A subtle change to this month’s Green Line board report showed there’s elevated cost concern, from medium to high, but the project CEO said it’s somewhat expected at this point in the process.
CEO Darshpreet Bhatti told board members during the Feb. 29 board meeting that they will have noticed a slight change to the cost reporting in his report. The total project budget to complete phase 1 from Shepard to Eau Claire is $5.5 billion.
“You will notice throughout the process since 2021, we identified this as an orange and today it’s red,” Bhatti said of the colour coding on the report.
“That’s a reflection of the submissions we have through our negotiations with our partners in the development phase.”
He told the board he wasn’t surprised, and that typically prices come in higher during the first part of negotiations. At the start of 2024, they passed the 30 per cent design stage.
Bhatti said that as design progresses, both sides learn more about the risks and design aspect.
“The understanding is not as defined as it needs to be, so the pricing is higher,” he said.
“What surprised us would be areas of sub-contracting work. We anticipated a specific threshold of where the costs would likely land and we have seen numbers much higher than that.”
Later, in an interview with LWC, Bhatti said that as you progress through the development phase, closer to 60 per cent, you find surgical ways to reduce the costs to keep them on track.
“The effort that we have taken with our partners over the last month and a half is to look at, can we do our design differently where those pricing elements are higher,” Bhatti told LWC.
After that, he said if there’s not a technical solution, they look at a commercial solution and potential risk sharing on the project. After that, they look at if the project could be delivered differently to save costs.
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Decision gate at 60 per cent design: Bhatti
Bhatti told the board that his team would be bringing additional recommendations in the coming weeks to address this potential pressure.
Later, in response to questions, Bhatti told board members that pricing will be one of the top three challenges they face moving forward, though they’re still negotiating with development partner Bow Transit Connectors and various subcontractors.
Bhatti told LWC, after questions about the threshold for going to council with a potential request for additional funding, that the development phase wasn’t intended to come to a decision point at 30 per cent design.
“We always said we would go to 60 per cent design, then we would have a decision gate with our board,” he said, noting that could be around July.
He said after exhausting all potential options for containing costs, if there’s still a funding gap, they would go back to council. Bhatti said they would ensure that city councillors understood the opportunities they explored, along with the outcomes to see why they’d be asking for changes.
“It is possible that it may not require substantial effort from anyone,” he said.
“But on the other hand, all of our steps could still result in us meeting and asking council for some sort of an approval, whether that’s just purely financial or tied to something more material on design, or a combination of both.”
Coun. Kourtney Penner, while speaking with media on the Equal Voice program at Calgary city hall, was asked about the Green Line cost concerns. She noted that the project was first costed almost 10 years ago.
It also suffered political delays and was the subject of a substantial provincial review that took more than a year to complete.
Penner said it’s indicative of inflationary pressures on many city projects right now.
“We’re having to really look to see what it is that can be done, and to continue to have those conversations so that we can keep the project moving and going forward,” she said.
When asked if she thinks there would be appetite on city council to provide additional funding, Coun. Penner said it would depend on how much and what it’s for.
“I think it’s too early to say yes or no on that,” she said.
The Green Line report will go to an upcoming full meeting of Calgary city council.
