It is crucial that the same attention and level of engagement be given to the procurement process as was given to the campaign to get LRT in Hamilton.
By Christopher Redmond
Published May 29, 2015
With the historic announcement on May 26 that the provincial government would provide full capital funding up to $1 billion for Light Rail Transit (LRT) in Hamilton, the feedback from people around the city has been mostly positive and has created a real sense of excitement and anticipation for what is next for the city.
And so there should be. A lot of hard work has gone into pursuing LRT here in Hamilton over the past number of years, from people here at Raise the Hammer and other advocates both inside and outside of the municipal and provincial governments. Not to mention, LRT represents a big step forward in the long-term development of the downtown core, especially in the east end.
However, it is important not to lose sight of the details of the proposed LRT plan amid all of the enthusiasm and excitement around the project.
More specifically, it is crucial that the same attention and level of engagement be given to the procurement process as was given to the campaign to get LRT in Hamilton. The procurement process is almost always where projects like this run into trouble - both in design and in financing.
Ontario has long been a steadfast supporter of the use of Public-Private Partnerships (P3s) for infrastructure projects across the province. P3s are a form of privatization where governments enter into partnerships with private consortia to work together to build infrastructure projects, with the private consortium typically providing the bulk of the capital needed to fund the project.
It is argued that P3s allow governments to tap into the expertise of the private sector, while also reducing costs and sharing financial risks. However, in recent years, evidence has emerged to suggest that P3s do none of this, and in reality, they actually cost the public more money. (If you are interested in reading more about this, check out CUPE's many reports detailing P3s.) Still, despite this new evidence, P3s continue to be used to move infrastructure projects forward.
In Ontario, under the guidelines of Infrastructure Ontario - the crown corporation set up by the Ministry of Infrastructure in Ontario to deliver infrastructure projects - all large projects must be delivered through an alternative financing and procurement delivery model, also known as a P3.
Moreover, the government of Canada has established a crown corporation known as Public-Private Partnership Canada (PPP), which demands all infrastructure projects requiring federal funding to incorporate a P3 aspect. What this means for LRT in Hamilton is that any LRT project will undoubtedly be delivered through a P3 model.
P3s come in many different forms, ranging from Design-Build and Design-Build-Finance to Design-Build-Finance-Maintain and Design-Build-Finance-Maintain-Operate. The difference in which type of P3 is selected can have drastic long-term effects.
The Design-Build and Design-Build-Finance setups see the private sector have a much smaller involvement with the project. Once the project is built, their involvement essentially ends.
Meanwhile, in a Design-Build-Finance-Maintain or a Design-Build-Finance-Maintain-Operate setup, the situation is much different. In particular, these types of P3 setups see the private sector more heavily involved in both the designing and building of the project as well as in the maintenance and operation aspects. This means that the private sector has a much greater vested interest and higher levels of control over the entire project.
In Ontario, the norm has been for P3 projects to be set up in the Design-Build-Finance-Maintain or the Design-Build-Finance-Maintain-Operate fashion. This has led to mixed results, to say the least.
The 407 highway, for instance, is seen by many as one of the worst examples of a P3 project in Canada, as the government lost hundreds of billions of dollars in potential revenues with a 99-year lease that cost investors only $3.1 billion to sign.
Another example is the VIVA transit system in the York Region. Looking at the VIVA system from afar, it is hard to argue that it has been anything but a success. However, a closer look reveals a system that has been hijacked by a private operator who has raised fares more than five times since the service began in 2005.
Fares now stand at a staggering $4.00 for a regular ride, $4.50 for an express ride, and $5.00 for a two-zone ride. These are some of the highest public transit rates in the world, and the regional government has very little recourse in stopping the operator from continuing to raise fares moving forward.
Another example, albeit from British Columbia and not Ontario, is the Canada Line. In fact, the Canada Line, although a much bigger project in scale, closely mirrors that of the planned LRT in Hamilton.
Like VIVA, the Canada Line looks like a major success from afar. Ridership numbers have been very good since the line opened in late 2009, and it has arrived at a point where some have suggested that the line is nearing capacity.
Moreover, it has provided the City of Vancouver with a direct link from the airport to the downtown core and has helped connect commuter communities to both the airport and the downtown.
However, a closer looks reveals a number of flaws and serious problems with the project. First and foremost, the costs of the Canada Line ballooned from $1.35 billion to more than $2.5 billion, as the private consortium continued to increase the budget on the project.
Second, the contract signed with the private operator through the P3 procurement process, which spans 35 years, states that the regional authority must subsidize the private operator any time ridership numbers fall below 100,000 riders per day. This, along with other factors, has led to the operating costs of the Canada Line to be more than double that of the other SkyTrain lines in the Vancouver area.
Finally, any improvements and/or upgrades needed for the Canada Line fall to the regional government, as these fall outside 'maintenance' and were deliberately left out of the P3 contract during procurement. This is especially important now that there are reports that the line is reaching capacity and major changes will need to be made to increase capacity in the future.
