Ahead of Technomic's April 16 webinar, Managing Cost and Risk on Multibillion-Dollar Projects, Peter Weltman, Director of Business Development, sat down with CCPPP to preview how Technomics equips stakeholders with actionable insights into the cost, schedule and risks of infrastructure projects that go beyond traditional bottom-up risk-management approaches. This interview has been edited for length.
What are some of the risk factors facing Canadian public infrastructure projects in 2025?
In my opinion, the first key risk is "social licence." We know that well-designed, thoughtfully planned infrastructure is necessary for growing Canada's economy. However, we haven't maintained an adequate pace of infrastructure investment for a long time. For example, housing development has not kept pace with population growth and immigration policy, and now we are trying to catch up.
This means many projects are happening at once, which is increasing complexity and risk and leading to cost and schedule overruns. We can't keep operating like that and expect the taxpaying public to continue supporting these critical projects. We need to improve our ability to accurately cost and efficiently deliver public infrastructure.
The second key risk, which is linked, is the changing nature of our trading relationship with the United States. Not only will we see an impact on the supply chain, but we will also have to think about reorienting our trade relationships and building the necessary infrastructure to do so. Ironically, this trade threat might give us more "social licence" than before.
What's the danger of utilizing traditional budget forecasting methods for large-scale infrastructure projects in this current economic moment?
Ask any cabinet minister who sits on the Treasury Board: they'll tell you they're fed up with projects repeatedly coming back to the board for more money due to unforeseen risks because they impact the government's ability to meet other fiscal commitments.
The traditional ways of forecasting cost and schedule using bottoms-up methodologies are helpful at later stages of projects but are insufficient at the concept stage. Doing a bottom-up costing at the concept stage and then adding a traditional risk factor doesn't work when you're building anything other than standard projects in standard locations. They don't adequately capture the risk experience from previous projects.
Project risk is assumed away, but there is little to no visibility on the risks' details, the risks' costs at various confidence intervals, and the appropriate sharing of the different risks between owner and vendor.
How does Technomics approach this analysis differently?
Technomics uses a parametric approach, which means building a cost estimate using data from previous similar projects and applying that comparative analysis to each part of the project to ensure a reasonable cost and accurate risk assessment. It's a rigorous, data-driven process developed over our decades of advising clients, mainly governments but also vendors, on project cost and risk.
The beauty of this approach is that it incorporates realized risks from previous projects and doesn't assume them away in a contingency factor. This provides the client with real insight into the details of the significant risks. We use statistical techniques to build cost-estimating relationships that identify the significance of the risks relative to the cost of the overall project.
This way, clients can spend time mitigating those key risks. For example, a minister at the Treasury Board meeting will be able to understand which risks are most costly and which ones they may be asked to revisit if a suitable mitigation strategy isn't achievable. They will also know how much needs to be set aside in the fiscal framework to accommodate the risk-sharing strategy so that they aren't surprised when the project team comes. Just as important, ministers don't want to tie up more of the fiscal framework than they absolutely need, so you don't want to "overbudget" either. Our analysis helps them make those trade-offs.
What questions should a project team consider to identify whether there are gaps in their decision-making processes or unidentified risks in project agreements?
Teams need to know what will "bite them" and why, hopefully well in advance. Teams also need to know and test the feasibility of the solutions being proposed by the vendor, the quantification of those risks, and the appropriate risk-sharing methodology.
