Sask. hospital expansion raises questions about the rising cost of raising a building

With Friday’s announcement that PCL Construction won a nearly $1 billion contract to build an expansion of the Victoria Hospital in Prince Albert, many Saskatchewan residents balked at the price tag.

Less than a year ago — July 2023 — the province committed $300 million for it. How did the bid end up coming in at $898 million — nearly triple the price?

A spokesperson for SaskBuilds, the Crown corporation responsible for procuring the contract, defended the price tag.

While the Jim Pattison Children’s Hospital was completed in 2019 with a final price tag of $286 million, SaskBuilds cited Statistics Canada data showing the cost of non-residential construction in Saskatchewan has risen over 41 per cent since 2017.

Since 2020, the cost of concrete has increased over 30 per cent, and the cost of steel has increased over 80 per cent, SaskBuilds says.

On a cost per square foot basis, they say the Victoria Hospital expansion comes in significantly cheaper than similar builds in other provinces.

“By way of comparison, similar projects in British Columbia, Manitoba and Ontario have come in at costs ranging from $2,700 to $3,800. The Prince Albert Victoria Hospital Project cost per square foot is an estimated $2,044,” SaskBuilds said in a statement to CTV News.

SaskBuilds says the government hired an independent cost consultant to assess PCL’s bid and they “found that the cost is reasonable and appropriate.”

The Saskatchewan Construction Association (SCA) says the location of a project can impact how much a contractor will pay for labour.

Labour is always hard to come by in the construction industry, according to SCA co-CEO Shannon Friesen.

“The competition for labour is extremely intense, so if you’re outside of Regina or Saskatoon, the costs for labour are really, really expensive, double the cost of what it would normally cost to recruit,” she said.

Contractors assume considerable risk with a complex long term project like a hospital build, said Friesen, and the greater the risk, the more a contractor will charge to buffer against uncertainty.

University of Toronto construction management expert Tamer El-Diraby questions whether such a steep increase in the price of a hospital could be attributed to market factors alone.

“If it is true in July it was $300 million and now it's almost $900 [million], there is something major that's taking place and it's not the market,” he said.

While there is always a shortage of labour in the construction industry, El-Diraby says these days people are more willing to move to work on major multi-year project.

“My suspicion is the project has increased in scope.”

A change in scope would occur if there were features added later in the process that added to the complexity of the project, says El-Diraby.

However, in an email to CTV News on Thursday, SaskBuilds maintained there have been “no changes in key outcomes since conception of the project.”

According to the Government of Saskatchewan, the agreement with PCL Construction includes the design and construction of a new acute care tower connected to the existing facility.

The tower will feature a heliport on the roof, an expanded emergency department, larger operating rooms, pediatrics, maternity, NICU, new medical imaging, and a First Nations and Métis cultural space to be developed in consultation with the Prince Albert Grand Council.

The agreement also includes an option to retain PCL for phased future renovations to the existing hospital, not included in the $898 million budget.

Construction is set to begin in the spring, with an anticipated completion in 2028.