Metrolinx and IO have experienced severe procurement issues with the Crosstown LRT, Finch West LRT, Hamilton LRT and now RER. Interesting pattern here
Couldn't possibly have anything to do with management of Metrolinx or interference from IO at all (strong sarcasm).
More specifically, it looks like Metrolinx and IO are using P3s as a political tool to mitigate the PR fallout whenever these projects go over budget. They want to shift all the risk to their private sector partners. This might also explain, at least partially, why the costs of the Hamilton LRT skyrocketed. If ML and IO were shifting all of the risk to the P3, it's no surprise that costs skyrocketed. The private sector isn't gonna take on all that risk without more compensation.
Obviously this also puts into question the viability of other ML P3 projects, including the Eglinton West LRT and the Ontario Line especially. Even before the stories surrounding RER and Hamilton LRT procurement issues broke, I had always thought that the Ontario Line proposal shifted way too much risk onto their private sector partners for the proposal to be viable. The Ontario Line proposal at this point is essentially a fantasy map, with very little concrete details set.
Metrolinx is essentially trying to get the private sector to design and build the Ontario Line from scratch, which is an extraordinary amount of risk for a company to take on. Especially in an environment such as Downtown Toronto, where you really have no clue what challenges you'll come across, and where you'll have to be interfacing with ancient infrastructure without disrupting their operation. Metrolinx wants the P3 partner to take on all that risk... for a measly $7 Billion? I'm no expert in public infrastructure procurement, but that just doesn't pass the sniff test to me at all. I would not be surprised at all if the private sector, as they did with the Hamilton LRT, will be asking Metrolinx for double or triple what they've budgeted for Ontario Line capital costs. Even if everything went swimmingly well, $7 Billion sounded like a ridiculously optimistic budget.
At this point I have to wonder if it would just be better for Metrolinx to bring much of the necessary work in-house. Otherwise the private sector will just continue to charge Metrolinx insane premiums, essentially as an exercise to avoid some bad PR fallout when these projects inevitably go over budget (as they all do). That's essentially the model the TTC uses, with them keeping much of the grunt work within the origination, while selectively outsourcing certain components (tunnels, stations, etc...). But then again, unlike the TTC, Metrolinx really doesn't have the institutional knowledge to build large scale public infrastructure themselves. An organization can't just buy that kind of institutional knowledge; it only comes from decades of experience.
Also, because the private sector has higher borrowing costs than the government, taxpayers are paying a premium to cover those additional borrowing costs, in addition to paying a premium to compensate the private sector for their risk exposure. We gotta ask ourselves if the model used by Metrolinx is even worth the financial penalty.
/https://www.thestar.com/content/dam/thestar/news/gta/2020/01/20/go-expansion-plans-facing-uncertainty-as-companies-raise-concerns-over-p3-procurement-model-documents-warn/go_transit.jpg)
