2009 Legislative Session: Fifth Session, 38th Parliament
HANSARD

The following electronic version is for informational purposes only.

The printed version remains the official version.

official report of

Debates of the Legislative Assembly

(hansard)

Tuesday, March 3, 2009

Morning Sitting

Volume 39, Number 3

[ Page 14133 ]

TUESDAY, MARCH 3, 2009

The House met at 10:03 a.m.

[Mr. Speaker in the chair.]

Prayers.

Introductions by Members

S. Fraser: Today we have visiting from Port Alberni Steve Brown's grade 5 class from Maquinna Elementary School. The students told me this morning that they had to get up at six or 6:30. They had the long trip from Port Alberni all the way here for a nine o'clock tour, which I escorted them on and learned from.

I was very impressed with Mr. Brown's class. They're very intuitive. They're quick on their feet. They answer questions very well, and they're so polite today. So would you all please join me in making them feel very, very welcome.

Introduction and First Reading of Bills

First Nations Heritage Protection
and Conservation Act, 2009

M. Karagianis presented a bill intituled First Nations Heritage Protection and Conservation Act, 2009.

M. Karagianis: I wish to move a bill intituled First Nations Heritage Protection and Conservation Act, 2009, and ask it be introduced for a first time.

Motion approved.

M. Karagianis: I'm honoured today to present the First Nations Heritage Protection and Conservation Act. This bill will better protect first nations heritage objects and sacred sites.

[1005]

The bill amends the Heritage Conservation Act to include a process by which first nations can trigger protective orders when heritage sites, objects or remains are discovered. I believe that the bill amends the heritage act to provide a better set of guidelines and tools for first nations, local government and the province in order to implement protection, stewardship and conservation of first nations heritage and culturally significant areas, their artifacts and their sacred history and, as well, to provide for the creation of a program to accomplish that goal.

I would ask that all members please review the bill, and I hope that they will support it. I move that this bill be placed on the orders of the day for second reading at the next sitting of the House after today.

Bill M201, First Nations Heritage Protection and Conservation Act, 2009, introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

Orders of the Day

Hon. M. de Jong: I call Committee of Supply — for the information of members, continued debate on the supplementary estimates, Transportation.

Committee of Supply

SUPPLEMENTARY ESTIMATES:
MINISTRY OF TRANSPORTATION
AND INFRASTRUCTURE

(continued)

The House in Committee of Supply; H. Bloy in the chair.

The committee met at 10:08 a.m.

On Vote 43(S): ministry operations, $20,000,000 (continued).

M. Karagianis: Yesterday we left off with the minister and me discussing the shift from twinning of the Port Mann to its current iteration and what impact that has on this $100 million acquisition to go into the Transportation Investment Corporation. The minister yesterday continued to, I guess, try and divert the conversation away from this issue of twinning.

I do think this is an important part of the discussion here on this supplemental. I know, from rereading the minister's comments, that he continued to say that the twinning in fact was never a real plan, that this wasn't a requirement of the bidding process and that even the act itself that created the new Transportation Investment Corporation, which was called the Port Mann twinning act, had nothing to do with twinning the bridge.

I would like to just refresh the minister's memory on the number of debates we've had here in the House about the twinning and the minister's very passionate assertion that the bridge would be twinned and, in fact, that the whole premise of the privatization scheme that was being put together was about twinning. We canvassed this, the minister and I, in estimates debate, where the minister repeatedly said that the government was going to twin the Port Mann Bridge.

[1010]

One particular piece of the debate which I think is important is that on April 2 the minister said:

"The centre of the project — so you now move across to the Fraser River — is the twinning of the Port Mann Bridge and the widening of Highway 1 from Vancouver all the way…to 216th Street in Langley. That's affectionately known as the twinning of the Port Mann Bridge.
[ Page 14134 ]

"This portion of the project is now in the procurement stage…..

"They are going through a competitive procurement process. That process should be wrapped up sometime in the fall, at which point we will have an identified concessionaire to operate the new twin Port Mann Bridge and oversee the construction maintenance operation of that project over the next many, many years…..

"What we have now is to make sure in the design and construction of the twinning of the Port Mann Bridge, that we do it with all of the elements that are called for under the LRSP."

So it seems to me that the creation of the Transportation Investment Corporation in which this $100 million is going to be placed ties directly to the minister's assertion last spring that the procurement process was based on twinning.

I know that the minister has now said that, in fact, the process has been driven by the privatization consortium that came forward. They came forward with another idea. In fact, I think at one point there was some discussion on whether or not more than one of the concessionaires had presented this. I think the minister said yesterday that, in this case, two of the concession groups came forward with the idea of a single bridge.

I need to ask the minister: if, in the spring, the procurement stage of this process was for a twinned project, where, in fact, did the government switch tracks and move to this? That appears to be at the bequest of the concession groups themselves that we would move to this larger project. I want to clarify this because it's important. There is more at stake here than this initial hundred million. As always, we're looking at how we effectively, efficiently spend taxpayers' dollars and how we're accountable to them for that.

In fact, is the minister saying that his claims about all of this twinning are wrong? That he didn't know, and in fact, that this is a surprise and that the minister had no idea that this was going to be the end result of this — a new and bigger and larger and more expensive project?

Hon. K. Falcon: I don't know how the member is continuing to have difficulty understanding something that is so fundamentally basic. The fact of the matter is that what we do when we enter into one of our procurement processes, particularly through the private-public partnership arrangements, is that we set out the basic standards that the province is looking to achieve.

So we say: "Here's what we're looking to achieve. Here is the number of lanes that we want. Here is the traffic that we anticipate will need to be dealt with in the future. Here is the electronic toll you're able to charge, and here's the term with which you're able to charge it." Within that framework we are expecting the bidding groups to come back with the best possible suggestion on how to deal with that.

Now, one of the ways that we do that is by allowing the innovations and the expertise that these folks have…. Having done business not just in British Columbia but, indeed, throughout North America and around the world, they have probably come across every possible manner of challenges — engineering, financial and otherwise — in different parts of the world. They bring that expertise to British Columbia.

It was an assumption by our ministry that the likely answer, by the expertise in our ministry, would probably be a twinned bridge. That just seemed logical to us. You could say that that might likely be how government would have proceeded had government been doing this on its own.

But, fortunately, we have learned over the years that the very innovation that the private sector brings to the table can achieve enormous benefits for the public. We have seen that under project after project after project.

[1015]

I'll give the member some examples. On the Sea to Sky Highway, the innovations that were brought forward on the Sea to Sky Highway P3 were extraordinary. The Auditor General confirmed in the value-for-money report that there were $133 million of additional benefits that were realized by the taxpayers as a result of going through that competitive process and, ultimately, coming forward with that very successful P3, which, by the way, will be opening well ahead of schedule and on budget.

We also saw that on the Kicking Horse Canyon. You know, the member only needs to turn to her colleague, the member for Columbia River–Revelstoke, to know what a tremendous success we have seen on the Kicking Horse Canyon. Now, I know the member would probably refer to that, as she always does, as a privatized deal — never quite understood what the member is talking about when she rattles out that nonsense. But the fact of the matter is that it is a project delivered 18 months ahead of schedule and on budget.

In fact, on the Kicking Horse, if the member looks at the Five Mile Bridge, she will see another perfect example of where the government assumed that there would actually be two bridges required for that section of work. But the innovation of the private sector coming forward through the competitive process actually determined how you could do it with a single bridge and avoid the environmental impact on an island that would have been utilized to make two bridges.

Again, we had the innovation. We had the cost savings, and we had these international firms that looked at this situation and were able to bring forward a plan that made a heck of a lot more sense.

So now we telescope our way forward to the Port Mann Bridge. We had a situation where government made an assumption that you would twin the bridge. In fact, I think everyone out there made that logical assumption that that's what would likely take place. But once again, we found that through the competitive process, the private sector came forward. They took a look at it, and here's what they said. "Well, we have a bridge here
[ Page 14135 ]
that we would be responsible for looking after for the next 35 years."

That bridge, by the end of the construction period, will be 50 years old. So that means that by the end of the concession term, that bridge will be over 80 years old, and that will be much older than the Pattullo Bridge. We know what problems the Pattullo Bridge is causing TransLink as an aged bridge that requires replacement. At some point, the dollars you are going to have to put into that old bridge to maintain it and rehabilitate it are going to be very expensive — in the order of about $200 million during that period of time.

