Why Are Canadian Construction Costs So High?

When I lived in Vancouver, I was enthusiastic about SkyTrain, which combined high service levels with relatively low construction costs. At the time, the budget for the 12-kilometer Broadway subway from VCC-Clark to UBC was $3 billion (all figures are in Canadian dollars, so subtract 20% for US PPP equivalents). The cost per km was average for a non-English-speaking country, and very low for an English-speaking one, and the corridor has high population and job density. With a ridership projection of 350,000, it was by a large margin North America’s most cost-effective rail extension.

Since then, costs have sharply risen. TransLink lost its referendum and had to scramble for funding, which it got from the new Trudeau administration – but the money was only sufficient to build half the line, between VCC-Clark and Arbutus. With the latest cost overrun, the budget is now $2.83 billion for 5.6 km: C$500 million per kilometer. This is barely below average for a North American subway, and very high for a Continental European one. I tried reaching out to TransLink before the overrun was announced, trying to understand how it was building subways for less money than the rest of North America, but while the agency knew who I am and what I was querying, it didn’t respond; now I know why.

Outside Vancouver, costs are high as well. In Toronto, there are several subway projects recently built or proposed, all expensive.

The least expensive is the Vaughan extension of the Yonge-University-Spadina Line. It opened last year, after a two-year delay, at the cost of $3.2 billion for 8.6 km, or C$370 million per kilometer. Andy Byford, then the chair of the Toronto Transit Commission, now New York City Transit chief, was credited with limiting the cost overruns after problems began. The line is an outward extension into low-density suburbia, and construction has no reason to be difficult. The source also cites the expected ridership: 24 million per year by 2020, or about 80,000 per weekday, for a total of $40,000 per rider, a high though not outrageous figure.

More expensive is the Scarborough subway. Toronto has an above-ground rapid transit line connecting Scarborough with Kennedy on the Bloor-Danforth Line, using the same technology as SkyTrain but with a driver. But unlike Vancouver, Toronto is unhappy with the technology and has wanted to replace the entire line. Originally the plan was to replace it with light rail, but subsequently the plans have changed to a subway. The current plan is to build a 6.4-km nonstop extension of the Bloor-Danforth Line, which would cost $3.35 billion, or C$520 million per kilometer. While this is still slightly below average by American standards, the dominant factor for construction costs in New York is the stations, which means a long subway tunnel with just one new station should be cheap. At the per-item costs of Paris, the line should cost US$1.07 billion, or about C$1.35 billion. At those of Second Avenue Subway, it should cost US$3.3 billion, or about C$4.1 billion. In other words, Toronto is building a subway for almost the same costs as New York, taking station spacing into account, through much lower-density areas than the Upper East Side.

Finally, Toronto has long-term plans for a Downtown Relief Line, providing service to the CBD without using the Yonge-University-Spadina Line. The estimated cost in 2016 dollars is $4-4.4 billion (source, PDF-p. 31), but this assumes faster-than-inflation cost escalation already, and adjusted only for inflation this is higher, about $5-5.5 billion. Per PDF-p. 15 the line would have 6.25-6.7 km of tunnel, for a total cost of about C$800 million per kilometer. The DRL is planned to go under older subways and serve Downtown Toronto, contributing to its higher cost, but the stations are to be constructed cut-and-cover. Despite using cheap construction methods, Toronto is thus about to build an extremely expensive subway.

While I’ve drawn a distinction between costs in English- and non-English-speaking countries, or between common and civil law countries Montreal’s costs are solidly common law Anglophone even though Quebec is Francophone and uses civil law. A 5.8 km extension of the Blue Line is budgeted at $3.9 billion, a total of C$670 million per kilometer. The Blue Line is circumferential, and the extension would extend it further out, but the residential areas served are fairly dense, around 10,000 people per square kilometer on adjacent census tracts.

