By John Allen

In 2023 Canada invested around $36 billion in transportation infrastructure. This investment has grown substantially in recent years as provinces and municipalities try to keep up with the rapid growth of their communities. It still arguably isn’t enough to keep up with what is needed. That is why it is important to ensure every dollar is well spent. According to a recently published Australian study, rail projects see an average cost escalation of 45 per cent worldwide. And while some of that can be put down to inaccurate upfront forecasting, risk is a major contributor and an area where there are many opportunities to have a big impact to reduce project costs.

What is risk?

Risk is essentially the unknowns around projects. It is the unexpected gas pipe, or contaminated soil. It can also be from drawn out permitting processes or local stakeholder opposition. Anything that causes delays can reverberate through a project schedule and lead to significant project delays and cost escalation. The larger those projects get, the more those risks and consequences are amplified. Risk is like a cancer for projects. If not prevented or treated early, it spreads, and its consequences become much more serious.

The experience of handling risks has wider impacts on the market. Bidders having to price in risks they cannot control will build in contingencies as protection that drive-up project costs overall. Where risks are not properly dealt with it creates an increasingly fractious environment driven by disputes and costly legal challenges. Companies are stepping away from delivering transit projects because the financial impact of a project going wrong could have serious impacts on their company overall.

Targeting the usual suspects

Over time certain risks continue to crop up on transit projects. Their frequent appearance has perversely had some benefit in helping projects to anticipate those risks and draw on best practices to handle them better. These common risks include utilities, geotechnical conditions, municipal planning and permitting, site access, community interactions, supply chains, labour and skills, and certifications.

Early work around utility relocations is now common practice and Hamilton went a step further by using the upcoming LRT as an opportunity to refresh their old downtown underground infrastructure. British Columbia has supportive policy agreements with municipalities as a condition of transit funding to smooth through the permitting process, and Quebec and Ontario have brought in legislation to help provide greater certainty to timelines in areas like site access and permitting. Edmonton Valley Line West set clear expectations around local stakeholder engagement laid out through the lifetime of the project with an emphasis of proactive relationship building with key stakeholders and timely responses to queries.

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Risk isn’t static

Through a project’s delivery timeline risks evolve, they grow, and can fade away. There are four critical stages where risk is heightened and need special attention: Pre-contract award, at contract award, through transitions, and entry into operations.

The biggest potential to impact risk is early in the project preparation. The collection of data, engagement with the market and local community, how procurement and contracts are crafted, and having supportive plans around the environment or employment and training can all have major benefits. British Columbia sets the standard around transparent market engagement to shape the approach chosen, help identify project risks, and build confidence among suppliers.

The period between selecting a winning bidder and contract award can stall momentum, and waste time at a critical point. Get a bad start and things can quickly snowball. The Eglinton West LRT provides an excellent template to follow with the owner working hard to do all they could to ensure the successful bidder could hit the ground running. This included mapping out and progressing all necessary permits, undertaking site preparation, and carving out budget for key equipment and early enabling work to put the project on the best possible footing.

Risk is also significantly heightened through project transitions and interfaces between different specialisms. People can tend to work in silos and focus on their own piece of the project. It is important to drive good communication, have clear accountability, and put in place the right incentives to encourage each component part to think of overall project success and work with each other.

Finally, a project is not deemed a success until a train is successfully up and running, carrying passengers. Transit projects are no longer about steel and concrete, but about technology too, and that adds a layer of complexity. The experience of Crossrail in the UK was particularly telling, with 20 per cent of the project cost—the technology and systems—accounting for 80 per cent of the issues. Operators need to be brought in early and time carved out early for critical pieces like testing and certifications.

People, information, time

It is impossible to plan for every eventuality, which is why projects need to have some strong fundamentals in place. People, information, and time need to be at the heart of how processes and contracts are structured, and how projects are managed day-to-day. By prioritizing these three themes it provides a checklist for the fitness of the project to adapt to risk.

People are at the heart of everything, and the project needs to be set up to empower people to make decisions on-site, have clear accountability, and drive collaborative behaviour. Maintaining a positive working environment and focus on what is best for the project, helps to keep people focused on successful project delivery.