But here's the other thing. We would then get that bridge returned to us at the end of the concession period, and we would likely have to replace it. It would now be an 85-year-old bridge. The cost of replacing that bridge in today's dollars would be at least $500 million.

So what did the private sector do? The private sector said: "Well, gee. That doesn't make a lot of sense. We would rather invest additional dollars up front and build a brand-new, ten-lane bridge with a 100-year-design life span." The advantage of that for them is that they could build in significant benefits to a brand-new bridge. They could make sure that it's got the cycling and pedestrian lanes on both sides of the bridge. They could make sure that they could design it so that it would allow for conversion of the RapidBus lanes into light rail in the future without any engineering changes to the bridge whatsoever.

That is exactly the kind of innovation that we look for from the private sector, and it was very compelling. It was compelling for a number of reasons. We know that over the next 35 years there will be significant savings realized as a result of not having to put money into a 50-year-old bridge and instead, of course, having a brand-new structure.

The member should know that that is exactly what we look for in government through the competitive bidding process. It is not in any way something that I feel any sense of shame. Or, "Gee, how is it that they showed us a better way?" and that we should somehow feel bad about that. That's exactly what we are looking for through the competitive process. That's exactly what gets delivered under these P3 processes that the NDP continue to oppose, in spite of the fact that the evidence is overwhelming on how successful they are.

You know, it would be nice if just once the NDP — as opposed to just a knee-jerk, reflexive, ideological opposition to P3s — could actually point out where they have not worked and where they have failed to meet schedule or failed to meet budget. They wouldn't be able to point to an example because, as I've mentioned before, we have over 24 examples of partnership arrangements that have been delivered on or ahead of schedule or on or under budget. That is a record of success that is unparalleled.

[1020]

It is one of the reasons why every other province, virtually, in the country is now setting up organizations equivalent to what our Partnerships B.C., so that they can take advantage of the opportunities of delivering major complex projects in a manner that protects the taxpayer and delivers them on schedule and on budget. It's why the federal government has not only set up an office but has set up, in fact, a P3 fund to actually invest and encourage more private-public partnerships.

They recognize — indeed, through some of the investments they've made in partnership with the province of British Columbia — how successful P3s have been on both the Kicking Horse Canyon, which they are invested in as partners, and on the Canada line, which is a major, complex, $2 billion project in the Lower Mainland — which that NDP opposition opposed, which their left-wing friends on Vancouver council opposed.

Yet that is a project that is being delivered ahead of schedule — probably at least six months ahead of schedule — and on budget. It is one of the most challenging, complex projects that you could possibly imagine, and it is going to open up ahead of schedule and on budget for the benefit of generations of Lower Mainland residents and generations of visitors who will come through the airport and will be using that new Canada line to get to the downtown.

In spite of that, there still appears to be confusion by the critic as to why we would consider the kind of innovation that gets brought forward from the private sector. It is for those reasons. In fact, I think that the ten-lane bridge design that was brought forward was extraordinarily compelling, clearly well-thought-out and clearly a financial benefit to the province, to taxpayers and to the road users.

M. Karagianis: I'm really happy to hear that the minister still has absolute faith in his privatization schemes, despite the very colossal failure of this particular project with the Macquarie Group. This has been an absolute, abysmal failure of a privatization scheme.

The government is now stepping in and having to take over all of this, despite years of assertion by the minister that this project was going to be twinned and was going to be a privatization scheme with the Macquarie Group.

Frankly, my questions here about the procurement process are to try and clarify here today whether or not the government tendered with the intention of it always being this size of a project. I would say, from the minister's own records here in estimates debate, that that's not so.

Up until not too long ago, the minister was asserting it would be a twinned project, that that was the way it was being procured and that that's what the contractual negotiations were going to be based on. Now, of course, we've seen the unravelling of the financial package here with the Macquarie Group, one of the key partners in this consortium. That's fine.
[ Page 14136 ]

It's a colossal failure. People in British Columbia know that. Now we're mopping up and looking at ways to put this project back on its feet. That's fine. There's no confusion on this side.

I would like to clarify for the minister. We're simply trying to figure out. Is the tendering process…? Was it based on a twinned project? Was it not? Apparently, it was a very fluid arrangement, and that's fine.

Certainly, when it comes to looking at how we move forward and how the pieces of this, which I hear the minister still insisting is a P3…. That's fine. As we explore this — how money is going to be spent here in this province on this project — I think it's fair for us to ask questions about how the procurement process has proceeded to date, how it has now obviously evolved into something different.

Fair enough. The minister has made all kinds of compelling comments here about why it's a better deal at a ten-lane bridge than it was twinned. That's fine. I accept his comments on the face of it. I do want to ask a little bit more about how this is being structured.

[1025]

In fact, this Transportation Investment Corporation — we know that it was created very specifically to funnel money into a P3, a privatization arrangement. I still see the same components on the table here for that, despite the fact that the privatization plan here has collapsed in some ways — perhaps not entirely — and I guess we'll clarify that with the minister here shortly. It was the public's understanding here in a huge announcement that the Macquarie Group, as we've known, has been in financial trouble for some time in their own universe — lots and lots of evidence here about problems that Macquarie was having.

Now they have, of course, pulled out of this, or the minister has pushed them out of this to some degree. But I see that Macquarie Group is still kept on as a financial consultant in this.

So the builders have stayed the same. The original consortium, Connect B.C., that was put together and started this process to twin the bridge in a procurement process that the minister laid out very, very clearly in estimates and debate last year on the Port Mann twinning bill…. That was how the process started. They were the winning concessionaires in this — the group Connect B.C.

Two builders, a financial partner — they came to the minister and said: "We're not going to twin the bridge. We want to have a ten-lane bridge here." The minister said: "Sure. Our tender process was not real definitive anyway. We're open to let you drive the process in a new way."

That is apparently kind of the steps that took place, until the financial piece of this fell apart here just recently. The government stepped in at one point, trying to salvage it, and offered up in excess of a billion dollars to help finance this. They offered a loan to the financial partner in this to help prop up this privatization deal. That didn't work, as we've only just recently heard. Big announcement that now suddenly that arrangement is off the table. The province is taking over the project as a public procurement.

Now, that was on the face of it, what I read in the press release here, although, certainly, now the minister has continued to allude to this as a P3, a public-private partnership. But the minister talked here very specifically about how the province has now engaged the Macquarie Group to provide advisory services, including on financing.

Why are we continuing to contract with the financial group that could not put together the financing for this? What exactly is their consultation role with regard to the financing of this project? If it's a publicly procured project — it's a design-build, as the minister has alluded — then why are we bringing on the financial partner that failed in the original procurement agreement? Why are we bringing that company on as a financial adviser? Can the minister enlighten us on that?

Hon. K. Falcon: Okay, well, that was a fairly long and rambling series of questions, so I'll try and work my way through it.

I think, first of all, the member should know that when we entered into a negotiation process with the Connect B.C. group…. There is a design-construction piece, and there is a financial piece. The member talks in hysterical terms about the collapsing of the deal and how apparently this is some great crisis.

News flash to the member. When you are negotiating a major financial arrangement in the midst of one of the most difficult capital markets in 65 years, it is very straightforward to the government and to Partnerships B.C. We either get to a deal that makes sense for us, or we don't. If we don't have a deal that makes sense for us, we don't do a deal.

Now, based on the contracts that I saw the NDP sign in the '90s, it appears that they signed anything that was put in front of them. The deals that we were left with and the contracts we were left with were nothing short of disastrous.

I can tell you that's not how this government does business. If the member would go back and look at the comments that I made at the time when we entered into a memorandum of agreement with Macquarie with respect to the financing piece, I was very clear that until there is financial close, it is still a very difficult capital market.

[1030]

You know, that shouldn't be news to the member. The member tries to make insinuations about Macquarie and about their financial health.

Member, you point to me a single investment bank or financial institution in the free world that has not seen a downward draft on their share price. I challenge you to find one.
[ Page 14137 ]

But in spite of that, Macquarie was able to successfully bring over $2 billion of debt and equity to the table. They were willing and able to do a deal with the province of British Columbia through Partnerships B.C. At the end of the day, we mutually agreed that we weren't going to do a deal because the terms that would be required were not satisfactory to the province.