The last case is Ottawa, where costs are less clear. Ottawa is replacing its BRT line with light rail, which includes a short city center tunnel, called the Confederation Line. The cost is $2.1 billion and the length of the line is 12.5 km, of which 2.5 is in tunnel and the rest is on the surface. The overall project is more expensive, at $3.6 billion, but that includes related works on other lines. I don’t know the portion of the Confederation Line’s cost that’s attributed to the tunnel, so any estimate for tunneling cost has to rely on estimates for the underground premium over surface transit. In Vancouver the original estimate for Broadway rail had a 2.5:1 premium, which would make the cost of the tunnel $320 million per km; however, a more common premium is 6:1, which would raise the cost of the tunnel to $500 million per km.

I don’t know why Canada is so expensive; I’m less familiar with the details of its subway extensions than I am with those of either the US or the UK. The fact that Toronto manages to have very high construction costs even while using cheap methods (cut-and-cover stations, or long nonstop segments) is worrying, since it casts doubt on the ability of high-cost cities to rein in expenses by using cut-and-cover stations rather than mining.

Moreover, the social reasons leading to degradation of civil service in the US are less relevant to Canada. There is less hyperlocal empowerment than in the US and stronger provinces relative to both the federal government and municipalities. Anecdotally I have also found Canadians less geographically solipsistic than Americans. If I had to guess I would say that Canadians look to the US as a best practices model, just as Americans in various cities do to other American (and sometimes Canadian) cities, and if they look at foreign models they look at the UK. Montreal used Paris as a model when it first built its Metro, but more recently its ideas about using France as a model have devolved into no-bid contracts.

21 comments

  1. Michael James

    Wouldn’t it be surprising if, after almost ten years of neo-conservative Stephen Harper as PM, there wasn’t a hollowing out of government especially w.r.t. public transport. I’ll repost this here (comments on similar issue in Australia, a $1.2bn blowout in costs of a lightrail project in Sydney).

    One theory about what went wrong relates to the way in which the project was contracted. Faruqi (Greens MP), who has a doctorate in engineering, has argued extensively there has been a hollowing out of technical know-how in the public service. The end result is more time and money trying to fix design changes. “I am hugely concerned about the deliberate de-engineering and politicisation of the public sector and the immense over-reliance on outsourcing,” says Faruqi. “This has led to a diminished capability to establish accurate scope and cost in the first place, followed by a lack of capacity to properly scrutinise design, procurement and delivery from private contractors and consultants.”
    https://www.smh.com.au/national/nsw/how-did-gladys-make-such-heavy-work-of-light-rail-20180629-p4zohz.html
    Making heavy work of the light rail task, Jacob Saulwick, 30 June 2018.

    • Alon Levy

      Government in Canada is devolved to the provinces, so Harper isn’t really relevant. In Vancouver the first SkyTrain line that got federal funding was named the Canada Line after the federal government – the previous two were done with provincial money.

      I guess you can blame Christy Clark and the BC Liberals, but the complaints from the left within the province are that the BC Liberals frack natural gas on Indian reservations, not that they’re privatizing the government.

      • Michael James

        OK, but in the Anglosphere even so-called parties of the Left turned all neo-liberal from the 80s on. Like Tony Blair, Bill Clinton and Hawke/Keating. It was the triumph of an economic philosophy that has taken decades to play out, before it reveals–to enough people–its unsustainable end-point. But I am not familiar enough with Canadian national politics, let alone regional politics, to know how it played out.

        • Alon Levy

          Not just the Anglosphere! The same trend happened in Germany under Schroeder, the Netherlands under Kok’s purple cabinet, France under Hollande (which was later, but was the first time PS won a presidential election since Mitterand), and Israel under Rabin.

