The Toronto York Spadina Subway Extension (TYSSE) to Vaughan has been much in the news lately thanks to its delayed opening and cost overruns. The line was originally expected to open in 2015, even in early rosy estimates before the Pan Am Games, but now will not be in service until 2017. The project was repeatedly cited (as recently as December 2014’s CEO Report) to be on its budget of approximately $2.6-billion. The exact final cost is not known but has been reported to be up to $400-million more.
To date, the TYSSE project is on budget with a total budget of $2,634 Million. The in-service date is targeted for the fall of 2016 however the project is facing a serious schedule challenge. [CEO’s Report for November-December 2014, p. 29]
The “on budget” statement, which had appeared in all previous CEO reports, vanished with the January 2015 report.
A peer review was conducted by an APTA panel in late 2014 largely to assess schedule and budget challenges. A report is expected at the end of January related to schedule and budget challenges and will make recommendations to mitigate these challenges.
Bechtel Ltd., a consulting firm, was also retained at the CEO’s specific direction to conduct a thorough in depth analysis of the project and likewise is expected to present its findings at the end of January. [CEO’s Report for January 2015, p. 30]
The results of these reviews are to be tabled at the March 26, 2015 TTC Board meeting.
There are two issues in play here. First and most obvious is the question of how a major project can suddenly be found to have budget problems, and why these were not discovered and reported sooner. How much oversight did the TTC Board actually have beyond the one-line monthly assurance that the project was “on budget”? Second is the more general question of the tracking of major projects, and why this is not regularly reported to the Board and through them to City Council and other funding governments.
To learn as much as I could from publicly available sources, I culled through TTC meeting reports going back to the early days of design work on the TYSSE. Tracking a project’s history this way can be challenging for various reasons:
- Some agendas exist only as a PDF file without links to the underlying reports.
- TTC procurement policy allows contracts of up to $5-million to be approved by management without a report to the TTC Board. (This is in line with the City of Toronto’s policy.)
- A monthly report listing all expenditures authorized by management in the $1-5m range was discontinued in March 2012.
- Changes in the total authorized spending on a line item only appear in public when there is an update involving a large contract change.
- The CEO’s report tracks variations in capital spending, but this is only against the expected amount for the current year, not for a project overall. Because of various delays, the TYSSE tended to underspend versus plans even though the estimated total cost to completion might actually be rising.
A detailed breakdown of the TYSSE budget was included in a March 2008 report on project delivery alternatives. This included a review of schemes such as those advocated by Queen’s Park which were found wanting at least in part because of reluctance within the construction industry to assume the risk on large contracts outside of the traditional procurement method.
The table at the end of the report lists the major project costs, and these total $1.889-billion (2006$). The body of the report states:
The estimated cost of the Project, unescalated (July 2006$), is $2.090 billion. When considering costs at year of occurrence the estimated final cost in 2015 is $2.633 billion.
The discrepancy between the unescalated cost and the total of the values in the table is not explained.
The TTC’s Capital Budget breaks down the project costs on a simpler basis. Although the total project cost is $2.634b, some items are notably different from the 2008 estimates:
- Property & Miscellaneous Costs set at $99.7m in 2008 are zero in the 2015-2024 budget.
- “Other” Costs appear in the 2015-2024 budget with total spending of $103.4m, but an estimated final cost of only $23.4m. These could be items that have been or will be reimbursed by other parties, or costs that have been transferred to other project budgets. No details are provided, and this type of third party cost transfer only occasionally appears in TTC Board reports.
- Vehicle costs of $149.5m appear in the 2015-2024 budget, but they are not included in the 2008 list.
- The 2008 report included a contingency of almost $400m. There is no information about how this has been disbursed among the budget lines.
When the TYSSE was first contemplated, the TTC’s projected fleet would be large enough to handle the extension without more vehicles. However, the decision to switch the YUS to TR six-car trainsets and to retrofit automatic train control (ATC) meant that the T-1 fleet could not be used on the YUS. The result was that the T-1 fleet was shifted to the BD line (and is large enough to accommodate the Scarborough Subway Extension), and a separate order for 10 TR sets was added for the TYSSE. This probably took a big bite out of the contingency.
Estimates and Contract Awards
Estimates and contract costs for stations have been through a few iterations.
- The original 2006$ estimates cited in the 2008 report.
- Updated estimates appearing in reports during the design phase.
- Estimates and awards for design contracts (these would grow as designs changed and construction progressed).
- Construction contract awards.
- Construction change orders (generally not reported because the dollar value is lower than the reporting threshold).
In two cases, Sheppard West and Highway 407, the station construction is included with the tunneling contract, and so there is no separately reported cost for the station itself.
For the stations that are not included in tunneling contracts, the most recently reported cost of design and construction contract awards and changes exceeds the most recently published cost estimates.