That's called negotiating, and I get that the NDP has a challenge with that. I get that the NDP can't believe that we wouldn't sign any deal. But that's the way it works in business. I know there's no business experience on that side of the Legislature, and that could explain why this is so complex to them.

The fact of the matter is that we have, as part of the agreement that was written into the request for proposal — the RFP process…. If we were unable to reach financial terms, we would have the ability and the right to move forward on the design and construction piece. That's exactly what we're doing, and we get to take benefit of the design that's been put forward.

Interjection.

Hon. K. Falcon: The member opposite from Maple Ridge.… What's his riding now?

Interjection.

The Chair: Members, please direct all comments through the Chair.

Hon. K. Falcon: The member from Pitt Meadows, who has over the years complained about the fact that we're building a Pitt River bridge…. I might remind the member that the new Pitt River bridge is actually being built by the same contractor that will be building the new Port Mann bridge and highway improvements.

I also might remind the member that that is also a design-build fixed-price contract. I also might remind the member that that is being delivered ahead of schedule and on budget. I also might remind the member that they opposed it, as they oppose every significant piece of infrastructure.

That is, I think, the problem with the NDP. The problem with the NDP is that they are so ideologically opposed to moving forward with road and bridge infrastructure that they just can't find it within themselves to find anything good about moving forward. So they opposed the Port Mann bridge. They opposed the South Fraser perimeter road. They opposed the Pitt River bridge. They oppose all the improvements that we are moving forward with as a province to try and deal with the fact that we need to get the economy moving and get people moving.

With respect to the member's question, the member, through that long dissertation, towards the end started to talk about the Transportation Investment Corporation. I'll remind the member that back in the spring when we passed the legislation, which they opposed…. The NDP opposed and voted against the establishment of the Transportation Investment Corporation, which would be there not only to own the assets of the Port Mann and Highway 1 but to oversee the delivery of this very important project.

That's exactly what we're here today to talk about — that the $100 million in supplemental estimates will be delivered to the Transportation Investment Corporation in the form of equity so that they can move forward in the construction of this major piece of infrastructure.

As I said yesterday, though I recognize that there's apparently still confusion in the NDP ranks about a process that would deliver a more innovative result and a design feature that actually recognizes that keeping a 50-year-old bridge for another 35 years, pouring $200 million of rehabilitation and maintenance into that bridge over the next 35 years, and then government having to replace it at a cost of at least $500 million — and that's in today's dollars, I might remind people….

Actually, rather than do that according to the private sector bid groups, it would make more sense to build a brand-new, ten-lane bridge with a 100-year design feature that allows them to achieve a number of objectives, including better cycling across the bridge and pedestrians across the bridge and that allows them to design into the new bridge features that are engineered in such a way that we can transfer the existing RapidBus — the dedicated bus lanes across the bridge that will allow bus service across that corridor for the first time in over 20 years.

It's a $180 million commitment by the province and TransLink so that on the day the bridge opens in 2013, there will be RapidBus service that will get people from Langley to the Burnaby SkyTrain station in 23 minutes.

[1035]

That is a benefit for the public, and those lanes that are dedicated on the bridge for that express purpose will be able to be converted into light rail or rapid transit in the future when the population growth south of the Fraser justifies making that kind of an investment.

That's called thinking ahead. That's called planning for the future. That's called recognizing the fact that in the next 20 years there will be a million more people moving into the Lower Mainland. It is about making sure we've got the kind of infrastructure that meets our transit needs, that meets our cycling and pedestrian needs and that meets our goods-mover needs and meets the needs of commuters who are stuck for 14 hours a day in rush hour congestion across that bridge corridor.

The Chair: Can I remind all members to direct their comments through the Chair.

M. Karagianis: The minister did not, in fact, answer the question that I posed there, which was the role of the
[ Page 14138 ]
Macquarie Group as a consulting partner in the financing of this project. I'd like to know what role Macquarie is playing in this. They have backed away from the original privatization plan, or as the minister said, they've mutually walked away. What role are they now playing, and what remuneration are they receiving for that role?

Hon. K. Falcon: As I mentioned yesterday in question period, the arrangement we have with Macquarie is essentially an arrangement that allows us, on an as-and-when-needed basis, to utilize their expertise with respect to this project. Keep in mind, Member, that Macquarie Group is one of the internationally recognized experts with respect to electronic tolling and with respect to oversight and investment on major projects such as the Port Mann bridge.

They've spent three years intimately involved in every detail of this project, and there may be a time when we want to actually access the expertise that they very clearly have with respect to this project. We may never use their advice, but should we decide we need their advice, we certainly want to make sure they're available and ready and willing to provide that advice to the government.

We would be, frankly, colossally silly not to make sure that we have the ability to take advantage of that expertise and their knowledge of this deal, which is extraordinary, given that they've invested three years into this process and clearly have a lot of information that would be valuable for the province. So we have them on a standby basis, on an as-and-when-needed basis.

If we decided we needed to retain them, we would enter into an agreement with them, figure out whatever the financial terms of that arrangement would be. But they have very particular specialized knowledge with respect to this project, and we want to make sure that we can have that information available to us should we decide we need it.

M. Karagianis: Again, the minister has not answered the question here. How much is Macquarie going to be paid? The minister has said they've been on this project for three years. Presumably, the ten-lane bridge, though, didn't pop up as an option until recently, because as early as last spring the minister was avowing that we are going to twin the Port Mann Bridge.

Now, if the Macquarie Group has been on board with this expertise for three years, why was the ten-lane not proposed early on in this process? That's one question. But more importantly, what has Macquarie been paid to date for their three-year involvement in this, and what will they be paid for their work — this engagement — as a financial adviser on this project?

Hon. K. Falcon: As I've said, what we've done is we've said to Macquarie that we would like them to be available on an as-needed basis going forward. We're not paying them anything unless we decide to utilize their services.

[1040]

We would be crazy not to make sure that we have them available and their expertise available on the basis that we may require some of that expertise as we move forward on the delivery of this project. They have an enormous breadth of experience, well beyond what we have in the province of British Columbia with respect to projects like this.

That's all we've done. We want to make sure that they're there. If we need them, we enter into an agreement with them. We'll pay them based upon whatever advice it is that we need from them.

None of that has been established at this point. We may not even require it. But we certainly recognize that they have an expertise there. It is an expertise that few around the world possess, and it is an expertise that nobody possesses with respect to this particular project, because they have spent three years of very detailed involvement in it. We definitely want to make sure that we preserve the right to engage them on a go-forward basis, and that's what we've done.

With respect to the issue of the twin bridge. Again, I just don't know what part of this the member is having difficulty grasping. It was the expectation of everyone, from government to every sort of individual out there that was following this case, that there would obviously be a twin bridge. It just seemed logical. It seemed logical to me. I think it seemed logical to everybody that was looking at this.

But again, one of the beauties of the competitive process — when you attract firms from around the world that have built projects in virtually every jurisdiction of the world and they are competing very, very aggressively for a major project like this — is that they bring in the best minds, the best engineers, the best designers, the best financial people from around the world. They pool them together in a concession group, bid group, and they go through a competitive process.

As I said to the member, what came out of that process was startling, but when you look at it, it was brilliant. They actually looked at the situation, and they said: "Okay, the government has made it clear that they want a certain number of lanes." There are five lanes on the current Port Mann Bridge. So you add another twin bridge, and you have ten lanes.

What they've done, what two of the three groups did, in fact, is say, "It actually makes more financial sense to build a brand-new ten-lane bridge" — so that we can avoid the $200 million of costs that would go into the old 50-year-old bridge over the next 35 years. We would rather plow that into a brand-new bridge.

The benefit for government…. This is an important benefit, Member, because a future government, 35 years down the line, is going to be looking at an 85-year-old bridge, recognizing that just as TransLink is having to deal with the challenge of a 70-odd-year-old bridge, the Pattullo Bridge, in having to look at replacing it….
[ Page 14139 ]
Rather than have government have that obligation and have to pay what in today's dollars would be at least $500 million to replace that bridge, they're saying: "No. It actually is a lot smarter to build a new ten-lane bridge." That's exactly the kind of innovation we look for in this competitive process.

