Delays with Infrastructure Construction Projects

From the June-July print issue, page 22

Almost every day across Canada news breaks that a major construction project is delayed. A subway or LRT line, a parkway, an airport, even a public square — it doesn’t matter — chances are that long after the project was due to open the site is still a dusty mess, yellow hardhats and heavy equipment are about, and barriers are still up. The photo op and grand ribbon cutting have retreated to a far distant horizon.
In its March 31 edition the Toronto Star listed nine major transportation projects in the Greater Toronto Area that were up to seven years late, millions over budget, and sometimes both. Among the most notorious is the Toronto York Spadina Subway Extension, a line tunnelling 8.5-kilometres northwest of the city. In March it was $150 million over its $2.6-billion budget and heading for being four years late. The Toronto Transit Commission fired two top engineering staff over this and other construction fiascos.
The TTC is not alone in its troubles. By late April workers were still fixing deficiencies at the $145-million PanAm stadium in Hamilton. It was supposed to be open 10 months earlier.
In downtown Toronto the endless renovations to Nathan Philip Square at City Hall are legend. “What in heaven’s name?” asked Mayor John Tory in April when he looked out his window and saw new construction fences being erected on the plaza, reported the National Post. Changes to the plaza were supposed to have been finished in 2012. “I just was so aggravated because I really want to declare this project over, to declare it as an unfortunate chapter in terms of the expenditure and move on, learning lessons from the thing as to how we can stop this from happening,” the mayor said. The budget has risen 50 per cent from $40 million to $60 million. Work has dragged on for so long that crews are now having to repair fountains that were installed three years ago as part of the renovations.
In Windsor the consortium building the Rt. Hon. Herb Gray Parkway to a future U.S. border crossing is reported to be paying $100,000 a day in fines because the 11-kilometre expressway is not open on time.
Western Canada does not escape. An expansion to Calgary Airport is running a year late, while Edmonton has three overdue projects: the Walterdale Bridge (a year late), the Metro LRT line (opening this spring, a year late), and the 102nd Street-Groat Road Crossing (work halted for weeks in April). According to the Edmonton Journal on April 8, so many projects have problems, Edmonton city councillors are questioning their procurement process. Councillor Michael Oshry said: “It might be a string of bad luck, but when you have three big projects late by this much, there might be something wrong with the selection.”
In Victoria, B.C., the unique Johnson Street Bridge ran into material supply problems and construction was at a standstill for 15 months. The budget has risen by the same steep curve we see in Toronto, from an original $63 million to $97 million.
It’s not just the complex, high-profile projects that are running past time. The Saskatchewan Ministry of Highways and Infrastructure released a report this spring that found more than half the province’s highway construction projects were late during the 2013-2014 fiscal year. It’s a recent trend: in 2008 only 29% of the highway contracts were delayed. Shantel Lipp, president of the Saskatchewan Heavy Construction Association, told the Journal of Commerce: “When I heard 51 per cent, that seemed high to us. We were shocked it had gotten to that point.”
It’s small comfort to know that Canada is not alone in this. KPMB International issued its “2015 Global Construction Project Owner’s Survey: Climbing the Curve” in mid-May. The report is based on 109 face-to-face interviews with the heads of companies and other organizations around the world that carry out large construction projects. The respondents were from across the Americas (38%), Europe, the Middle East, Africa and Asia-Pacific. A quarter of them represented government agencies. Their capital budgets ranged from US $410 million to more than US $5 billion. These people told KPMB that fewer than one-third of their projects in the last three years were completed on time and on budget. Only 25% of their projects came within 10% of their original deadlines, and only 31% came within 10% of their budgets.
Clearly there is a problem.

