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Ontario plans to build more than $60B in transit projects in the next decade. Will a pandemic, looming labour shortage and cost overruns derail them?

Thestar.com
July 12, 2021

Speaking at the groundbreaking ceremony for the Scarborough subway extension last month, Ontario Transportation Minister Caroline Mulroney had a message for the doubters.

When Premier Doug Ford announced his subway expansion plan two years ago, she said, critics scoffed that it couldn’t be done.

“But look where we are today … We’re building transit for the people, and we’re full steam ahead,” Mulroney said at the June 23 event at an East Toronto work site. “To the critics out there: Premier Ford has made the impossible possible.”

But while the groundbreaking marked a milestone for the Ontario government’s subway program, it still has a lot of work to do before it can claim it’s turned its transit plans into reality.

Those plans are massive and far from finished. Over the next decade or so the province hopes to deliver more than $60 billion worth of transit projects in Toronto and the surrounding area, including completing at least eight new subway and LRT lines or extensions, and making major upgrades to the regional rail network.

Getting so much built at once would be difficult under any conditions. But to keep its transit program on track the province will have to overcome market disruptions caused by the pandemic, address a looming construction labour shortage and repair a fractious relationship with private sector contractors tasked with building the new lines, some of whom charge that provincial agencies’ contentious management of rail projects is driving up costs and hampering their completion.

Given the size of the plan and the challenges it’s facing, can the province get it all done?

Michael Lindsay, president and CEO of Infrastructure Ontario (IO), the arm’s-length agency that alongside Metrolinx oversees transit procurement, says the plan is on course.

“I’m pretty confident,” he said, explaining that IO is constantly monitoring the construction market’s capacity for pinch points, and is staging work to ensure the industry can handle it.

“I think our track record here in the province in Ontario is holistically a very good one about delivering projects on time and on budget,” he said.

But Ontario NDP transit critic Tom Rakocevic (Humber River-Black Creek) said the government’s record is poor.

“Even before the pandemic hit, Ontario was years behind schedule to complete promised transit projects that residents and commuters badly need to ease congestion,” Rakocevic said in a statement, pointing to setbacks on the Eglinton Crosstown LRT and Ford’s Ontario Line.

He said the government also “has a history of ripping up shovel-ready transit projects, like the Hamilton LRT and the cancelled Toronto relief line.”

While experts have questioned the wisdom of some projects in the province’s plan, most agree new lines will be critical to keeping the GTA moving in the coming years. Despite ridership plummeting during the pandemic, according to provincial projections released this spring, by 2046 the region’s population is expected to grow by more than 40 per cent, to almost 10 million.

“COVID is going to be forgotten as an impact on transit by the end of 2022,” predicted Phil Verster, CEO of Metrolinx, the provincial transit agency.

Major transit construction, much of it launched by the previous Ontario Liberal government, is already well underway, with the Eglinton Crosstown and Finch West LRTs in Toronto, and the Hurontario LRT in Mississauga-Brampton, all expected to open in the next three years.

In addition to the Scarborough subway, the $28.5-billion transit plan Ford launched in 2019 included the Eglinton West LRT, the Yonge North subway extension, and the Ontario Line. Earlier this year, the Ontario government added a fifth project by resurrecting the Hamilton LRT it cancelled in 2019.

The biggest project in the provincial pipeline is the $17-billion GO Transit Expansion program, which will require adding more than 200 kilometres of track and electrifying portions of the regional rail network, and is intended to transform GO’s rush hour commuter lines into an all-day service.

The transit megaprojects will have to compete for resources with other major provincial infrastructure work, including new hospitals and nuclear power refurbishment, at a time when experts are predicting a labour crunch.

BuildForce Canada, an industry organization that monitors the construction labour market, estimates that over the next 10 years more than 92,000 workers in Ontario’s construction sector will retire, the equivalent of 21 per cent of the workforce.

In order to replace retirees and keep up with anticipated demand, the industry will need to hire and train more than 116,000 workers in the next 10 years. The sector is on track to bring in about 80,000 younger workers during that time, but that would still leave the province about 31,000 short.