What part of that challenges the NDP? What part of that is difficult for them to understand, that you could invest up front some additional dollars to have enormous savings over the long term? It is incredible that that kind of basic financial understanding escapes the members opposite. I guess that's how we got into fast ferries and got into other silly arrangements during the 1990s.

You know, the only failure here — because the NDP critic and the member from Pitt Meadows talk about failure — really, when we talk about the Port Mann bridge is the failure of the repeated commitments the NDP made in the '90s to twin that bridge. That is embarrassing.

It's embarrassing because as they did with the South Fraser perimeter road, as they did with the Port Mann bridge, as they did with the Pitt River bridge…. All three of those projects were characterized by broken promises in the NDP.

I'll tell you here's what's different about this government and that NDP when they were in power. When we say that we're going to build something, we build it — on this side of the House. We don't panic because 20 people might show up….

Interjections.

The Chair: Members.

Member, take a seat.

[1045]

If all members will please show respect for the House. Allow the person that has the floor to speak so that we can hear their words, and when everyone else has the floor, the same respect should be shown to them.

Hon. K. Falcon: Thank you, Chair. I appreciate that.

The fact of the matter is that this government doesn't panic if 20 people show up and say they don't want something done. I can tell you that the experience in the history of British Columbia is that none of the great projects we see today or see under construction would have been built had the NDP been there. If you think about the SkyTrain, the SkyTrain was strongly opposed by the NDP. They thought it was going to be terrible. They thought that the Social Credit government of the day should never go forward. It's been the greatest investment in the Lower Mainland public transit we've ever seen.

They opposed the Canada line. Why did they oppose it? Because of the same ideological claptrap that you're listening to in the House here today. They talk about privatized schemes, how it's going to go wildly over budget, how this is going to be a terrible disservice to the public. Oh gee. So what's happening? It's being delivered well ahead of schedule and on budget. Yet they can't recognize that. It is…

Interjections.

Hon. K. Falcon: …unbelievable to me.

The Chair: Member. Member, please. Would the member for Maple Ridge–Pitt Meadows please refrain from interfering when other people have the floor.

Please continue, Minister.

Hon. K. Falcon: There does need to be a sense of professionalism and commitment on government that if they're going to build major infrastructure, you have to recognize that a commitment to doing what you say you're going to do is important. That's why today the Pitt River bridge is under construction. That's why it's under construction by, ironically, the same contractor that is going to be building the Port Mann bridge on a fixed-price, design-build basis. They are delivering that Pitt River bridge, as I mentioned earlier, ahead of schedule and on budget.

It's also worth noting to the members opposite that the group that will be building the Port Mann bridge Highway 1 improvements for 37 kilometres is actually a joint venture between Kiewit brothers and the Flatiron group. Flatiron is the same group that was involved in building another major P3 project that was a tremendous success.

As I've said, they should just talk to the member for Columbia River–Revelstoke if they want to know how successful the Kicking Horse Canyon project has been — a project that was delivered 18 months ahead of schedule and on budget. That is an incredible record of delivery and accomplishment. It is being celebrated around the world by almost everyone except, you know, about 38 people across the aisle there that just can't get their heads around the fact that these are tremendous successes to the benefit of the public.

So you know, I think with respect to Macquarie, as I've said before, they're there on an as-needed basis. This is a company that has an incredible track record of delivering major projects around the world. They're one of the most experienced groups that you could possibly find.

As I say, Macquarie, in spite of having to deal with one of the most difficult capital markets we've seen in at least 65 years, was able to bring over $2 billion of debt and equity to the table, maintain that, prepared to do a deal, and at the end of the day in the course of negotiations, we mutually agreed we couldn't come to an arrangement in terms that were acceptable to the province.

I'll tell you…. I'll say it here, and I'll say it again. We have said that every single project we look at has to stand
[ Page 14140 ]
on its own merits. We will examine every project on the basis of what is the best way to deliver that project for the benefit of the public.

The Pitt River bridge is one good example of that. We examined it as a P3 option. We made the determination that that project could best be delivered under the design-build, fixed-price basis. We went ahead on that basis.

On the Port Mann. We made the decision that we would move forward on a P3 basis with the Port Mann. There were two elements to it — the financing piece and the design-construction piece. We weren't able to conclude a financial piece that was satisfactory to the province of British Columbia. We didn't go ahead with that piece. We were moving forward and able to conclude an arrangement and move forward on the piece that was the design-construction piece, and that project moves forward today with 400 workers building and constructing that bridge and improvements, and that is going to be a great benefit for the public of British Columbia.

M. Karagianis: Well, I won't remind the minister of the numerous times he said we're going to build a twinned Port Mann bridge, and that promise certainly didn't hold any water. Let's talk about the Evergreen line and how many umpteen announcements we've heard on that, and that's not been built.

But I think that the heart of the question here goes back to the fact that you said that Macquarie has been on the job for three years, but there was no sort of enlightenment here, this dawning moment of clarity, where someone said: "Now we've got to build a ten-lane bridge."

[1050]

Three years into the contract with the government…. We will assume that it cost money, although the minister has not said how much Macquarie has been paid so far for the three years' involvement in this project.

For three years, and we heard last fall, a few months ago…. Let's say two and a half years of their work on the project was around twinning the Port Mann Bridge, we can assume, because the minister was still declaring that right up until last summer. Then things changed very rapidly in the fall, where we came up with the ten-lane bridge, once the procurement process had come down to Connect B.C. as the winning group.

I would like to know: in the three years that Macquarie has been involved in this project, how much have they been paid so far? What does it cost the taxpayers of British Columbia for the three-year involvement so far on this project?

Hon. K. Falcon: The member should know that back on January 31, 2006, was when we announced that we were moving forward with the Port Mann bridge. That's when all the bid groups started coming together. There were three concession groups that were involved.

They went through that process until July 2008, when the final submissions and bids came in from the three different groups. That's where we discovered that two of the three groups had come forward with the ten-lane design with respect to this project. As I say, extraordinary innovation was brought forward that will accrue to the benefit of the public of British Columbia.

We have arranged to have all of that information transferred to us, so all of the intellectual property, all of the design and engineering work that's been undertaken by Macquarie. All of that information gets transferred over to the province. It is signed over to the province so we have the full right to proceed. As I said, that was written into the request for proposals. We get all of that in return for $8 million.

[1055]

To put that in perspective for the member, should we have gone through this process as government, gone through the same process of doing the design and engineering work, it would be three to four times more expensive. So we received extraordinary value in return for being able to move forward with this project.

The project cost does not change. It is still $2.46 billion. The electronic toll amount does not change. That is still $3. Government still controls the toll. Government still has control over all aspects of the project. It's extraordinary value to the public of British Columbia.

M. Karagianis: The transfer of all the intellectual property to the province — why is that necessary?

Hon. K. Falcon: Obviously, the province wants to make sure that all the design work, all the engineering work and all the intellectual capacity property that went into this project assigns over to the province.

We want to make sure there are going to be no contingent liabilities whatsoever. We want to make sure there are not going to be any issues with any of the subcontracts, any of those kinds of issues. So we make an arrangement with them to recognize that there's value in that.

Obviously, if we went and did all that work ourselves, as I mentioned, it would be three to four times more expensive. In fact, we commend Macquarie for essentially assigning that over to us for very, very good pricing, certainly something that we could never achieve on our own. It would cost at least three to four times that in terms of our own costs if we tried to bring forward this kind of design and engineering work and intellectual property.

M. Karagianis: Well, why Macquarie? It's a consortium. Connect B.C. was a consortium. Did it not have equal partnership? Is Macquarie the lead dog here and the others are simply hired contractors with no input into this?
[ Page 14141 ]

You know, the minister said the consortium — a number of consortiums — presented ideas. So are the other two contracting the construction partners here? Do they have no part in this whatsoever? Macquarie owned all of the intellectual property and engineering. The idea, the concept plan — is that what this is about?

Hon. K. Falcon: Yes, that is correct. Within the consortium, to use the member's language, they are the lead dog. Macquarie is the lead on that, and yes, they own all the rights. Macquarie is the one that brings together the group, and they're the ones that are responsible for leading the negotiations and putting the deal together.

When we come to an arrangement where we cannot move forward on the financial piece, then we certainly want to make sure we have full assignment of all the intellectual property — the engineering, design work and all the efforts that have gone into the project — and that's what happened.

S. Fraser: Hon. Chair, today it gives me great pleasure a second time.…

The Chair: Did you want to seek leave?

