Introduction

Background

4.1 Canada’s economic success is closely linked to the strength and competitiveness of its transportation system, which enables trade within the country and with other countries. International trade represents more than 60% of Canada’s gross domestic product and relies on moving goods in and out of the country.

4.2 Goods are moved to, from, and through Canada using a network of roads, bridges, rails, airports, and seaports (Exhibit 4.1). Gateways^{Definition 1} and trade corridors^{Definition 2} are important components of this network and are part of the overall supply chain.^{Definition 3}

4.3 Canada’s multimodal transportation system enables trade, which is critical to Canadians’ prosperity and quality of life. When this system does not perform well, Canadian exporters are less competitive in foreign markets, Canadian consumers pay higher prices for goods, and Canadian businesses pay more for raw materials, making their products less competitive at home and abroad.

4.4 To maintain and develop Canada’s gateways and trade corridors, the Government of Canada has established various programs to provide funding to provincial, territorial, and municipal governments; airports or port authorities; and universities and private firms (such as railway companies) involved in the transportation industry. The most recent of these programs is the National Trade Corridors Fund, launched in 2017 and administered by Transport Canada.

4.5 The National Trade Corridors Fund supports infrastructure projects in Canada, such as work on airports, ports, railways, railyards and storage facilities, public highways, and access roads. The fund provides money for projects that aim to

• improve the flow of goods within Canada
• increase the flow of trade in and out of Canada
• help the transportation system to withstand the effects of climate change and better adapt to new technologies and innovations
• address the transportation needs of Arctic and northern communities

The National Trade Corridors Fund’s initial budget was $1.9 billion over 11 years (2017–18 to 2027–28). The budget was expanded in subsequent years, and as of August 2023, it stands at $4.6 billion.

4.6 Transport Canada. The department is responsible for developing and overseeing the Government of Canada’s transportation policies and programs so that Canadians can have access to a transportation system that is

• safe and secure
• green and innovative
• efficient

The department provides funding to public and private organizations that strengthen the transportation network. In particular, Transport Canada is responsible for designing, implementing, monitoring, and reporting on the performance of the National Trade Corridors Fund. Final decisions on which projects to fund under this program are made by the Minister of Transport or the Treasury Board.

4.7 In September 2015, Canada committed to the United Nations’ 2030 Agenda for Sustainable Development. In 2017, the Office of the Auditor General of Canada committed to examining how federal organizations are contributing to the United Nations’ Sustainable Development Goals. The matters examined in this audit relate to Goal 9 (Industry, Innovation and Infrastructure) and Goal 13 (Climate Action).

Focus of the audit

4.8 This audit focused on whether Transport Canada designed, implemented, and monitored the National Trade Corridors Fund effectively to improve the fluidity and resiliency of transportation corridors.

4.9 This audit is important because improving Canada’s trade-related transportation infrastructure contributes to the country’s economic success, improving the quality of life for Canadians. The audit is also important because it examines whether the money from the National Trade Corridors Fund was allocated to recipients based on merit, fairness, and transparency.

4.10 More details about the audit objective, scope, approach, and criteria are in About the Audit at the end of this report.

Findings and Recommendations

Transport Canada designed the National Trade Corridors Fund to address the main needs of Canada’s transportation system

4.11 This finding matters because the National Trade Corridors Fund needs to make investments in locations with capacity pressures or bottlenecks. Also, it is important for Transport Canada to be aware of the needs and opportunities in Canada’s transportation corridors to make informed decisions and demonstrate accountability.

4.12 The purpose of the National Trade Corridors Fund is to provide federal funding for projects and activities that strengthen the fluidity^{Definition 4} and resiliency^{Definition 5} of national trade corridors, including those related to northern infrastructure. The department issues calls for proposals to solicit and select eligible projects that meet the objective of the fund. Funding for eligible expenses is provided for the selected projects as a federal contribution and is subject to reporting and performance conditions specified in a contribution agreement.

Design of the fund informed by evidence

4.13 We found that Transport Canada used relevant information on the state of Canada’s transportation corridors to inform the design of the National Trade Corridors Fund. The calls for proposals that the department designed for the fund aligned with this information and evolved to target transportation system needs (Exhibit 4.2).

4.14 The fund was intended to be flexible in order to address the evolving needs of Canada’s transportation corridors in the dynamic environment of global trade flows. We found that Transport Canada designed the calls for proposals in a way that was consistent with this flexible approach, with calls that had either broad or targeted objectives based on the evidence about fluidity and resiliency needs.

4.15 We found that the calls with broad objectives were designed using an evidence-based approach. For example, the department developed an internal tool to support investment decision making, which presented a list of eligible and recommended projects on a map, overlayed with information about known trade-corridor fluidity issues.

4.16 We also found that the department designed the targeted calls using an evidence-based approach. For example, call 6 targeted Canadian ports, which were experiencing congestion issues, as was shown in the available data at the time. Similarly, the department designed call 7 to address digital infrastructure challenges identified by research in this area.