          • Michael James

            Alon Levy, 2018/07/04 – 17:04

            Not just the Anglosphere! The same trend happened in Germany under Schroeder, the Netherlands under Kok’s purple cabinet, France under Hollande …

            I’ve made the same comment about Germany but I think it is misleading to put France & Francois Hollande in the same basket. Those advanced (northern) Europeans have not destroyed their social-democracies and won’t. The meme of Macron as Blair-lite is wrong too.

            And I shudder at the apparent serious suggestion that if Merkel falls they will bring back Schäuble as a temp. leader! OTOH, maybe that might be the straw that breaks the camel’s back. It all just confirms that Germany should never be allowed to get so powerful.

          • Alon Levy

            If anything, Blair is Macron-lite. Macron hasn’t so far done anything as progressive as Blair’s minimum wage law or NHS funding increases.

            I’m less familiar with the other Nordic states, but Sweden has moderated its social democracy since the 1970s and 80s. I don’t know if the Social Democrats count as fully neoliberal (and Löfven himself very much isn’t), but they’re way to the right of where they were in the Olof Palme days (but then Palme was very far left – think Michael Foot, not Neil Kinnock).

          • Michael James

            To be scrupulously fair, the UK was a mess when Blair (well, most post-war PMs) took office. You mention just labor rates/law and health, but France is way ahead on both counts so Macron doesn’t have the same problems. France is often rated #1 for its healthcare system while I don’t think UK healthcare is as bad as some make out, and it does quite well on some measures (eg. it is third on “access”) on “outcomes” it is currently second last (on it’s 70th anniversary this year as the world’s first universal healthcare system (1948) there are various reports on it). They spend 9.7% GDP versus 11% in France and 11.3% in Germany, so it is probably not spending per se (though it might be how they spend).
            In France, because of its strong and competent civil service, it doesn’t matter as much even when you get an extended bunch of clunkers in power (from Chirac-1997 to Sarkozy-2007 to Hollande-2012), and combined with France’s long-term plans. Macron has already solved one of the issues Hollande & Sarko found impossible, ie. the transport workers; and he did it with no blood, and very little bad blood (after all the existing workers are not sacrificing anything). Some pundits said he should leave this difficult problem until later in his term but that is nonsense since he would appear like the others, as well as the lame-duck problem. By tackling it early and “winning” he has earned a halo and it will make further difficult reform easier with more people believing he can do it.
            Compared to the UK, France has very few big problems, and it all comes down to about 1.5% of GDP (save a bit on the budget, create a bit more, and voila; though creating real jobs in the modern world is getting more and more difficult).

      • Brendan Dawe

        “I guess you can blame Christy Clark and the BC Liberals, but the complaints from the left within the province are that the BC Liberals frack natural gas on Indian reservations, not that they’re privatizing the government”

        That was actually a loud and ongoing throughout Campbell & then Clark’s years in power.

        • Alon Levy

          Not really about TransLink, though… the big complaint was that the BC Liberals held the referendum and washed their hands off of the result rather than giving TransLink the money it needed for expansion.

          • Brendan Dawe

            The BC Liberals, who were in power for many years before and after your sojourn here, were extremely fond of P3 construction schemes of varying degrees of privateness. As it relates to translink this saw the design-build-operate Canada Line project, which contained upfront costs but did so at the expense of some rather questionable value-engineering (though not as questionable as is often claimed, since the Canada Line has as much latent capacity as the Expo Line) and the design-build Evergreen Extension, which was done fairly economically and ended up leaving SNC-Lavallin holding the bag (last I heard, at least) for underestimating geo-technical risk.

            In 2007, the BC Liberals took decision making power away from the Mayors and replaced it with an appointed board screened by a panel composed mostly of industry representatives, though the Mayors were moved into a somewhat more important role in 2014

  2. SCC

    I wonder if Canadian construction costs being comparable with American construction costs has something to do with how similar the engineering consultant industry in Canada is to its American equivalent. That being said, I’m not very familiar with the list of engineering consultants who work with capital projects at TTC.