S. Fraser: I seek leave to make introductions, please.

The Chair: Proceed.

Introductions by Members

S. Fraser: Thanks for the clarification.

It gives me great pleasure today to introduce a grade 5 class — Kathleen Battan's class — from Maquinna Elementary in Port Alberni. It's the second class today that I've had the pleasure of joining on a tour of this place. The grade 5 class — very sharp class. They're learning about how this place works, and I'd like this House to give them a very warm welcome and make them feel happy to be here.

Debate Continued

M. Karagianis: Macquarie is the one that actually put in the bid. It would appear that there is not an equal partnership in this consortium between the financing piece, the construction piece and the engineering. What, in fact, is the role of the two contractors in that consortium? What role do they play? Are they simply bringing construction teams to the actual hard labour to the table in this?

Hon. K. Falcon: The construction component of it is responsible for coming up with design, construction costs, schedule, how they're going to deliver it. All of those are important elements to their bid because, of course, the complexity of delivering a major project like this involves an extraordinary level of planning.

[1100]

This is not just doing an interchange. This is multiple interchanges, highway widening, building a brand-new ten-lane bridge, and having to do that and coordinate all the traffic movement through the process. So you can just only begin to imagine the level of complexity that's involved, and that's what the construction arm of the bid group is responsible for doing.

Essentially, Macquarie, as the lead, brings together all these key players. They will go through the process of finding the very best on the construction side, on the contracting side, on the engineering side, bringing together all those folks into this Connect B.C. consortium, and then negotiating a deal on their behalf. That's essentially what they do. So our dealings are with Macquarie, and Macquarie represents that group.

What we wanted to make sure, through this process, is that we would have the ability…. So for all the three groups that were bidding, we specifically wrote into their RFPs that we wanted to have the ability, should we be unable to arrange a satisfactory financial arrangement on the financial piece of the P3, that we would have the right, should the province decide to exercise it, to take advantage of the work that they've done on the building design, the construction costs, all of that other piece of it, should that, in the province and Partnerships B.C.'s judgment, deliver value for the public.

Clearly, in the case of the Connect B.C. Group, there's just no question that it delivers extraordinary value. That's why we've been able to arrange with Macquarie to assign those contracts over to the province to ensure that we can continue moving the project forward.

There's not one day of delay as a result of this. The project keeps moving forward to the benefit of the public.

[S. Hammell in the chair.]

M. Karagianis: Can the minister just clarify for us, then, that the two contracting partners here, Kiewit and Flatiron…. Are their components of this project separate and stand-alone? Does Macquarie…? Do they present a whole package — take it or leave it — without any ability to pick either one or the other?

The minister talks about: "If the financial piece didn't come together in the procurement stage there's been some protection to say that we could take pieces of that consortium apart."

So are they stand-alone values for each of those other two partners, or does Macquarie own those rights as well to their portion?

Hon. K. Falcon: The short answer is yes. The design and construction piece is like a stand-alone piece within Connect B.C., which is owned by Macquarie. So
[ Page 14142 ]
Macquarie, again, brings together those groups, and one of those pieces is the design-construction piece, which is a joint venture Flatiron and Peter Kiewit Sons.

What we did was make sure that we wrote into the RFP…. All the three bid groups knew this. There is no sense of mystery about this. All of them knew, whichever one of them would be selected at the end of that period of July 2008 as the lead proponent, that government would reserve the right to move forward, should we choose to, on any piece of their particular project.

So if we could take all of it, we would if that made sense for government. If we could take part of it, we would if that made sense for government.

M. Karagianis: Is the government still in a position where they could review the previous competitors, because there originally were three groups, three concessionaires, that were in the running for this project? The Macquarie–Connect B.C. concession group was chosen.

Is there a way to look back on the previous bids from those groups? I mean, if all of them came into the game with the same rules, that the government could pick and choose components out of that, has there been a review of those to see how competitive those other bids were?

[1105]

Hon. K. Falcon: Yes. The short answer is yes, we could, if we wanted to, go back to any of the other bidders. There's just no question in our minds, and I want to underscore this, that the Connect B.C. Group and their proposal and the design-construction piece was clearly, by a long shot, the best value for the province and taxpayers of British Columbia. There's simply no question about that.

I heard the member for Delta North talking about how it was changed. The member should understand that's actually not true. I want to say on the record that that's not true. Hopefully, when I say that, I won't have to keep hearing this silliness repeated when it's clearly not the case.

There was a competitive bid process from three concession groups. They were given a framework within which to bid, and all we look for from them is how you can deliver within that framework the best possible benefit for the public of British Columbia. That's what our evaluation team looks for. When they came forward, as I say, two of the three groups on their own concluded the best value is delivered by building a brand-new ten-lane bridge as opposed to twinning the bridges and having to invest in a 50-year-old bridge over the next 35 years.

That did not make financial sense over a period of time. I think that should be obvious when you actually examine the financial numbers. Clearly, in the view of our very professional ministry staff and the very professional folks over at Partnerships B.C., the Connect B.C. Group by a long shot provided the best value to the public of British Columbia.

M. Karagianis: The Macquarie Group was the lead agency in this consortium of Connect B.C. The two construction arms of this had their sort of separate pieces of that. We paid $8 million to Macquarie for the intellectual property and the design, basically, I would expect. That's their design. The way these privatization deals work….

I know from past experience at the municipal level that you have to pay big bucks if you don't purchase that intellectual property. If you use it in any way without engaging the original owner of the property, then they can come back and sue you quite aggressively on this. Now we've engaged Macquarie. We purchased all of the intellectual property off them, and now we have engaged them.

I know that the minister said, "No money unless they do something for us," but when the government uses a term like "we've engaged the Macquarie Group…." Is there a contractual agreement right now with Macquarie for ongoing services?

Hon. K. Falcon: To the member's last point first. No, there is not a contract in place. As I say, we reserve the right to engage them in the future as we may need them. There may be a point in time when we think that Macquarie has some expertise we want to tap into.

Should that be the case, then we will determine what the expertise is, what rates they wish to charge, and if we think there's value for the government of British Columbia and the Ministry of Transportation, then we will engage in an agreement. That totally depends on what it is we're asking them to do and what rates they're willing or wishing to charge. If we think there's value there, then we'll take that.

To the earlier point that the member made. The member made the argument, actually, just as well as I could make it. She's absolutely right that what we are essentially doing is acquiring those design, those contracts, that intellectual property.

[1110]

We're doing it on the basis…. We want to make sure exactly that there's not going to be a situation where there's going to be a lawsuit or you could be sued because you're using intellectual property that was derived at great expense without the consent and the agreement of those that were involved in putting it together.

The great thing about that for the province is that we've done it at an extraordinarily good price. As I say, $8 million is, according to my professional staff, who I think are among some of the best…. They will tell me that it would cost us three to four times that to try and pull together that kind of design and engineering work for a $2½ billion project.
[ Page 14143 ]

M. Karagianis: So when the government press release came out that said the province has engaged Macquarie…. In fact, that's a bit of a stretch. There's some kind of a verbal understanding with Macquarie on this. Is that it? Or do they take their $8 million and they're basically out of the picture at this point? If the government chose to no longer rely on their expertise or not, they're out of the picture completely? Is that what the situation is?

Hon. K. Falcon: Yeah, the understanding is that they will be available to us. We very much appreciated that, by the way. Macquarie was very good. And I have to say, from the beginning, Macquarie has been exceptional in this whole process, not just in the assignment of the contracts but saying and stating that they will be available should we need them on an as-needed basis.

Remember, Macquarie has got an office in the Lower Mainland. They're committed to the province of British Columbia. They are involved in the Sea to Sky Highway project, which as I mentioned, is being delivered ahead of schedule and on budget.

So they have a tremendous amount of expertise. We may wish to tap into that expertise. Should we decide to do so, they've made it clear that they would be available and that we can engage directly into a contract with them. We don't know what that would be at this point. It may end up being nothing, but it may be something.

Certainly, my view and the view of my staff would be that there is an expertise there that not only is germane to this particular project, because they are intimately knowledgable about this project, but with respect to these kinds of projects from around the world. We want to make sure that we have the ability to take advantage of that expertise should we decide to. So I think that answers the question.

