamy said. "It's still early in the game in my opinion."
Less than one per cent of the $387 million in contracts awarded in 2012-13 by the Ministry of Highways resulted in “liquidated damages” penalties so far, totalling $500,000.
Over half of the contracts were late during that time.
On average, 30 per cent of the $2.5 billion highway maintenance and construction contracts over the past eight years failed to be completed on time.
In that span, the ministry assessed $7.37 million in “liquidated damages” penalties, amounting to 0.3 per cent of the overall value in awarded contracts.
Government considering legislative changes
Govindasamy said his ministry needs to do more work before it can fully understand the problem.
Ministry officials currently have no way of tracking whether contracts are days or months behind schedule. The total value of a whole category of penalties classified as “site occupancy” cannot currently be calculated by the ministry.
Govindasamy is unable to say how often contractors are purposely late with government work while they pursue other business opportunities.
Saskatchewan considers tightening bidding rules
Govindasamy is weighing his options to improve the system, including looking at an approach used in Ontario.
It has a system of "prequalification" in place for contractors who want to bid on ministry work.
Those contractors have to demonstrate they have the capacity to take on the work within the deadline expected.
And if they have a history of being late, they could be barred from bidding.
Right now these sorts of rules may not be allowed in Saskatchewan because by law, the ministry has to pick the low bidder, regardless of their history or ability to get the work done.
Govindersamy is wondering if that can change.
"I'm asking the question whether or not this legislative requirement that was put in place several years ago is restricting the manner in which we do our business in this ministry."
Industry open to new rules
The Saskatchewan Heavy Construction Association acknowledges some contractors do delay government contracts because of more lucrative opportunities.
But Lipp says that is the exception.
"The ultimate goal is to get their projects done and get as much roadwork done as possible," Lipp explains.
"I think you'll see more often than not contractors are trying their best to honour the contracts and the completion dates than deferring a highways project to go work on another project."
She says the organization is open to the sorts of rules the province is considering but she says it should move carefully and thoughtfully.
"Saskatchewan's got a very short construction season and so there's got to be all kinds of things considered before a policy like that, I think, could be implemented."