The CEO of Calgary’s Green Line said he believes they can keep the $5.5 billion project on track and costs in line by approaching it with a different mindset.
Though, Darshpreet Bhatti, Green Line CEO, reiterated comments made earlier this week that if cost escalations continue, Calgarians might only see Phase 1 of the project with current funding.
Bhatti talked with LiveWire Calgary on Friday, just days after delivering a Q1 Green Line report to Calgary’s Executive Committee.
In that meeting, councillors heard from Bhatti and Green Line board chair Don Fairbairn about the current financial situation. Cost escalation due to inflation, supply chain, labour market and competing projects are taking a bite out of the budget.
“As a consequence, we can say nothing other than that we have a low level of confidence in our ability to deliver all of stage one within available funding,” Fairbairn said during that meeting.
Bhatti later talked about how they would be meeting those challenges. He talked about value engineering and looking at innovative ways to move the transit line forward.
In the conversation with LWC, Bhatti expanded upon some of these areas to provide a clearer picture of how they expect to move forward with Calgary’s Green Line.
Value engineering and a different mindset
Bhatti told LiveWire Calgary that previously there was a mindset that things must be done in a particular way. The value engineering aspect is meant to provide flexibility, he said.
“We’re opening that up,” he said.
He used the downtown tunnel as an example. It’s one of the single biggest expenses – if not the biggest – for the entire line.
Does everything need to be tunneled? Can some of it be cut-and-cover? What about the size of tunneling?
“If you allow flexibility on all of those different metrics, it all of a sudden opens up opportunities from different methods, which will then mean cost savings,” Bhatti told LiveWire Calgary.
Bhatti said they’re looking at traffic management. They could close off certain intersections they’re working in, instead of the cost of closing more.
They’re also examining work hours and noise ordinances to see where they can gain a cost advantage. Financing, not only with the city but with contractors, is another area they may be able to shave costs.
He said they also need to test assumptions with major infrastructure like bridges and stations. Bhatti said they may be able to avoid costly custom solutions if they evaluate “off-the-shelf” options to cross roads and rivers.
Even the design of underground stations may be rethought for aspects such as depth and the needed amenities.
“It’s not changing scope, it’s changing what is the actual need and how it can be delivered,” he said.
“The initial approach and defining what was needed was wrong because the outcome that we need is very different. So, it’s really tying the outcome to how you approach different design and delivery.”
Stations and the placemaking effect
Ward 9 Coun. Gian-Carlo Carra raised the issue of station design during the Green Line quarterly report presentation.
There was a subcommittee supposed to meet with council, he said. It was to discuss the station-by-station design and how it plugs into the neighbourhoods.
We asked Bhatti about that placemaking vision for stations and whether budget pressures would impact that aspect of the design.
He said the placemaking aspect will happen over time.
“What we’re trying to do is provide provisions now as part of our initial step,” Bhatti said.
“City planning plays, I would say, a primary role in that, because they have to then look at what is the best way of developing around the station.”
Their approach is to ensure the tools are there for the neighbourhood integration to occur.
“So that placemaking piece, we’re just a catalyst and we’re not necessarily doing the steps to bring that in,” Bhatti said.
“From within the station footprint, we do have to provide enough links so that feature work can connect with it without having to then disrupt the station.”
There’s perhaps some uncertainty amid the uncertainty. Particularly from the contractors’ side.
As was seen in the now-cancelled Calgary Event Centre, uncertainty over future cost escalation isn’t a risk some groups will take. The risk may force some contractors to shy away. Others may bid higher to ensure escalations can be accounted for.
Bhatti said that’s part of the creative process for procurement. Typically, you don’t really see how the pricing is done and then there’s a sticker shock.
During the Green Line update, he said the bids for the Beltline utility work came in higher than they’d accounted for – even with escalation.
“We want to go down a path where we have a process where we can actually have a more open dialogue, so we understand where (contractors) see risks, and how we can best manage that risk,” he said.
That open dialogue allows them to examine the risks, particularly around pricing, and find a way to mitigate them. Maybe even share them, Bhatti said.
“I think at the end that’s to our benefit because then you understand where the pressure points are, which typically is never done under most procurement models,” he said.
“You stay silent about these things until you get to the end and then you say, ‘OK, you know, we have this number and it’s over and then you try to look for solutions.”
Getting down to the brass tracks
Can this project be built – both phases within the current budget?
Bhatti said it’s impossible to tell at this point.
“It is fair to say that if numbers do go higher up as they are consistently right now, that it’s very unlikely that phase two can be done within the budget,” he said.
They need to start seeing contracts come in on certain portions of the project.
“We’re trying to be very, let’s say, creative in our procurement process, right now,” Bhatti said.
“And I’m hopeful that once we go through it, and we successfully award, that it may leave a lot of options for us to do phase two.”
It all comes down to how prolonged this current cost escalation goes. Bhatti said if it plateaus or subsides, they can absorb much of the impact. They’ve made conservative assumptions on the escalation for Phase 1.
In the meantime, work on the Beltline and downtown utilities is already underway, Bhatti said. Closures have begun along 11 Avenue. The work is moving ahead as planned.
“Our friends are already out there starting to work, so we will commence, there’s no doubt on that in my mind,” Bhatti said.
The Green Line put out a project update on Jan. 27. More information on upcoming construction impacts can be found there.