M. Karagianis: Now, with regard to the other two partners in the Connect B.C. consortium, Kiewit and Flatiron, are they still operating under the Connect B.C. name, and do they have any ties to Macquarie?

Hon. K. Falcon: They're no longer part of Connect B.C. That ended once we ended the financial negotiations, and they assigned the joint venture contracts and costs over to the province. It is a joint venture between Kiewit and Flatiron, two different companies that are working together to build this $2.46 billion project.

M. Karagianis: So this is a design-build fixed-price contract. Are we still in negotiations on this, or has a contract been signed with these two partners?

Hon. K. Falcon: I can tell the member that we've agreed to the terms of the project, and we are in the midst of executing the agreement.

M. Karagianis: So in fact, the deal is not finalized at this point? You haven't got a signed deal with these two companies. How much more negotiation will take place, and what kind of time line is on the finalization of that?

Hon. K. Falcon: Maybe the member misunderstood me. The terms are finalized. There's a letter of undertaking between the two of us, and we're just in the midst of executing that agreement.

[1115]

B. Ralston: When the three groups responded to the RFP, they obviously balanced their bids between construction, engineering and financing. Can the minister advise whether Kiewit was the low bidder on its portion?

Hon. K. Falcon: Yes, they were.

B. Ralston: Do we know how close the bid prices were on those various segments?

Hon. K. Falcon: Recognizing that there are commercial confidences, what I can tell the member is that they were substantially lower than the other two bids.

Obviously, yes, we do. Our staff and Partnerships B.C. staff would be intimately aware of the different bids and the costs involved in the different bids. What I can tell the member is that the joint venture proposal from Flatiron-Kiewit was substantially lower than the other two.

B. Ralston: As the minister knows — I think, as everyone knows — substantial repricing has taken place in the construction market and pretty well everywhere else since last August, and no doubt Kiewit will be able to take advantage of that when they purchase the supplies necessary to construct the project. Why should they get that extra profit, and why shouldn't the price be lowered and reflected in a savings for the taxpayers?

Hon. K. Falcon: The member is right about that. From the period July to January, where we announced the memorandum of understanding, there have been substantial downward adjustments made in respect to the contract costs. Those were in negotiations that went on between ourselves and the joint venture, but also between Macquarie and the joint venture, and they reflect the changes in reduced fuel costs, steel, concrete.

Having said that, Member, there was a countervailing force that was also at play, which is the reduction of the Canadian dollar, which tended to counterweight some of that. But that was reflected in the number that was released — the $2.46 billion in January of '08.

B. Ralston: Just so that I'm clear then. The initial bid, and that component of the bid — the Kiewit component of
[ Page 14144 ]
the Connect B.C. portion, which was the initial award — was made in October. Negotiations began, and the price that's been negotiated is lower than the price that Kiewit quoted back in August.

Am I understanding that correctly, then, Minister?

Hon. K. Falcon: The member is basically correct, except for the characterization of the bid being awarded in July. What happened was that they became the lead proponent, meaning they have earned the right, due to the nature of their bid — the cost competitiveness and all the other factors that go into the analysis of the three different bid groups. Then what happens from that point on until January of this year…. Further negotiation takes place, and those negotiations reflected a downward move in the total cost to reflect the changes that have taken place, as the member referenced.

[1120]

B. Ralston: Well, given that the contract has changed substantially — in the sense that the design solution that was found is very different from the one that was originally imagined, the price has substantially changed, the construction environment has substantially changed and the corresponding prices have lowered considerably — what is the response of the minister to those unsuccessful bidders who might contest, or certainly feel unhappy with, a direct award to Kiewit at this stage?

Given all that has changed, it might be the view of some that it might be better to go back to new tenders and take further advantage of the decline in construction prices. That would be my question to the minister.

Hon. K. Falcon: The short answer, Member, is that it was specifically written into the request for proposals, so all three bid groups knew exactly what they were going into. They knew that they were going into a competitive process that would allow the government to strip away whatever portions they liked or didn't like as we went through the negotiation process. If we weren't able to conclude on the financial piece, we could move forward on the design-construction piece.

The final thing I'll mention with respect to that, Member, is that there is an added element here too. In addition to the fact that all of the big groups were very aware of how this process would move forward and keenly understood that they needed to come out of the gate with the most competitive possible proposal, I will also say — without betraying any commercial confidences of the other two bidders, which I won't do — that the Kiewit-Flatiron joint venture cost bid was substantially better than the other two.

I mean substantially to the extent that, in layperson's language, it's not even close enough that we would even consider that, gee, maybe we should go back to that second-place bid and see whether there is something that we might want to negotiate there, even though we would have the right to. It was a quantum that was sufficient enough in the view of the province and Partnerships B.C. that we had the right group, we had the right design, and we had the right costs.

B. Ralston: Some further questions to the minister. One of the concerns that is expressed about these kinds of processes…. Certainly, a direct award to Kiewit in the dollar amount that's mentioned has caused some in the construction field….

I'm thinking in particular of Manley McLachlan, who is the president of the B.C. Construction Association. He made a presentation to the Select Standing Committee on Finance and Government Services.

While he does recognize the process, his concern on behalf of his members — and I'm sure, as the minister well knows, they represent a variety of construction firms in the province, small and medium — is that the process does not permit local firms to enter into the process and get the work.

I'm quoting from what he said to the Select Standing Committee on Finance and Government Services on October 2 last year at Langford.

"Many companies have strong bonding capability and financial capability, but they simply don't have the resources to cover what we call the pursuit cost. The concern that's emerging now that more and more companies are looking to the public sector for their project opportunities…. The question is: have we got an adequate way to address the local industry and projects that appear at the local level?"

He suggests that in the P3 bidding process, which is obviously academic because this project has now been made the subject of a direct award to Kiewit…. How are you engaging that local industry? In other words, what's your approach to local industry? How are you going to engage local contractors?

[1125]

Kiewit is certainly well recognized with, I think, local operations here, certainly. But they are principally an American firm, to judge from their website and the brief look I had at their financials.

I think Mr. McLachlan's question is a very legitimate one, particularly at a time in a downturn in construction when many small and medium firms have the expertise, have the labour force, but don't have some of the additional ingredients to benefit and bid on these kinds of huge contracts.

They feel they're being cut out of the equation, and someone like Kiewit really is monopolizing the field. They've been fortunate to be successful in bidding on the Sea to Sky. This is yet another successful contract for them, so many of his members are asking that question. He's posing it on their behalf. I would be interested in the minister's response.

Hon. K. Falcon: Yes, Kiewit is one of the members of the group that the member opposite references.
[ Page 14145 ]

First of all, again, I want to correct something that the member said which is false. I want to make sure that we address falsehoods in this House right up front to make sure they're not repeated. This was not a direct award, so when the member makes reference to the term "direct award," that is false. I want to state that on the record so that the member, being an honourable member, would know that you don't repeat something that you know not to be true.

This was a highly competitive process that three bid groups went through. I can't imagine a more competitive process that is in place for a major infrastructure project than the one which we had. It was a process that represented some of the best companies in the world, including local companies that were part of the bidding groups.

During this highly competitive process, all of the participants are familiar with how the process unfolds. All of the participants recognize that when a lead proponent is selected through that bid process, the government and the lead proponent will then negotiate a deal and that the deal will be two pieces, a financial piece and a design and construction piece, and that the province and the government will have the ability to move forward on all or part of that, depending on the decision that the government makes.

I think that what the member needs to know is that that criticism is not an unusual criticism. But the issue really comes down to this. On a project of this scale and magnitude, what you have to have is a contractor or contractor group that is responsible for making sure it can be delivered on schedule. That means that you have to have one group that is making important decisions with respect to scheduling, with respect to materials management, with respect to all of the issues associated — traffic management — with getting the process done.

The best example I can give to the member opposite is the Sea to Sky Highway. When we announced that we were moving forward with the Sea to Sky Highway, the initial reaction from communities up and down the corridor was generally one of what I would describe as shock and horror. The reason it was shock and horror was because their only experience with improvements on that highway corridor was back when government made improvements in the '70s and, to a lesser extent, in the early '80s.

What government used to do, because we had to do it, frankly, and nobody really thought of perhaps a different way of doing it…. There would be multiple jobs taking place on the bridge, and the traffic management was a disaster for the residents because they would have to stop, wait for hours. Often there were six-hour closures. Government typically was working during the daytime. There wasn't evening work going on, etc.