  3. Untangled

    very low for an English-speaking one

    You should check out the airport rail being built now in Perth, Western Australia, also one of the world’s most isolated cities. They’re building an 8.5km almost entirely underground, only 500m is not underground, rail line for $A1.8 billion or $US1.33 billion or $US156 million per km.

    about $5-5.5 billion. Per PDF-p. 15 the line would have 6.25-6.7 km of tunnel, for a total cost of about C$800 million per kilometer. The DRL is planned to go under older subways and serve Downtown Toronto, contributing to its higher cost, but the stations are to be constructed cut-and-cover.

    I don’t think going under or over existing tunnels should be hideously expensive itself. I just noticed that in Sydney, the 15.5km metro tunnel and station excavation contract (they packaged it up) through the CBD was only $A2.81 billion. This $2.81 billion includes constructing a tunnel that goes under or over existing underground regional rail lines numerous times, a road tunnel, a harbour and 3 underground stations will be mined with another 4 underground stations cut-and-cover. Based on the relatively low price of that, I don’t think the tunnel itself, whether it goes over or under existing tunnels, or even cut-and-cover vs mining, would make a huge difference. I think fit-out and other stuff would be the key to reducing cost. Sydney Metro is $12 billion all up so if they’re only spending $2.81 billion on tunnel and station excavation, the rest has to come from other stuff. (Eg, they spent a cool $A1.8 billion on property acquisition for the metro)

  4. Brendan Dawe

    At the very least, about $300m of that cost escalation would have to be general inflation above the 2010$ $2B study.

    The cause that usually gets cited for the growing cost of Broadway is real estate inflation, rising construction costs, and changes in the exchange rate. Vancouver land values are very high and have multiplied since the 2012 study, though, i’m also told that many of the station sites have been long secured, and the Broadway Line is under city streets except for the segment east of Main Street, so¯\_(ツ)_/¯ . Construction costs have gone up in the region, driven by by the ramping up of the local construction industry as house prices rose, though I am unsure to the extent to which that can spill over into infrastructure costs.

    Things that do come to mind other than real estate value are that the City has insisted on a bored tunnel since 2014 or so (though also promised to pay for the cost of ‘not technically necessary’ tunnelling), in an attempt to avoid sore feelings over the Canada Line Construction, and that the newest cost estimates are informed by geotechical survey work that’s been done since at least 2015.

  5. Stephen Rees

    “Hollowing out of the public sector” might be credible here but actually doesn’t really reflect on how rapid transit has been built in Vancouver. SkyTrain construction was never given to the transit agency. There was always a Project Office reporting directly to the Province. Most recently the Evergreen Line was built by MoTI. The Canada Line was a bit of a one off P3 – and pretty much a great object lesson in why aiming for the lowest possible project capital cost produces a less than adequate solution. Building down to a price meant the specs were cut so that it was not really big enough the day it opened, and is going to be really expensive if they ever decide to expand it to what is needed now that growth is being encouraged along the line. The P3 also ensured that plenty of money was spent on profits and financing costs which would both have been avoided with conventional public sector procurement. Of course, being BC and therefore exceptional, no public sector comparator was ever published – even if it existed.

  6. johndmuller

    When I’m looking for a scapegoat to hold responsible for something where the true villain is unclear, which covers, when you think a little about it, most situations, I usually choose between two culprits – Harvard Business School, and The Rolling Stones. The Rolling Stones are pretty much the catch all (Kris Kristofferson: “Blame it on the Stones”) when all else fails, or if the issue can specifically be blamed on decadence.

    As to the Harvard Business School, I hold them responsible for the penny pinching school of business ideals, where Maximizing Shareholder Value is the Holy Grail, which gradually took over the corporate world starting sometime in the latter half of the 20th century.

    It’s dangerous enough when only applied to business, but when demagogues take it into public policy, or any liberal arts realm, they will rapidly find that virtually nothing qualifies as a worthy investment, thus turning them into radical libertarians. Blame it on the Stones.

