The struggle to build transit projects on time and within budget

Ian Austen
After more than a decade of construction, a major intersection in Toronto remains a chasm from a light rail project.Ian Austen/The New York Times

July 9, 2022

Canada is on a mass transit building spree. But to say that things are not going according to plan would be an understatement.

On Thursday, a justice of the Court of Appeal for Ontario leading a provincial inquiry wrapped up three weeks of testimony on Ottawa’s light rail system. The project has been described as a debacle after being plagued with delays, repeated shutdowns, equipment failures and a destructive derailment that closed the entire system for seven weeks.

In Toronto, a 19-kilometer stretch of Eglinton Avenue is still a mess, 11 years on, with a giant excavation where it crosses Yonge Street. Bus trips along the major artery remain jarring as construction continues on a rail system that was supposed to open two years ago. That may not happen until next year.

Last month, an elevated rail network in Montreal known as the Réseau Express Métropolitain delayed some of its openings until 2024. And earlier plans for another network costing 10 billion Canadian dollars were set back when the Caisse de Dépôt et Placement du Québec, the province’s pension and investment fund, left the project after many residents said that its downtown portion would disfigure the city and after the transit authority said that it would siphon too much business from its existing routes.

Aside from delays, cost overruns and all-around headaches, what these projects have in common is that they were structured as public-private partnerships, an approach that first gained momentum in Canada during the 1990s. Rather than follow the traditional route of managing, owning and maintaining the project, governments strike a deal with a business — most often a special company formed by several corporations — to handle the work under contract.

But the struggles in those transit projects have now taken the shine off such partnerships.

“There is definitely a rethinking on public-private partnerships in Canada, and it’s been precipitated by the transit sector,” said Matti Siemiatycki, the director of the Infrastructure Institute at the School of Cities at the University of Toronto. “Transit has just added a whole other level of complexity, and the record is decidedly mixed.”

An inquiry is examining the myriad troubles plaguing Ottawa’s light rail system.Ian Austen/The New York Times

At first, the partnerships were mostly used to build and maintain large public buildings like hospitals. For the most part, Professor Siemiatycki said, they generally worked out well.

In theory, collaborating with a group of companies can bring expertise and skills that governments lack to get the project done efficiently and on time.

And while it costs cities more to use partnerships, those extra costs on the front end mean overruns can be unloaded onto the private-sector partners and penalties can be set up that discourage or prevent delays.

“It’s like an insurance policy that if things go wrong down the road, then they are the private sector’s responsibility,” Professor Siemiatycki said.

That idea, he said, has been badly shaken. In 2020, Crosslinx, the private consortium behind the Toronto rail project, sued the local transit body for 134 million Canadian dollars in extra costs it claimed were related to the pandemic. The two sides reached an out-of-court settlement, with the transit authority agreeing to reimburse Crosslinx an undisclosed amount.

“Governments used to say they were paying more upfront, but they were well protected in the case of a large cost overrun or delays or poor delivery,” Professor Siemiatycki said. “What’s happened in practice is that many of those risks and the cost of those risks have boomeranged back to governments. It’s becoming clear that government is the risk holder of last resort.”

And the contractual nature of the partnerships has often left the public and even politicians in the dark about exactly what’s going on.

Not all of the public-private transit partnerships have turned sour. Professor Siemiatycki said that Vancouver’s Canada Line train system was generally a success, as was a light rail system in the twin Ontario cities of Kitchener and Waterloo.

Several cities have struggled with private sector transit partnershipsIan Austen/The New York Times

It’s also unclear whether using the old-fashioned approach would have kept the projects on track with their timelines and budgets. For years, for instance, the Toronto Transit Commission managed a major extension of one of its subway lines. It opened in 2017 — two years later than expected. Its budget of 1.5 billion Canadian dollars had more than doubled.

It’s not just governments that are questioning the value of the partnerships. SNC-Lavalin, an engineering firm in Montreal that is a major partner in the Toronto and Ottawa projects, has sworn off public-private partnerships for the foreseeable future.

Transit projects, however, are clearly a major priority for Canada. Among other things, the federal government views them as important tools for meeting the country’s carbon emissions reduction goals.

With more projects on the way, Professor Siemiatycki said it would be critical for the country to figure out a better way to build them.

“It continues to be a really big issue in Canada,” he said. “There’s a lot of hope and aspirations being connected with major public transit investment. But it really, really isn’t common to get the delivery right.”

A native of Windsor, Ontario, Ian Austen was educated in Toronto, lives in Ottawa and has reported about Canada for The New York Times for the past 16 years. Follow him on Twitter at @ianrausten.

[Top photo: After more than a decade of construction, a major intersection in Toronto remains a chasm from a light rail project.Ian Austen/The New York Times]