What we have today with Kiewit as the lead contractor on the Sea to Sky Highway is that they are responsible for schedule. They coordinate the entire project and the movement of the materials needed. They work 20 hours a day. So it's virtually a 24-hour-a-day operation. They only have four hours to basically do repair and maintenance on their vehicles, and then they're right back at it — two shifts of ten hours a day.

They manage the traffic along the entire corridor so that they don't, for example, open up one section, the traffic moves ten minutes, and then they find themselves into another blockage and sit there and wait for another 25, 30 or 40 minutes or what have you.

All of it is coordinated by Kiewit to make sure the process moves smoothly. What has the result of that been? The result has been that up and down that corridor…. Whether you're talking to Lions Bay or you're talking to Squamish or Pemberton or Whistler, all of those residents will tell that you it has been phenomenal in terms of how well they have managed the project, built the project and kept traffic moving.

[1130]

It is no different. In fact, it is even more important on the Port Mann bridge project, where you have an extraordinarily high volume of vehicles, 120,000 vehicles a day, going back and forth along that corridor — the most congested corridor in the province — that as the contractor moves forward with that process, you want to make sure you have one group that is responsible for managing that process through.

Member, the short answer is that there are enormous efficiencies that are realized as a result of doing that. The other thing you should know is that there are lots of opportunities for small- and medium-sized contractors to be involved, and they will be involved in a very significant way on that project. The reason…. Macquarie has stated this publicly. The project is of such a size that they will be relying on the local contractors to help them deliver pieces of this project. There's just no question about it because of the sheer size.

This is the largest transportation project in the history of the province of British Columbia, and Kiewit, as the main contractor, will be relying on local contractors to deliver important pieces of this. The best recent example I can give the member is on the South Fraser perimeter road, where today we've got up to $50 million worth of contracts that have been tendered, all to local and mid-sized companies that are delivering the work that is currently underway on the South Fraser perimeter road. It'll be no different on the Port Mann/Highway 1 improvements.

B. Ralston: The minister has chosen to disagree with the term that I have been advised is the appropriate one, "direct award," and chastises me for that. So would the minister, then, choose his own phrase to describe the process whereby which Kiewit has been selected out of that remaining component, the construction component, after the financing component has fallen away?
[ Page 14146 ]

The decision to award it to Kiewit — how would the minister describe that process? Many observers that I've been in contact with describe it as a direct award. So if the minister disagrees with that, could he please explain what is the best way to describe it, according to him?

Hon. K. Falcon: Yeah, I think the member's characterization is just totally false, and I think it's important to get that on the record because I want to walk the member through how this process works.

First of all, we advertise around the world. Anybody and everybody that wishes to be involved in bidding for this major piece of infrastructure work is welcome to come to British Columbia and make their bids.

Then what happens is that there's a request-for-qualification stage. Naturally, as you're going to go into an RFP stage, you want to make sure the people that are bidding are qualified, obviously, to build it. I think that would be something that even the member opposite would agree with. So there's a prequalification stage.

[1135]

Then it goes through an RFP stage, the request-for-proposal stage, which involves selection and evaluation that is informed not only by the professionals in the Ministry of Transportation and Partnerships B.C., but by international expertise that's brought in from around the world to make sure that the evaluation process itself is amongst the most rigorous you could possibly imagine.

I can say to the member that this process, more than any other project in the history of the Ministry of Transportation in British Columbia, has had more rigour and more competitiveness than we've seen in any other project. I deal with all of those contractors the member talks about all the time. Believe me, they're all, frankly, supporters of us, and I get…. [Laughter.]

Oh, I heard someone laughing. They're all supporters of us. I can promise you that, Member opposite. They recognize that this is a government.…

Interjections.

Hon. K. Falcon: No, actually. Well, the member….

Interjection.

Hon. K. Falcon: Well, the member talks about….

Interjection.

Hon. K. Falcon: Actually, you shouldn't heckle, Member, when you're not sitting in your chair. You probably know that, so you'll stop from this point on, I'm sure.

But the member should know that actually, our supporters believe in the competitive process, and as long as it is open and competitive and fair, that's all they're going to get out of this government — an open, fair and competitive process.

The winners and losers will be determined by the strength of the bids, and it has always been that way with this government. It's not like the NDP, where you set up an Island Highway project, and you sleeve deals to union guys that couldn't win it on their own. That's not how we do business. It's open and fair tendering, and it will remain that way.

This process was, as I say, the most rigorous, competitive process we have ever undertaken in the history of the Ministry of Transportation. I totally get that there are small contractors out there, and they come to me sometimes and say: "Gee, we think the whole thing should be broken down into little, individual bits so that we can all get a crack at it."

The member needs to understand that on major construction projects like this, the price you pay by doing that, not just in terms of higher costs…. The challenge of delivering a major, complex project like that with all of the scheduling challenges, all of the materials management challenges, all comes to the fore.

So what we do, as we've done so successfully on the Sea to Sky Highway, as we've done so successfully in the Kicking Horse Canyon, is make sure we have a fair and open process where we allow bidders from around the world to be part of the process and ultimately select a lead proponent and negotiate a finalized deal that will work out to the benefit of the public of British Columbia to ensure that this major infrastructure is delivered on or ahead of schedule or on or under budget, and that's exactly what's happened in every single one of the projects we've been involved with.

B. Ralston: Well, I'm tempted to comment on the condescending tone, but I don't expect that will change.

I asked the minister for his phrase that would describe the process whereby which Kiewit wound up with the award. He has objected to the term "direct award." What is his term? How would he characterize it?

Hon. K. Falcon: A full and competitive process.

B. Ralston: I want to continue, because the minister touched indirectly on some of the notions of local contractors being able to participate, and I think local hire as well.

One of the concerns that's been expressed…. I gather from what the minister is saying that there's nothing in the contract that binds Kiewit to either hire locally or source locally, but he is expecting that that will happen. As the minister will know, a concern that has arisen in a number of these projects is…. I'm thinking of the Canada line, where foreign workers were brought in to do the work in conditions that were the subject of a finding by the B.C. Human Rights Tribunal that they
[ Page 14147 ]
were basically underpaid and abused in their position as workers on that project. Other companies have sourced workers from not only outside British Columbia, but outside the country as well.

First of all, what are the contractual limits within the award that's been made to Kiewit that prohibits them from engaging in such practices? If there are none, what is the minister's expectation of what will happen? Because the Canada line, and I'm sure the minister will concede this, is not the sort of labour practice that British Columbia would want to be known for, and those are problems that I would expect that he would want addressed.

[1140]

Hon. K. Falcon: Through to the last point first, the member should know that you can only use foreign workers on a construction site if there is no one locally that can undertake the work. There is no expectation on any of this work that there are going to be any of those situations.

The fact of the matter is that virtually every person working on this project, Member — the 8,000 jobs that will result as a result of this Port Mann/Highway 1 improvement project — will all be local people. These are all local people that will be doing the work, that are benefiting from the paycheques, that are supporting their families. They're going to be local people.

You know, the member only needs to…. The member for Columbia River–Revelstoke pointed out yesterday in this House how in the community of Golden virtually the entire town was employed through the Kicking Horse Canyon P3. It's true. The figure the member used is 70 percent, and he's right about that.

It is a huge job generator for the public. It is the same on the Sea to Sky Highway. Virtually all of the people employed on the Sea to Sky Highway are local British Columbians that are getting those paycheques, that are supporting their families, that are involved in gaining expertise on some of the most innovative design and construction work that we can possibly imagine.

They are able to utilize those skills as they go forward on future projects. This is a huge benefit to the public of British Columbia. I think that the member should never forget that.

To talk about the Canada line…. Again, I have met with the contractors that have worked on that line. It has been a huge job generator for them, and boy, I'll tell you, they're appreciative. Any foreign workers that were brought into that were brought in to manage the tunnel-boring machine. It's a very particularized skill. We don't have any tunnel-boring machines in British Columbia, so there's not a ready-made skill set here that's able to do that. That's why they were able to bring in foreign workers, but they first have to demonstrate there's nobody local that can do the work.

One of the reasons why we are moving forward with the Port Mann project is not only to meet with the very important economic and goods-movement benefits that will result, not only to deal with the public transit benefits and the future potential for light rail and rapid transit across the corridor, but it's about the 8,000 people that are going to be working. That is why the opposition of the leader of the NDP and the NDP party against this project has always frankly confounded me.

