The Province of Ontario is not exactly transparent when it comes to reconciliation of announced project costs and actual spending, let along the changes that might occur along the way. A project, or group of projects, might be announced with a value in then-current dollars, and without necessarily including all future contract costs. There are various reasons behind this approach including:
- The government does not want to tip its hand on the amount of money “on the table” to prospective bidders who might tailor their bid to the perceived level of funding.
- Some contracts include future operating and maintenance costs as well as capital costs. In some case the announced cost does not include the O&M component, only the estimated capital portion.
- Provincial projects are typically quoted in then-current dollars with future inflation to be added as it occurs, at least to the point where there is a contract in place which includes that provision.
This approach hides the likely as-spent costs and makes provincially run projects appear cheaper, at least in the short run.
This is fundamentally different from the way the City of Toronto tracks projects and how TTC requirements are reported. Specifically:
- City project cost estimates include inflation to completion because this is factored into future funding requirements.
- City projects do not bundle future operating costs with capital, but report them separately.
Note that cost estimates shown in the Infrastructure Ontario market reports do not necessarily match values shown by Metrolinx because IO shows these values on a different basis. Future operating and financing costs are no longer included in IO estimates so that a project’s value reflects only design and construction costs, a value that gives potential construction bidders a general size of the project’s scope.
Infrastructure Ontario notes on the November 2022 Market Update that we have modified the methodology used to calculate the estimated costs as presented on the chart. In May 2022, and for Market Updates prior to that, we used the Estimated Total Capital Costs. For the latest update, and going forward, the costs listed only include Design and Construction costs.
These changes were adopted after feedback from our construction industry partners found that including only design and construction costs provided them with a better sense of the scope of the project and would assist in determining if they wished to participate in the bidding process.Email from Ian McConachie, Infrastructure Ontario, Manager, Media Relations & Communications, November 24, 2022.
This can be confusing with “bundled” projects such as the Ontario Line RSSOM contract which includes both provision/construction of vehicles and infrastructure, as well as future O&M costs. This is probably the reason, or a good chunk of it, for the very large increase in the RSSOM contract value between the initial estimate cited by IO and the contract award. However, the way these contracts are handled generally makes it impossible to know how much of the change is simply due to inflation in materials and labour costs, and how much is due to underestimates or scope changes.Continue reading