  7. R. W. Rynerson

    It is interesting to follow the traces of project influences from one system to another. (I had a prof for Modern European History who was big on the transmission of ideas and methods.) Of the light rail projects that I’ve worked on, the first one completed — Edmonton — had a downtown tunnel segment, but many of the costs were shared with the majority surface portion. At the time it was considered a bargain, partly because Edmonton Transit had a fixed price contract in 1974, which meant that the contractors ate the inflation by the 1978 opening. Also, I learned that there was a good deal of knowledge to begin with as to what was underground in Edmonton.

    The Edmonton starter line was influenced originally by Toronto (dimensions), Montreal (underground environment) and Cleveland (use of rail r.o,w,). Dutch and German influences included the timed-transfer bus feeders and the choice of rolling stock. Operating influences included the MBTA Green Line and British tramways and the CNR. Old-style Edmonton management kept close watch on expenditures, but importantly set up a good system for tracking commitments to spend.

    Portland was influenced by Edmonton and German practices. Sacramento was influenced by Edmonton, San Diego, Portland and German practices. Denver was influenced by L.A. Blue Line, Portland, Sacramento, and German practices.

    And so forth. Unfortunately, it seems to be harder to import best practices in construction costs than in service design.

  8. Adam

    the costs are high because consultants write a number on a napkin for the contractors (and the politicians the contractors employ) and say “we can get this much, I know it’s four times what you think it will cost, but we can get this and no one will ever know the difference and we get to keep the difference.”

    and then they get the number and everyone involved is suddenly very rich.

    It’s extremely simple, extortionate rent-extraction, nothing more. Same as it always was.

    • Michael James

      Adam, 2018/07/05 – 13:20

      because consultants write a number on a napkin …
      and then they get the number and everyone involved is suddenly very rich.
      It’s extremely simple, extortionate rent-extraction, nothing more. Same as it always was.

      Yes, but the question is, why is it so much worse in the Anglosphere. And thus, what can be done about it?

  9. Donald Malcolm Johnston

    Lots of poor research for his article.

    Toronto’s ICTS (Scarborough Line) is fully automated, but retained the driver’s position as a safety (union) precaution. The only job the driver does, was to ensure the doors are not fouled before closing; he does not drive the train.

    In Europe, EEC laws stipulate all automated transit systems must have an attendant/driver on board for emergency (insurance) purposes.

    Toronto is replacing its ICTS system for three main reasons:

    1) It operated poorly in the snow.
    2) The guideway and cars are life expired.
    3) Maintenance costs are very high.

    ICTS was conceived to mitigate the high costs of subway construction, while at the same time, bridging the gap of what Toronto streetcars could carry and that of a subway. LRT instantly made ICTS/ALRT/ART obsolete over night. Today, only 7 of the proprietary ICTS/ALRT/ART SkyTrai’s have been built in the past 40 years, compared to now well over 200 new build light rail systems built during the same period.

    There is not/was not any plan to date for a 12 km extension of the Millennium Line to UBC, rather the proposed subway was always going to terminate at Broadway at Arbutus, because that is what the original planning for the former Broadway/Lougheed R/T project was to terminate.

    In Vancouver, for the original cost of LRT plan from Vancouver to Richmond, Lougheed Mall and Surrey, only could afford SkyTrain (ALRT) from Downtown Vancouver to New Westminster.

    Ottawa’s higher initial costs also include many “one-off” costs for the initial build, such as the maintenance centre, making extending the system far cheaper than SkyTrain’s current estimated cost of $130 million/km to build.

    The deal clincher for Ottawa’s LRT is that it was found to be much more flexible in operation than ART.

    Edmonton’s LRT, considered to be the first new built light rail system built, was a direct copy of German S-Bahn, as the term LRT was not much used in general use, when construction first started in 1974.