M. Karagianis: In these normal privatization deals, a large part of the work of the private partner is in the long-term maintenance and operations of any of these infrastructures. Generally, that's where the profit margin is made once the construction phase is done.

Now, as this is going to be a design-build and fixed-price contract, we would assume, then, that it's strictly in public hands. Is that true? Are the long-term maintenance and operations of this infrastructure going to be turned back over to the Ministry of Transportation?

Hon. K. Falcon: There is an existing contractor on that corridor, Mainroad, that will continue to operate through the term of their contract. I think there are about five years left on their contract. Then, no differently than we do on every other part of our highway system, the government would competitively tender the work, and we would contract it to the successful bidder.

I should remind the member that on every single partnership project that we've undertaken, the competitive tendering has resulted in a B.C. company that has been providing the maintenance work.

You know, the member continues to throw around these terms. She likes to use "privatization," etc., but I never hear the member comment on the extraordinary success and the public joy at these projects. The Kicking Horse Canyon is really a great example — 18 months ahead of schedule and on budget.

[1145]

I bet you the member has never even visited the bridge. In fact, I'm going to go on the record and say that I'll bet you the member has never actually been on the bridge. But if the member actually went and visited it and talked to the community residents in Golden…. Her colleague next door to her from Columbia River–Revelstoke will tell her, if she asks, just how excited and enthusiastic the communities are about those improvements that have been made — a tremendous benefit. I just can't understand why the member and the critic have such difficulty celebrating these incredible successes.

The Sea to Sky Highway project has been delivered ahead of schedule. In spite of the fact that it is a highway corridor that sees 16,000 vehicles a day during their peak periods, which are in the winter and summer, they have been able to continue moving that traffic along that corridor with virtually very little interruption to the travelling public.
[ Page 14148 ]

It is an outstanding example of a P3 that, again, is working very successfully. I don't know what it will take — how many successes have to be racked up through this process of being delivered, projects that are being delivered on or ahead of schedule, on or under budget — until the NDP finally get past their ideological blinders and recognize that maybe, just maybe, this is a way of delivering some projects, not all projects, very efficiently and very effectively for the public of British Columbia.

I don't know whether we'll ever see that point. I rather doubt we will, because they're beholden to CUPE, and the public sector union CUPE doesn't support these. I get that. They don't like open, competitive processes.

Nevertheless, the benefits for the public of B.C. are self-evident, and that's why we will examine every major complex project we do through the lens of a P3 and determine whether or not that project makes sense to be delivered in that manner. Every project will be different. Every project will involve the same full and competitive process. Ultimately, with every project we will determine whether or not we wish to proceed on it either as a P3 or as a design-build fixed price.

M. Karagianis: Certainly, the minister may think that condescension and belittling are a form of debate, but in fact, they're not. What I would say is that the original question was around the long-term maintenance and operations. We know that in every other existing privatization scheme that the government has engaged in, these contracts are for 35 years out.

Originally this contract with Macquarie would have been 35 years as well. At this point, that's an unknown factor in this new design-build fixed-price contract as a result of the collapse and failure of the original P3.

I think a good and reasonable question to ask is: how are the maintenance and operations going to be carried out? If they're no longer part of a 35-year agreement with Macquarie, then is this going to be business as usual under the Ministry of Transportation? Or is there some kind of agreement with either of the other two remaining partners of the consortium that are now going to be building this? Do they have any kind of contract to maintain and operate this infrastructure long term?

Hon. K. Falcon: The member doesn't like my tone. I don't like it when the member refers to these projects inaccurately, so I think it stands to reason that both of us may get irritated at some points with each other. That's the process of estimates, I imagine.

The fact of the matter is that the joint venture, Flatiron and Kiewit, is not responsible for maintenance of this highway. We as the province, as we do with every other piece of highway infrastructure, will be the ones that manage and oversee that. At the end of the term of the existing Mainroad contract, we will issue a new contract and tender a new contract for maintenance. It will likely be on the same basis that we do all our other contracts, typically ten-year terms, and we will likely do the same thing on this project.

Of course, it always remains, as it always has, government making those decisions and tendering those awards. British Columbia companies up to this point have been exclusively the ones that have delivered those maintenance services very competently across the province.

M. Karagianis: If in fact that's not part of the long-term plan here — the maintenance and operations — then I want to go back to the original premise. I know the minister originally outlined that the project itself, the scope of the project, was part of the tendering process. The expectations of what the deliverables would be on that were part of the project — and, of course, the tolling. A set toll was to be part of the procurement and tendering process. That's what any of these concessionaires would bring to the table.

[1150]

Given the fact that a 35-year contract was the basis for this original privatization scheme and that maintenance and operations of the bridge were part of that and that the tolling of $3 per vehicle was part of that formula, where does that leave us with regard to the tolling?

This is now a public project that is strictly a design-build with a finite dollar amount on it. So certainly the tolling fee that was set at $3 was part of the original 35-year deal to pay off the Macquarie Group under the privatization deal. If that's all not part of the plan anymore, and it's been streamlined down to simply being a design-build, where do we sit with regard to the tolls — the length of time that we will be tolled, the amounts of the tolls and all of that? They're not part of a 35-year payback, so how are they going to be handled?

Hon. K. Falcon: The toll amount and the toll term — a 35-year toll term, and then there's a five-year construction period — pay for everything. They pay for the cost of building all the infrastructure and making all the improvements to the infrastructure and all the maintenance of the infrastructure over the entire term. So that doesn't change. That's still in place.

I think that while this is, I'm sure, interesting for the member, and I'm trying to give as much latitude as I can, I would remind the member that we're here to talk about a $100 million supplementary estimate for the Transportation Investment Corporation, and we might at some point want to get back to talking about that.

M. Karagianis: I am going to go directly there, because I'm just trying to define now the new scope of this project, how it's going to be maintained and operated. We certainly know somewhat now how it's going to be built and what the costs are.

The scope of this has changed considerably, and as all of this is going to be managed through the Transportation
[ Page 14149 ]
Investment Corporation — and we're looking at initially a fund here of $100 million and some future funding as well going into that — how that money goes in, what it's used for and how it's returned is, I think, a key part of this. I would hope that the tolling structure here is expected to be, as the minister said, to cover all the costs.

If, in fact, the 35-year tolls at $3 per vehicle per trip, plus the cost-of-living increase over the years…. Under the pre-existing agreement with Macquarie — and obviously now, if that same framework is going to be used — that's a return easily in excess of $14 billion over the life of the project.

Why would the government still be sticking with that as a framework if this is no longer a contract that is going to a privatization scheme that will also build, maintain, operate and make profit? We don't need to be making profit off the taxpayers of British Columbia here when we build infrastructure. So why are we sticking with the pre-existing structure for the tolling that was based on the original Macquarie agreement of 35 years?

I'd like to talk a little more about why we're sticking with the kinds of dollars that are going to be accrued there and what they are going to be used for. If this money is going through the Transportation Investment Corporation — and we haven't clarified yet exactly how money is going to be going in and out of that particular fund — I think it's important to then get into a discussion and establish exactly what the tolling structure is going to be and why we're sticking to the original dollar agreement and contractual length that we've agreed with in a privatization scheme that's no longer going to occur.

[1155]

The 35 years are going to have a huge return on those tolls. I mean, that is, in essence, a tax to the commuters across the Lower Mainland. I'd like to hear from government what the retirement of this tolling plan is going to be, if there is going to be one, or if this is going to continue to be an additional tax on the taxpayers of the Lower Mainland.

What kind of transparency can we expect in how that money is used to pay off the cost of the bridge and the other maintenance and operational requirements that go along with that? I'll be looking forward to hearing from the minister exactly what the tolling structure is going to be like.

Noting the time — I see that the Speaker is here — I would ask that we rise, report progress and ask leave to sit again.

Motion approved.

The committee rose at 11:56 a.m.

The House resumed; Mr. Speaker in the chair.

The Committee of Supply, having reported progress, was granted leave to sit again.

Hon. B. Penner moved adjournment of the House.

Motion approved.

Mr. Speaker: This House stands adjourned until 1:30 this afternoon.

The House adjourned at 11:57 a.m.

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