The department assessed project proposals based on merit but could not demonstrate on what basis it prioritized some meritorious projects over others

4.17 This finding matters because assessing the project proposals based on merit and then selecting which ones are recommended for funding are essential steps in prioritizing limited funding and ensuring that transportation needs are met. These steps also support accountability, fairness, and transparency.

4.18 The department issued calls for proposals to solicit and select projects that met the objective of the fund. According to Treasury Board policies and departmental guidance, once eligibility was confirmed, the proposals received should be assessed and selected based on merit and the strength of the business case. Eligibility requirements and the criteria against which applications would be assessed should be made available to applicants. After evaluating the merit of proposals, the department was responsible for providing a shortlist of funding recommendations to the Minister of Transport. Final funding decisions would be made either at the ministerial or Treasury Board level.

Merit-based approach for assessing eligible project proposals

4.19 Transport Canada’s approach to assess eligible project proposals and select which ones to recommend for funding was a 2‑stage process:

• Stage 1: The evaluation team assesses merit and makes preliminary recommendations for funding to committees.
• Stage 2: Committees review evaluations and finalize recommendations for funding.

4.20 In stage 1, a multidisciplinary team of department officials used evaluation grids to assess the merit of each eligible project. We examined the merit criteria in the evaluation grids and found that they aligned with the selection criteria principles of the fund and with the objectives of each call. We also found that this stage was implemented in a transparent manner using the merit criteria that were publicly available at the launch of each call.

4.21 We looked at whether the proposals were evaluated in a consistent manner, with each criterion assessed by more than 1 person. Overall, we found that the merit criteria were assessed by a team using the evaluation grid as intended and that a preliminary recommendation was established in stage 1 for consideration in stage 2.

No documentation of the basis used for recommending some meritorious projects for funding over others

4.22 In stage 2 of the process for evaluating the proposals, Transport Canada set out to conduct various reviews in committees to ensure the consistency of the merit-based scoring from stage 1 and to finalize the list of recommended proposals. We compared recommendations by review committees in stage 2 against the results of merit evaluations from stage 1. We found that in 15% of cases, recommendations by review committees in stage 2 differed from stage 1 results. The department told us that the review committees discussed evaluations, scores, and other considerations before finalizing the list of recommended proposals. We found, however, that the department had no documentation of the rationale used by review committees in validating scores and prioritizing projects, or of the justifications for selecting which ones to recommend or not recommend for funding (Exhibit 4.3).

4.23 We found that the department provided documentation to the Minister of Transport explaining the benefit of the individual projects being recommended for funding. However, this documentation was insufficient to support the review committees’ additional considerations and ranking of the proposals.

4.24 The Minister or the Treasury Board ultimately makes the final funding decisions. We did not examine the Minister’s reasons for exercising their discretion and whether it was properly exercised. We found no occurrence of funding being granted to ineligible recipients.

4.25 In support of the transparency and fairness of the project selection process, Transport Canada should document the review committees’ work, including the rationale used when validating project evaluation scores and applying additional considerations for identifying which proposals to recommend for funding.

The department’s response. Agreed.

See Recommendations and Responses at the end of this report for detailed responses.

The department did not effectively monitor and report on results

4.26 This finding matters because monitoring and reporting on results help Transport Canada to determine whether the funding provided is being used to meet the intended outcomes of the National Trade Corridors Fund. Monitoring and reporting on these results are also important for identifying when to make adjustments to improve the performance of projects supported by the fund.

4.27 Programs like the National Trade Corridors Fund require a performance measurement strategy for the ongoing management of the program. This strategy must identify the expected results of the program and have performance measures and indicators for monitoring and reporting.

4.28 Once a project is approved for funding, Transport Canada must develop a contribution agreement that states the terms and conditions under which the funding is provided. The agreement also includes a description of the results to be achieved by the recipient, including collecting and reporting on measurable performance indicators at the project level.

Lack of reporting on the outcomes of the program to improve transportation corridors

4.29 We found that Transport Canada’s original approach to measure the outcomes of the National Trade Corridors Fund was ineffective, as it used program-level performance indicators that were either not practical or that could not be measured. For example, one of the original performance indicators was as follows: “Capacity added to the transportation system measured at the project level.” This indicator did not have a target that specified how much capacity was to be added or by which date. It also did not include a method for tracking the relevant data at the project level, and it was never reported on by the department.

4.30 In 2021–22, the department developed a revised performance measurement strategy that included new performance indicators, such as “transit time of goods.” While the new indicators were more measurable and practical, we found that they showed the actual performance of the transportation system, rather than improvements to the fluidity of trade corridors that could be directly attributed to the projects completed under the fund. As a result, the department had limited ability to demonstrate project-level results and the impact of the fund on the fluidity and resiliency of transportation corridors.