The industry’s recruitment rate has been improving but is “not sufficient at this point to keep pace with overall construction demands,” said BuildForce executive director Bill Ferreira.

But he predicted the sector will step up its efforts in the coming years to meet demand, in part by diversifying recruitment to draw from groups under-represented in construction, including women, Indigenous people and new Canadians.

The Ontario Ministry of Labour, Training, and Skills Development says it’s addressing the shortage by investing $1.1 billion in training, and simplifying the skilled trades and apprenticeship system.

To make it easier for the private sector to handle concurrent transit builds, Metrolinx and IO have also started parcelling out work on the projects into smaller contracts.

The contract for tunnelling work on the Scarborough subway extension was awarded in May, allowing some construction to start sooner. The more substantial work on stations and track isn’t scheduled to begin until sometime after a separate contract closes in spring 2023, ahead of completion by 2030. A similar approach is being taken on other elements of the province’s subway program.

The piecemeal strategy could help address concerns of contractors who have criticized the agencies for what they see as their overly aggressive approach to big transit contracts.

The criticism centres around the province’s public private partnership (P3) procurement model, under which private companies are responsible for designing, financing, building and even operating new lines. The province generally issues payment for P3s once work is complete, and strict financial penalties for delays are written into contracts.

The model is designed to shift the risk for delays and cost overruns onto the private sector by giving builders financial incentives to stick to the schedule and budget.

But industry sources say some contractors’ perception is that rather than working collaboratively to address construction problems that inevitably arise on complex transit projects, Metrolinx fights builders at every step and forces them into adversarial claims processes or costly court fights. Metrolinx and IO are currently entangled in a messy lawsuit with the consortium building the Eglinton Crosstown about delays to that line.

Such disputes risk wiping out the profit contractors build into their bids for work, and sources who spoke to the Star said some builders no longer want to bid on bigger provincial transit lines.

“Eventually you’re going to get companies deciding that these projects aren’t worth the risk,” said one industry source, who spoke anonymously to talk about sensitive procurement discussions.

Three industry sources told the Star contractors have started to add premiums to bids on provincial transit contracts to account for what they see as the provincial agencies’ aggressive approach.

“There’s real concern that if we bid on these types of projects the way we have in the past, the chances are we’re going to lose money,” said one industry source, describing the contractors’ thinking.

“So if we are going to go ahead and do it, we will put in a premium to the price that we think will result in a profit. So that’s not good for taxpayers obviously, because (they’re) paying more per kilometre to get transit projects done.”

Contractors charging extra could also make it harder to get transit built on time, because if the province doesn’t get enough bids that come in on budget, it can be forced to redesign its procurement.

Something like that scenario appears to have played out with GO Expansion, after contractors initially balked at the risk involved in its procurement. Although work was supposed to be substantially complete by 2025, this week an IO spokesperson wouldn’t confirm that date. Metrolinx and IO maintain GO Expansion is on track.

Verster, the Metrolinx CEO, said his agency has listened to criticism and is moving away from traditional P3s to contract models that are less risky for builders. The Building Transit Faster Act passed by the Ontario government last year is also intended to reduce regulatory hurdles that can stall contractors’ work.

Verster acknowledged the agency has recently received higher-than-expected bids, which have caused it to defer some work. But he attributed the trend to pandemic supply chain problems rather than contractors charging extra for working with Metrolinx. He noted the price of materials like steel and lumber have as much as doubled during COVID-19.

Verster denied taking too hard a line with contractors.

“Metrolinx have gone out of our way to protect the taxpayer’s funds. And what we have put in place is commercial management around our contracts which hold the contractors to account for what they bid,” he said.

$60 billion transit pipeline

Here some of the major provincial projects, their costs and expected delivery dates:

Eglinton Crosstown LRT, $9.1 billion, late 2022
Hurontario LRT, $4.6 billion, late 2024
Ontario Line, at least $11 billion, by 2030
Scarborough Subway Extension, at least $5.5 billion, 2029/30

GO Expansion, $17 billion total, phased after 2025