Convention Centre Expansion in the "Range of $800 million"Access to Information

April 23, 2007

Convention Centre Expansion in the "Range of $800 million"

In addition to demanding the terms of reference for the secret investigation being conducted for the government by KPMG, the NDP held the government's feet to the fire during question period last week on the cost overrun for the Vancouver Convention Centre Expansion. They mocked Tourism Minister Stan Hagen for referring to the updated costs as being in the "range of $800 million", but that is the same phrase used in the budget documents tabled in February by Finance Minister Carole Taylor.

Hagen's weak defense of the more than $300 million cost overrun referred to rising construction costs and he attacked the NDP, claiming that they don't care about the jobs being created. Construction costs have gone up but there is no evidence that they have increased by over 60% in three years. The Campbell government's benefit projection for the 2010 games attributed over half the benefits to the construction of the Convention Centre Expansion. It is universally recognized that the project is needed; that is not the point. The question is how did the Campbell government mismanage it to the extent that it may soon be declared as the biggest cost overrun of any capital project in the history of the province (it already exceeds the cost overrun for the fast ferries). When writing about the ferries, in his 1999 report, former Auditor General George Morfitt said:

"Large capital projects have long been recognized to have significant inherent risks. They involve large sums and are challenging to manage, as they often are complex, involve new technologies, and require different skills than are used in normal business operations. Consequently, project management techniques for large capital projects have been the subject of considerable study, and principles have been developed to assist those responsible for such projects."

It will fall to a different Auditor General to report on how the Campbell government failed to properly manage one of the largest capital projects in the province, but a review of four years of denial and the government's failure to comply with legislative requirements for financial reporting on capital projects would be a good starting point in any study of what's gone wrong.

The 2003-2004 budget, tabled in the Legislature in February 2003, was the first that provided a cost estimate of the Vancouver Convention Centre Expansion. It noted that: "Funding of $67 million in 2003/04, $62 million in 2004/05 and $70 million in 2005/06 provides for the province's share of the construction costs." In the table of capital projects in excess of $50 million (a requirement of Section 8 of the Budget Transparency and Accountability Act), the 2003-2004 budget indicated that the total budget for the Convention Centre Expansion was $230 million.

The 2004-2005 budget commented on the Vancouver Convention Centre Expansion Project (VCCEP) when it said: "In December 2003, Tourism Vancouver confirmed its $90 million contribution to the VCCEP. The province and the federal government had each previously committed $202.5 million to the VCCEP, bringing total funding commitments to $495 million." The table on capital projects over $50 million continued to show the provincial share of the cost of VCCEP as $230 million.

The 2005-2006 budget was the first to report that the budget for VCCEP needed significant adjustment. It said:

"The VCCEP consists of an expansion to the existing Vancouver Convention and Exhibition Centre, as well as an upgrade and linkage to the existing facility. Total funding by the province to VCCEP will total $313 million by 2007/08:

$230 million to fully fund the province's commitment to the project,
including $7.5 million subject to matching funds from the federal government.
$83 million of Tourism Vancouver's $90 million funding commitment. The province is contributing these funds to the project, and will be reimbursed through Tourism Vancouver's own source revenues over time."

That looks like an attempt to stick to the $230 million figure while admitting the project was in trouble and additional funds would be advanced through Tourism Vancouver via the province. The shell game had started. The table on capital projects over $50 million continued to claim that the provincial share of the cost of VCCEP was $230 million.

The 2006-2007 budget finally admitted that the provincial contribution to VCCEP would be more than $230 when it said:

"The Vancouver Convention Centre Expansion Project (VCCEP) represents a significant investment in tourism for the province. The total budget for this project is $615 million. This includes expansion, upgrades of the existing Vancouver Convention and Exhibition Centre, and interconnection of the existing and new facilities. Funding for the project is from the province ($272.5 million), the federal government ($222.5 million), Tourism Vancouver ($90 million) and from upfront payments related to commercial agreements ($30 million). The provincial contribution may be reduced if more than $30 million is realized upfront from commercial arrangements."

Note the effort to cling to faint hope with the reference to realization from commercial arrangements. The table on capital projections over $50 million finally reported an increase in the provincial cost with the new total provincial budget figure of $273 million. That figure did not include $90 funded by the province through Tourism Vancouver with the expectation of eventual repayment.

The 2007-08 budget (this year's) acknowledged that there were big problems with the budget for VCCEP but it refused to quantify the extent of the problem. It said:

"The capital spending plan includes a capital contingency averaging 9.5 per cent of total taxpayer-supported capital spending. This contingency allowance provides protection against higher-than-expected construction price inflation. This is expected to absorb the potential additional cost of the Vancouver Convention Centre Expansion Project for which a revised project budget is being developed for review by government."

This year's budget documents went on to say:

"Preliminary estimates of an updated project cost are in the range of $800 million depending upon the contract model selected. The capital contingency has been increased since Budget 2006 to reflect this pressure. Subject to government approval of a revised budget for VCCEP, funding will be allocated from the capital contingencies to the project and reflected in subsequent quarterly reports and fiscal plans."

The table listing capital projects over $50 million showed a total provincial budget for VCCEP as only $281 million, but it at least included a footnote which said that: "Preliminary estimates of an updated project cost are in the range of $800 million depending upon the contract model selected."

The Campbell government promised to be the most open and transparent in Canada. It regularly violates the spirit of access to information legislation, and it also appears to violate provisions of the Budget Transparency and Accountability Act. The First Quarterly Report for fiscal year 2007-2008 isn't due until the end of September. There is a slim chance that is when the Campbell government will finally tell the public how big the budget over-run is for the Convention Centre Expansion, but you might not really find out until the Public Accounts come out in July 2009 for fiscal year 2008-2009. That date conveniently falls two months after the next election!