Finding fault
Delays inevitably mean spending more money, whether it’s the developer forced to pay financial penalties and spend more on labour, or the general economic toll paid by society and businesses for the inconvenience of ongoing construction and the traffic snarls that result.
Construction projects are highly complex so there are myriad reasons why things can go wrong. There is weather.An extremely harsh winter last year wreaked havoc on schedules, for example. And often there are unforeseen conditions, such as coming across an old sewer line that is in the way of new infrastructure. There are freak incidents, like the steel beams that bent several inches for unknown reasons when they were being installed on Edmonton’s 102nd Street overpass during a windstorm in April.
In the media, blame for the delays is cast around like seeds in a farmer’s field. The reasons are laid at the feet of contractors (for cutting corners and shoddy work that has to be redone); suppliers (sending inferior equipment); and designers (creating extravagant architecture and unrealistic green designs that demand more time). Sometimes the owners and politicians are held to account for managing things poorly, as in the case of the TTC subway.
And yes, consulting engineers are implicated. The Saskatchewan Ministry of Highways report, which was independently prepared by McNair Business Development, finds many reasons for delays, including contractors “stockpiling” projects to save work for the next season. But it also notes that problems have become worse since the Ministry began outsourcing more work to consulting engineers. The sheer volume of projects in the province meant that too many small and inexperienced contractors and engineering companies that don’t have the capacity to do the work were being hired. Another problem was that engineering firms weren’t being given enough authority by the Ministry to make decisions, which led to hold-ups on site.
Chris Newcomb, P.Eng., chair of McElhanney Consulting in Vancouver, recalls that problems come about through traditional scheduling practices. Municipalities often don’t approve their budgets for the design of projects until spring. “The artificial imposition of the financial year-end means that construction is jammed into the late summer and fall.” As a result he says, “Construction bids are higher and the contractors have a compressed construction schedule. If winter comes early some projects don’t get finished until the following spring, the environmental impacts are aggravated due to rain washing mud into creeks, and engineers’ estimates are often overrun because of the uncertainty of it all.”
From a project management point of view there are plenty of theories of why projects go wrong. R.S. Means, the cost consultants, have cited misaligned schedules, late-stage changes in project scope, and unrealistic designs.
A shortage of experienced staff is also causing problems, both in the private and the public sectors. And regulatory approvals can be a huge stumbling block on any project, but particularly when First Nations are involved where there can be a lack of structure, with no clear process, authority or deadlines.
In many cases the reason given for delays and poor projects is the all-too-common practice of hiring consultants and contractors according to who submits the lowest bid to do the work. “You get what you pay for” is not an axiom that owners who embark on construction projects seem to believe in.
No-one really gets to the bottom of what caused a particular project to be badly delayed unless it ends up in litigation. There each poor decision and mistake is ferreted out in laborious — and expensive — detail. By that time, at least in public projects, the damage has likely been done and the taxpayers are on the hook for the cost overruns.

Soldiering forth and QBS
Dr. George F. Jergeas, professor of project management at the Schulich School of Engineering, University of Calgary, gave a presentation in March on construction activity in the oil sands. As reported on March 24 by the Journal of Commerce, Jergeas believes what is needed to keep mega-projects on track is more attention at the “front end, the owner side of the business and the engineering side.” “The more engineering is involved, the more complete and better quality the design,” he said.
In Edmonton, Paul Ruffell, P.Eng., president of infrastructure for Tetra Tech EBA in Canada, says the same: “We’re not often allowed to put enough engineering into projects at the start. If you were to have infinite money and infinite time, you could do a design that allows the project to be completed in a straightforward manner. But of course you never do have infinite resources, so you do the best design you can and then soldier forth and deal with the situations that arise and impact the schedule.
Ruffell believes that using a qualifications-based-selection (QBS) process to hire an engineer can help. In this method engineers are pre-qualified for a job based on their expertise, so they can then sit down with the owner before the project’s scope of work is established and first share with the client all the things that can possibly go wrong.
In contrast, where price is the deciding factor for hiring a consultant or selecting their proposed design, the competitors are almost bound to downplay potential problems. “Pessimists don’t win bids,” says Ruffell. “You have to take the sunny view and say that things are going to align and everything will go swimmingly.”
John Gamble, P.Eng., president and chief executive officer of the Association of Consulting Engineering Companies-Canada in Ottawa, agrees. “The greatest source of disputes in any project is a matter of misaligned expectations. That is because most procurement systems are adversarial to begin with. Most procurement systems emphasize price. Some overtly, some subtly. What that effectively does is it encourages engineers, architects and contractors to minimally interpret the scope of work. It actually discourages them from identifying potential complexities.”
In contrast, he says, the consultants selected through a qualifications-based process can focus on the client’s needs. “Studies in the U.S. where they have had QBS in place for over four decades have demonstrated that both cost creep and schedule creep are dramatically reduced when QBS is used to select engineering and architectural consultants.”
Gamble adds: “In the case of a P3 or design-build project, using QBS is an especially effective approach because the private consortia are taking a huge leap of faith. So it’s more important than ever to have the right team.”