Moreover, and also pertinent to LRT in Hamilton, the design plans of the Canada Line were changed many times throughout the procurement process. In fact, the P3 contract revealed that it was actually negotiated into the contract that the private consortium could change, expand, or contract the parameters set out in the contract as long as "the impacts of those changes - on urban design, neighbourhood, environmental, business, or project objectives - were taken into consideration."
This clause in the contract allowed the private consortium overseeing the Canada Line to be able to introduce changes to the design after it was approved by the regional government, including things like elevating the transit in places where not originally planned, a shortening of station stops, the elimination of certain stops, the use of cut and cover construction, and the elimination of turnstiles at certain stations (which the regional government ended up having to pay for in the end, as they felt they were necessary).
It is important to note that what allowed this clause to be included in the contract was the fact that there was a very high level of secrecy surrounding the Canada Line procurement process, something that is typical of P3 projects.
This meant that there was a lack of transparency and a real lack of information about what the project would actually entail, right up until the start of construction. Even high-ranking government officials and elected city councillors were kept in the dark about the final bids during the procurement process.
It was argued that the secrecy was needed so as to ensure the most fair and competitive bids. However, the only thing that it actually ensured was a lack of public engagement and consultation on the project.
Public engagement has long been a key aspect of good public policy as it is argued that not only that those affected by public policy should have a say in it, but also that it almost always leads to more effective and legitimate policy and decision-making. However, in most, if not all cases, of P3 projects it is almost never a crucial part of the procurement process.
Most recently, P3 public transit and transportation projects in Ontario have begun to move away from the Design-Build-Finance-Maintain-Operate, and instead only go with the Design-Build-Finance-Maintain setup.
In particular, the Eglinton Crosstown LRT in Toronto and the Confederation Line LRT project in Ottawa have both opted for this approach. In both cases, the already established transit authorities will operate and control the LRT systems.
However, it was recently announced that the ION Stage 1 LRT project in Waterloo would be a Design-Build-Finance-Maintain-Operate setup.
In Hamilton, red flags have already been raised that suggest that the LRT project will be a Design-Build-Finance-Maintain-Operate P3.
In particular, at the announcement no one was willing to comment on who would operate the system. One would assume that if it was the plan that the LRT would be run by Hamilton's public transit operator, Hamilton Street Railway (HSR), that would have been part of the announcement or at least been alluded to in some more direct way.
It remains to be seen what is planned for LRT in Hamilton, but it already seems that public input and public control are threatened by the P3 procurement process, especially as a Design-Build-Finance-Maintain-Operate P3.
Whatever the P3 may end up looking like for LRT in Hamilton, it is imperative that the public, as well as our elected officials, are diligent in demanding public consultation and engagement throughout the procurement process.
The only way we can ensure an LRT system that is both financially feasible and designed to serve our public transit needs best is if the public and elected officials are consulted along the way.
Even in Hamilton, where a city council is consistently split on even minor issues by a suburban vs. urban vote, and where LRT decisions could go awry because of this chasm among councillors, it is still crucial that they are involved in every step along the way.
Related to this, it is important that city councillors make it clear to Metrolinx that public consultation is a requirement in any procurement process. It is only through public consultation and the involvement of our elected officials that we can hope to avoid the same pitfalls that the Canada Line and other P3 projects before it have fallen victim to.
This article is not meant to be pessimistic, and I understand that people are still basking in the glory of the long-time coming LRT decision. Instead, it is intended to shed light on the procurement process, which often flies under the radar at the time and ends up being very important as the project gets under way.
Canadian Council for Public-Private Partnerships (CCPPP). (2015). P3 Projects: Ontario Transportation.
Canadian Union of Public Employees. (2003). Public derailment? Why publicly operated rapid transit is better for the Lower Mainland. CUPE Publications: CUPE 7000, May 2003.
Canadian Union of Public Employees. (2009). Time to come clean on the real costs of P3s. CUPE Publications, April 2009.
Figueredo, J.C. (2005). Public Participation in Transportation: An Empirical Test for Authentic Participation. A dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy in the Department of Public Affairs in the College of Health and Public Affairs at the University of Central Florida Orlando, Florida.
Halvorsen, K. E. (2003). Assessing the effects of public participation. Public Administration Review, 63(5): 535-543.
Lanovaz, D. (2005). P3 ring road will be highway robbery, says CUPE. Canada NewsWire, 3 March 2005.
Pearce, S. (2013). Region considers hike in YRT/Viva fares. York Region, 11 September 2013. http://www.yorkregion.com/news-story/4073949-region-considers-hike-in-yrt-viva-fares/
RAVCO. (2003). Project Definition Report. Draft for Public Consultation, 27 February 2003.
Schwandel, R. (2012). Vancouver Sky Train. Robert Schwandl's Urban Rail Blog, 27 July 2012.
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