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Case study: Time limits and cost overruns on a large-scale transport infrastructure project

Projet_infrastructures_transport

Three years after the Rapibus was commissioned, the Board of Directors of the Société de transport de l’Outaouais (STO) mandated Strategia Conseil to conduct an independent review of the Bus Rapid Transit (BRT) project built in 2013. 

The objectives of the mandate were: 

  • Identify the strengths and weaknesses of project management and governance; and 
  • Present findings and make recommendations to influence the quality and performance of the management of future projects. 

The unforeseen circumstances encountered during this project’s implementation caused a significant increase in initial costs and an overrun of the announced schedule. 

The project: Deploying new transport infrastructure 

The Rapibus project was initiated about 20 years ago. The Outaouais region sees a lot of heavy road traffic, leading to congestion during rush hour and even during off-peak hours. 

The Communauté urbaine de l’Outaouais (CUO) mandated the Société de transport de l’Outaouais (STO) to improve the reliability and speed of public transit, rather than building an additional interprovincial bridge. 

Various studies have identified the integration of a dedicated bus lane within the existing rail corridor as the best technological choice. Essentially, the Rapibus project is a Bus Rapid Transit on a 15 km bidirectional track. 

At the request of Quebec’s Ministry of Transportation (MTQ), a feasibility study was conducted in 2004. An authorization in principle for the preparation of plans and specifications was then granted in October 2007. In June 2009, the preliminary and final draft design studies were submitted. 

Five months later, in November 2009, the MTQ granted a final authorization and announced its financial contribution to the Rapibus project: up to 75%, through its government assistance program for public transit. The City of Gatineau would be responsible for the remaining 25%. 

Over the years, several adaptations were made to the scope of the project. These adaptations led, among others, to an overrun of
the initial schedule and an increase in expected costs. 

Summary of costs and delays 

The table below summarizes the cost and time overruns for the project. 

Reference parameter Final result
Target

Margin of accuracy

Real

Difference
Value % Value %
Cost $205.8 M

$195.5 M  to

$236.7 M

– 5%

to

+ 15%

$239.1 M + $33.3 M +16.2%
Schedule 40 months 65 months + 25 months

+ 62.5%

How can we explain a 16.2% increase in costs and a delay of over 25 months? 

Causes of schedule delays 

We identified three main causes explaining the schedule overrun.

1. Adoption of an unrealistictimeframe

The initial schedule was established when the project scope was not defined enough to clearly establish its duration. This schedule should have been qualified as “provisional”, with a certain margin of error, rather than a fixed duration. Rather, the 40-month duration was interpreted erroneously as being realistic timeframe for the project’s target schedule.

2. Lack of informed planning

The schedule for the final design stage, produced after detailed information on the project was made available, shows that the timeframes for design activities were significantly underestimated.
Better planning could have avoided a significant underestimation of the time required for design activities.

3. Lack of contingencyin the schedule

The schedule should have allowed for contingency for delay risks. While it’s impossible to predict all unforeseen events, it would have been wise to perform a risk analysis at the preliminary project stage. Doing so would have exposed the risks and quantified the likelihood of not meeting the 40-month target. 

Causes of cost overruns 

If we compare the projected final cost of $282 million with the target budget of $233.5 million, we calculate a variance of $48.5 million, or 20.8% of the budget.
In summary, this $48.5 million difference is due to three main factors: 

  • Cost escalation (± $18 million); 
  • Increase in indirect costs in Phase 1 (± $23 million); and 
  • Increase in direct costs in Phase 2 (± $7 million).

1. Cost escalation

The primary cause of cost overruns was the cost escalation factor. For work to be completed in 2016–2017, the $27.7 million budget (in 2010 dollars) must be indexed by $5.5 million, bringing the total amount to $33.2 million. 

Despite its importance, this rate is rarely taken into account in the project’s financial documents; the reference year of the dollar value is almost never mentioned. However, cost escalation has a very significant impact on the costs of a project, as it provides a measure of the true value of the work over time.

2. Increase in direct and indirect costs

In addition to cost escalation, the budget overrun was largely due to additional direct costs resulting from changes in the scope of the initial work. Underestimated indirect costs in areas such as the following were also a factor:
– Professional services
– Site overhead costs
– Project management and funding 

The increase in indirect costs is certainly linked to budgetary underestimation, but also to a much-too-optimistic timetable (see above). 

Other factors impacting the project 

Project governance 

The main challenge lies in the STO’s and its team’s ability to adapt to its new status as “project owner”. The shift from an operational role to a project management role for a transit system is significant. 

While the STO had tried to set up an efficient and effective project-based organization, its limited experience in managing major projects represented a significant risk for stakeholders. 

This could have been mitigated for example by adapting the project governance structure to the nature and size of the project and by reaching out to experts in the field of construction project management. 

Risk analysis

The Rapibus project was the only one of its kind in the Province of Quebec. Installing a rail line, two bus lanes and a bicycle path in an urban environment and in the same corridor, as well as crossing 18 street intersections, posed unusual challenges in and of itself. 

It was should have expected that the implementation process would be fraught with problems to be solved and uncertainties to be addressed. Although the project definition documents (Feasibility Study-2004, Project Charter-2008, and P/FD) contained considerations and warnings about the project environment and certain conditions that may affect its feasibility, they were not presented as quantifiable risks. 

Risk analyses performed at the various stages of implementation would have been necessary. They would have made it possible to understand the events and certainly facilitate the management of the project, in particular by assessing each event’s potential impacts on the costs and schedule. 

Conclusion 

The 239 million-dollar Rapibus project is no doubt a large-scale public transport project. There were no other projects in Quebec that could have served as a model. 

The implementation of this type of public infrastructure project poses major technical and organizational challenges, which further justifies the need to establish an appropriate and transparent project governance structure and to be supported by experts in construction project management. 

The success of any project, especially a large-scale project, requires a well-informed and rigorous management framework. Adopting a structured approach early in the process helps to position the project in relation to its design and implementation progress. 

In conclusion, we applaud the STO’s initiative to conduct a postmortem analysis of the project to highlight the strengths and weaknesses of its management processes and governance mechanisms. 

The main lessons to be learned from this project are: 

  • Establish project governance that is adapted to the specific requirements of the project; 
  • Have a realistic budget and schedule before starting a project (have an independent evaluation, if necessary); 
  • Strengthen the application of project management best practices; 
  • Obtain the support of external experts who can provide advice to the client’s internal project management team; 
  • Apply a risk management approach to all phases of the project; and 
  • Ensure informed and rigorous follow-ups on all project activities by the project manager. 

Note: This case study is based on the Strategia Conseil report, which is available online (in French only).