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Projects produce warehouses worth of information, but much of it is often in siloes or designed for box ticking as opposed to serving a specific purpose or adding value to the project. There should be a clear shared view of where a project is doing well and where it faces challenges to help keep everybody focused. The potential of digital tools also promises to vastly improve outcomes if matched with effective project governance.

Finally, an emphasis on time. Reducing any uncertainty around timelines that can come from internal or external sources, and identifying internal processes that are adding time to a process but little overall value. Eglinton West for example introduced pre-submittal meetings that substantially cut the number of resubmittals required for project documentation by ensuring questions could be answered directly without any ambiguity and priority feedback incorporated.

Driving change

Canada has been fortunate that in recent years political parties of all stripes have recognized the importance of investing in infrastructure. This support cannot be taken for granted. Government budgets need to be balanced and escalating project costs will get to a point where the calculation of where to invest reaches a tipping point away from infrastructure towards delivery of public services. This is why the public and private sectors must work together to tackle project risk and improving the track record of on-time and on-budget delivery for transit.

The good news is that projects across Canada are looking at things differently to address project risk. Much like in tackling a medical scourge like cancer, we can be a lot more effective by sharing data on the causes of risk, and what works in addressing it. This will benefit everyone in the end.

Best practices

Eglinton Crosstown West Extension A 9.2-kilometre light rail project running from Toronto to Mississauga. It introduced a series of proactive measures to identify, proactively manage, and create an environment to tackle risk. Particularly striking was the use of incentives for reaching early milestones, which focused minds early, around handling of issues that would typically just be claims. The contingency pot which is usually a relatively unsophisticated financial buffer for the project for unexpected costs has been made to work smarter. The contingency pot, has been calculated by pricing out project risks and whatever is left at the end is shared 50-50. This does not impact the rights of the contractor to put in a legitimate claim, but it has had a significant impact on mindset, with contractors coming with solutions to reduce the impact of an issue or avoid it altogether rather than just submitting a claim.

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(Metrolinx)

Union Station Enhancement Project The track and platform work that is critical at Canada’s busiest rail station is enabling the massive expansion of rail service across the Greater Toronto Area. It is particularly complex as it is being delivered as trains continue to run and passengers continue to travel. It is the first major transit project using an Alliance delivery model that focuses on collaborative behaviour. Underpinning the approach is a gain-share mechanism that ensures all parties are rewarded for the project being delivered successfully. Beyond that there are many interesting mechanism and softer behavioural elements that focus on creating a collaborative environment. These include having a shared “best for project” charter, co-locating teams, using key result areas around factors such as team retention and stakeholder satisfaction, and looking at behaviour as a factor to evaluate procurement.

Surrey-Langley Skytrain A 16-kilometre extension to the Expo Line in British Columbia includes an elevated guideway and eight stations. The project sets the benchmark for transparent market engagement in Canada. Market feedback is published in a report that feeds into procurement evaluations and risk reports to ensure perspectives from those who will be delivering the work are gathered early when they can have the biggest impact. Early, open engagement both taps into local insights about what can cause problems and helps establish trust from day one.

(JF Savarna/REM)

Réseau express métropolitain A 67-kilometre light rail line serving the Montreal region with 26 stations linking the downtown with the southeast and northwest. It was delivered in a unique way by CDPQ, Quebec’s pension plan, but the rigour brought to reducing overall project risks provides lessons for other projects. A key area was around providing timeline certainty that came via provincial legislation to provide fixed timelines for securing permits. The environmental assessment process had greater flexibility, which reduced the need to resubmit applications with a small design change, with the project setting out a clear environment plan from the start. REM leveraged the use of digital tools to better manage project risks jointly and improve internal communication. They also used standardized designs for stations to provide replicability and economies of scale.

John Allen is vice president at Global Public Affairs.

[This article originally appeared in the July/August 2024 edition of ReNew Canada]

Featured image: The Eglinton Crosstown West Extension will run 9.2 kilometres from the future Mount Dennis LRT station to Renforth Drive and will operate mainly underground. (Metrolinx)

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