    Portland’s LRT was basically an enhanced San Diego light rail, with only a small influence from Edmonton and Calgary.

    Vancouver’s SkyTrain is really 3 different railways:
    1) The Expo Line; is the rebranded proprietary ICTS system, with a new name, ALRT.
    2) The Millennium/Evergreen Lines is SNC Lavalin and Bombardier’s (the patent holders of the proprietary railway) rebuilt ALRT/ALM light-metro, now marketed as ART. Both proprietary railways are compatible in operation, but the smaller switches on the Expo Line cause extra maintenance costs to the longer wheelbase MK.2 cars.
    3) The Canada Line; has the distinction of being the only heavy-rail metro in the world being built as a light metro, with little more than half the Capacity of the proprietary ALRT/ART Lines, due to having station platforms a mere 40m in length and the ability to operate only 2 car trains. Internationally, the Canada Line is considered a classic “White Elephant”.

    Transport Canada’s Operating Certificate for the ALRT/ART Lines only allows a maximum capacity of 15,000 pphpd. To increase capacity, over $3 billion must be invested to rebuild stations with longer platforms to allow longer trains; rebuild and increase the electrical supply; replace all switches; replace the automatic train control and of course purchase new cars and more.

    The cost to increase the capacity of the Canada Line is now pegged at $1.5 billion.

    There is much more, but it is suffice to say that SkyTrain costs a lot, lot more to build, maintain and operate than LRT and why only 7 such systems have been built in 40 years.

    The real question is why SkyTrain is still built in the region?

    • Alon Levy

      Rescued from the spamfilter.

      Paris has fully driverless trains, without attendants. I don’t know where you’ve heard that EU law forbids this, but it’s incorrect. Paris has driverless trains, Copenhagen has driverless trains, Nuremberg has some driverless trains, Barcelona’s newest line is driverless, Helsinki planned to have driverless trains but then decided against them. The minimum headway that I’m aware of is in Paris, where trains run every 85 seconds at the peak, and if I understand it correctly then both here and in Vancouver the systems are capable of 75-second headways.

      Another wrong thing you’re saying: the plans to extend the Millennium Line to UBC were discussed on TransLink’s site when I lived in Vancouver. The documents got scrubbed due to link rot, but you may still be able to read the plans, which said the full 12 km extension would cost about $3 billion.

      The Canada Line has trains of the same length as the Copenhagen Metro. The biggest capacity problem is the single-track tails; otherwise the line can support more than twice the frequency it runs today. I doubt it’s internationally considered a white elephant for the simple reason that Europeans rarely think about public transit anywhere in North America and Japanese don’t seem to think much about public transit anywhere in the West.

      Edmonton’s light rail may have been inspired by S-Bahns, but has very little to do with actual S-Bahns. S-Bahns use existing tracks outside the city core to keep costs down. Munich’s S-Bahn has grade crossings, single-track segments, and shared tracks (not just ROW) with freight trains on outer branches. North American light rail networks don’t do this except peripherally; all track construction is greenfield, with per-km cost that’s comfortably an order of magnitude higher than just restoring service on existing lines in Germany.

      Vancouver keeps building driverless metros because speed and capacity matter. When you no longer have easy ROWs, the only way you can save money by building light rail is by putting it on the street at very low speed. Calgary’s first three lines were cheap, but then West LRT required some tunneling and cost far more than the rest, both per km and per rider – and Calgary is talking about putting the North LRT line in a downtown tunnel.

      • Michael James

        Alon has already refuted it, but I will also point out the Paris M14 which opened in 1998 was completely driverless from the beginning. Of course it was a copy of the metro train developed for Lille which were running totally driverless, unmanned trains from 1983. The same driverless system was rolled out in many other European cities: Paris-Orlyval (1991); Toulouse (1993); Rennes (2002); Turin (2003); Paris-CDGVAL (2007). And the related line-D trains on Lyon’s Metro (1991).

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