4.31 Our recommendation in this area of examination appears at paragraph 4.43.

Ineffective monitoring of project results

4.32 As part of the funding agreement, each funded project was required to have a performance measurement strategy with performance indicators in place to demonstrate results. The performance measurement strategy and performance indicators were co‑developed by the funding recipient and Transport Canada. We found that at the onset of the program, the department had not developed standard performance indicators to monitor and report on results of individual projects. This hindered the department’s ability to tabulate and roll up the results from individual funded projects to inform program-level performance.

4.33 As of August 2023, Transport Canada had selected and approved about $3.8 billion in funding for a total of 181 eligible projects on the basis of their expected contributions to meeting the National Trade Corridors Fund’s objectives (Exhibit 4.4). As of that date, 30 projects had been completed and about $711 million had been spent (Exhibit 4.5).

4.34 We examined a representative sample of the signed contribution agreements for the 116 projects that were underway. Our sample contained projects that were dedicated to the Arctic and northern region and other national projects that were taking place elsewhere. We found that half of the projects (27 out of 54) had an incomplete performance measurement strategy in place. Of those, 19 were from the Arctic and northern region, representing 95% of the projects in our sample for that region. Other projects (3 out of 54) had no strategy at all (Exhibit 4.6).

4.35 We also examined the final reports of the 30 completed projects. We found that half of them had incomplete performance reporting. Of the 30 final reports,

• 30% (9 of 30) had no results reported at all
• 20% (6 of 30) contained some reporting on results, but information was missing in order for them to be useful, such as a baseline, a target, or other information required in the performance measurement strategy
• 50% (15 of 30) had reporting against their targets (6 had met all their targets, 7 had met some targets, and 2 had met none)

4.36 In the cases where the results were not reported, we found that some funding recipients did not report them because those results would not become available until a future date. For example, an airport storage project had expansion work completed, but the expanded facility was not yet operational, and therefore, results on increased performance could not be reported. We found that the department had no concrete plans to follow up with recipients to obtain the missing results.

4.37 We found that in 2023, Transport Canada took steps to improve its monitoring of performance at the project level. The department developed new standard performance indicators (Exhibit 4.7) from which funding recipients could select those applicable to their projects. These new indicators were incorporated into the contribution agreement template in June 2023. We found that 9 recently signed contribution agreements, representing $84 million of federal funding, used the updated template.

4.38 However, we found that the performance monitoring improvements were not carried through to the other 107 projects out of the 116 already underway. These 107 projects amounted to over $2 billion of investments under the fund. In our view, gathering performance results for all projects based on standard performance indicators would allow the department to evaluate and monitor both project- and program-level results.

4.39 Our recommendation in this area of examination appears at paragraph 4.43.

No reported results on the fund’s contribution to United Nations’ Sustainable Development Goal indicators

4.40 In terms of its contribution to the achievement of the United Nations’ Sustainable Development Goals and targets, Transport Canada identified the National Trade Corridors Fund as a program that contributes to the achievement of Goal 9 (Industry, Innovation and Infrastructure) and Goal 13 (Climate Action) and the following associated targets:

• Target 9.1: “Develop quality, reliable, sustainable and resilient infrastructure, including regional and transborder infrastructure, to support economic development and human well‑being, with a focus on affordable and equitable access for all.” This is measured by indicator 9.1.2: “Passenger and freight volumes, by mode of transport.”
• Target 9.4: “By 2030, upgrade infrastructure and retrofit industries to make them sustainable, with increased resource‑use efficiency and greater adoption of clean and environmentally sound technologies and industrial processes, with all countries taking action in accordance with their respective capabilities.” This is measured by indicator 9.4.1: “carbon dioxideCO₂ emission per unit of value added.”
• Target 13.1: “Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countries.”

4.41 The department incorporated the following activities into its sustainable development plans and reporting and into the delivery of the fund:

• strengthening the resilience of transportation networks to the impacts of climate change (targets 9.1 and 13.1)
• promoting sustainable transportation by reducing greenhouse gas emissions (target 9.4)
• increasing the efficiency of the transportation system (target 9.1)

4.42 Consistent with our findings on program-level performance reporting, we found that the department had not reported any concrete results on the contribution of the fund to achieving the sustainable development targets. We noted that the updated standard performance indicators included indicators that would allow direct reporting of the fund’s contribution to the sustainable development targets.

4.43 Transport Canada should strengthen project-level performance evaluation and monitoring to allow the consistent and timely gathering of performance information for future projects and those underway and to allow the roll‑up of results from individual funded projects to inform program-level performance and accountability.

The department’s response. Agreed.

See Recommendations and Responses at the end of this report for detailed responses.

Conclusion

4.44 We concluded that overall, Transport Canada designed and implemented the National Trade Corridors Fund effectively to improve the fluidity and resiliency of transportation corridors. However, the department did not effectively monitor the program’s results.