In the case of the two bundled station contracts, if the estimated cost of the stations is removed from the total of tunnel-related contract awards, what is left is in line with the 2006 Tunnels and Running Structures estimate adjusted for inflation (taking that factor at about 25% by analogy to the increase from 2006 estimates to 2015 projected total costs).
For readers interested in the details of additional costs at stations, here are links to reports containing some of the information. The lists here reflect conditions known to the date of the reports, and more issues no doubt arose during construction.
- Sheppard West Station
- Finch West Station
- York University Station
- Steeles West Station
- Highway 407 Station
- Vaughan Station
Other Project Costs
As for other cost categories, there is some variation both above and below the original estimates. Some of this is undoubtedly caused by my assignment of contracts to specific budget lines, and I leave it to the reader to see how some of these are a wash.
However, there are some areas of note:
- The cost for signals has more than doubled from the original estimate. This was awarded in two segments, one for the base contract, and another to add ATC for a total of $45.8m between the two awards.
- Wilson Yard changes are triggered by a combination of factors including the increase in fleet size (10 new trains for TYSSE plus 10 more new trains for service growth), and by reorganization and expansion of carhouse space to accommodate 6-car trainsets in place of the married-pair T-1s. Only part of the cost shown here is strictly due to the TYSSE project, but the proportion is not broken down in TTC reports.
- Project engineering is considerably below the original estimate. It is possible that some costs I have included elsewhere belong in this category, but if so, the most likely component is station design (currently totalling $159m).
Adding all of this together does not get us to the projected total of $2.6-billion, let alone a $400m overrun, and so there must be other costs that have not yet been reported, or are for items yet to be tendered.
The private agenda for TTC Board meetings has included items on both the Highway 407 and Steeles West station contracts for some time. Recently, the ATC signalling contract joined the list.
There is a bona fide reason for private meetings when contractual and legal affairs are under discussion including issues such as non-performance and penalties. However, the mere presence of these items should be a red flag. Indeed, problems with some contracts have been noted as a general issue in public reports, but with no specifics beyond a delay to revenue service.
Something of a “Catch-22” applies to these discussions because a change in project estimates could signal to a contractor that more money is available if only he holds out long enough. The question, then, is whether project costs have been reported as “on budget” as a matter of negotiating tactics, or to avoid the inevitable fallout of cost overruns, especially in the run-up to an election which, for a time, included a former TTC Chair as a candidate.
A fundamental rule of governance at any body is that the Board should not be able to say “we didn’t know”, and especially not “we didn’t ask”. This is an issue at least as important as the mechanics of project management, design and construction.
There is more to learn about the TYSSE project, and clearly the bills are not all yet in. However, a few basics are quite clear:
- Public reports have not reflected the evolving cost of components of the project, nor raised any flags about costs.
- There is almost no public reporting of change orders and their effect either on anticipated cost or on design elements (e.g. simplification) of stations or other elements.
- The degree to which site conditions affected design work suggest a fundamental problem with the amount of preliminary investigation and design undertaken for an Environmental Assessment and initial project estimates.
- Cost estimates, including those as recent as the 2015 Capital Budget, may not reflect actual conditions on the project. This has severe implications both for the City and for other capital projects, especially those that are “unfunded”.
I cannot help being amused by suggestions from Queen’s Park that the City and TTC could do better, and especially that a move to “Alternative Financing and Procurement” would solve everything. The Metrolinx Board meets quarterly, and receives considerably less information about its projects (at least in public) than the TTC. If they have concerns about cost controls, these are not reflected in statements by Board members. Unlike the City, a provincial agency can announce projects in current dollar costs, and there is little or no public review of how these might evolve through either change orders, construction delays or inflation.
There are always concerns about transparency in public spending – the “your tax dollars” argument – but this is too often manifest in debates over how short a pencil must be before it is replaced, not the big ticket items. Councillors and Board members should not be required to review every penny of spending – that’s why they hire management – but they should be able to track projects and expect their managers to flag problems before they get out of control.
This is not the only TTC project where site conditions have played havoc with project cost estimates. Too often during the preliminary phase we hear “that’s too detailed a level of exploratory work” even though site conditions could be a deciding factor – absent political interference – with the selection of options. By the time the horror stories come out, the selection is cast in stone, and the only option is to forge through whatever difficulties might arise.
This is not just an issue of finding a few public servants, maybe even some consultants, to take out to the woodshed. As those who follow Vancouver politics will know, an attempt to gain additional transit funding through a sales tax may fail in a coming referendum because Translink is seen to be an incompetent, wasteful steward of public funds. Exactly the same argument is heard in Toronto when more generic, transit-directed funding makes an appearance for debate.
Transit’s credibility depends on the ability of governments to deliver service and to get good value for the money they spend. The perceived lack of transparency and control on the Spadina extension project does great damage to the credibility of transit advocacy and to the TTC in particular.