The board overseeing the construction of Calgary’s Green Line LRT megaproject is making a change in its procurement strategy.
Previously, the segment running at-grade from Shepard to Ramsay and the underground segment from Ramsay to Eau Claire were going to be bid on for separate contracts. Now, the city is going to combine the two segments in a revised procurement process.
Construction on the segment north of the Bow River to 16 Avenue N will be contingent on the ability to build the Shepard to Eau Claire segment on-budget.
Green Line board executive chair Don Fairbairn said the change is to meet the board’s “real interest in cost certainty.”
“The board is committed to deliver this program within available funding and schedule,” Fairbairn said Wednesday. “So with one procurement, from Shepard through Eau Claire, we’ll have a very strong level of cost certainty when those bids are received.
“And at this time of significant (construction cost) escalation, we think that’s the prudent approach.”
The inflation of construction costs is driven by economies north and south of the border reopening. Fairbairn cited an example as the increased prices for sheet plywood.
Fairbairn said combining the underground and above-ground segments into one contract will make the project attractive for companies to bid on.
“We’re going to structure this procurement to meet the expectations of the market and to ensure that this project is attractive to the market,” Fairbairn told reporters. “And we have a belief that there are a sufficient number of bidders and teams that will be interested in this project.”
With the change in procurement, the Green Line team will need to revise its construction schedule, he said.
The board and city already admitted to having lost the 2021 construction season, following a year-long detailed review of the plan for the Green Line by the provincial government. The city also paused procurement on the Shepard to Ramsay segment during the provincial due diligence.
‘The UCP effect’
With a new request for quotation (RFQ) and a new request for proposal (RFP) to go out as part of a restarted procurement process, further delays could add up to two years, Green Line committee chair and Ward 12 Coun. Shane Keating said.
“You have to go out, do a new RFQ — three to six months — and you’ll have to do a new RFP — nine to possibly 18 months,” Keating told Global News.
“So you’re looking at a minimum a year-and-a-half- to two-year delay.”
When city council approved the plan in 2020, construction was due to begin in 2021 and be complete in 2026.
The Ward 12 councillor hopes previous work on things like RFQs and RFPs, and an expedited provincial and federal review process, can reduce any further delay.
“You’d think they could take those documents, supplement them, change them a little bit and get back out on the on a faster rate,” he said. “The faster they can do that, then we obviously know that they’re going to see things possibly on time.”
Keating laid any delays at the feet of the Alberta government, “what I’m calling the UCP effect.”
“Basically, it’s delay and increase costs,” Keating said.
The Green Line committee chair is worried about those cost increases due to the delays.
A press release from the city noted that “project escalation costs are being reviewed by large infrastructure projects across North America.”
“As a reference, every 0.5% in escalation costs equates to more than $100M for Green Line,” the release read.
Business case approvals needed
Mayor Naheed Nenshi said the reason for reducing the number of contracts for work was “a question as to the most efficient procurement.”
The city’s previous strategy of three smaller contracts allowing for smaller and local companies to bid “did lead to a little bit of what we call ‘completion risk,’ just making sure that the various pieces work together,” the mayor said.
“Ultimately, in consultation with our partners at the government of Alberta, it was decided that rather than to do three separate contracts, we’ll do two contracts,” the mayor said.
The new procurement strategy was part of the business case sent to the province, which will review it and send to the federal government.
Fairbairn said the province found the new procurement “acceptable.”
“Our sense is that both the provincial and federal government are interested in moving this business case through their approval channels as quickly as reasonably possible,” the Green Line board chair said.
But it’s not quite time to celebrate for Ward 3 Coun. Jyoti Gondek.
“I’m going to be a little bit cautious until we get the full approval on the business case,” Gondek, who also serves as vice-chair of the Green Line committee, told Global News. “But things are moving forward and that’s what we’ve been waiting for.
“Any time we have positive momentum on the approvals for this project, I will take it as a win. But once that business case is fully approved and signed off, that’s when the true celebration begins.”