Public-private partnerships
fare better
In fact, public-private-partnerships (P3s) are turning out to be a better solution for bringing large infrastructure projects in on time.
TD Economics published a special report on March 31 responding to a previous one issued by Ontario’s Auditor General about the cost of P3s, also known as “alternative financing and procurement (AFP)” projects.
The TD economists pointed out that an independent review of 37 public-private-partnership projects completed in 2014 had shown that 73% of them had been finished on time or within a month of their scheduled completion date.
The primary purpose of the TD report was to show that even though P3 projects had cost more to finance than they would have using public funds, there was good reason. Before construction began on P3s the private consortia had accounted for potential risks and delays and built them into the price. In contrast, traditional projects frequently run into problems after construction, which causes budgets to escalate and deadlines to be delayed. “On the surface, P3s appear to have a higher price tag on the tangible aspects of the project than in a traditional procurement project,” says the TD report. “However, that ignores the fact that the tangible costs in an AFP are a more complete pricing of all of the risks of the project.”
The TD report also notes that one of the reasons that P3 projects come in closer to their deadlines is that a great deal of the engineering is done before shovels hit the ground. So it lists “time savings” as one of the primary benefits of the P3 model. It notes: “Although the tendering and contracting phase of a P3 may take longer due to the complexity of projects and contract arrangements, the construction phase is often accelerated. This minimizes public inconvenience and construction-time costs relative to traditional procurement. If a project is delayed, in most cases the private contractor would bear the cost.”
In other words, the reason P3 projects are successful is because the private owners realistically assess the true risks before they start. So Ruffell is right: if owners put more time and effort into the engineering up front, then the chances of a project bumping into unforeseen difficulties and being thrown off schedule become less likely.
On a positive note, many projects do manage to be completed on time, and even ahead of time. Good news is no news, however, and the successes slip under the media radar. Recent examples are repairs to the Gardiner Expressway in Toronto (two months ahead of schedule), most of the Toronto PanAm Games venues including the complex Athletes’ Village, and a new $278-million stadium in Regina, which in March was reported to be on track for opening in 2017.
But doesn’t the public have the right to expect that all construction projects should be completed at least reasonably close to the promised due date? Is there really a valid excuse for so many chronic delays?
“It’s about setting up expectations,” says Ruffell. He suggests it would be better to be honest at the beginning of a project and warn the public that construction often meets unanticipated snags. It’s a brave city manager who will stand up in council and admit it,” he says, but if we are honest, “stuff does happen.”
Another way forward is to have owners, engineers and contractors work together towards a solution. In Nanaimo on Vancouver Island a group of 140 people met all day on May 13 at the first annual Capital Projects Forum. Hosted by the Construction Council of Vancouver Island, the Royal Bank of Canada and Herold Engineering, the forum was to promote “constructive dialogue between owners, consultants and contractors.” It was to “focus on pursuing better collaborative work between owners and the construction community, to communicate effectively, demolish silos and generate better project delivery outcomes.”
Let’s hope it works.                           cce