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Multimillion-dollar settlement talks prove LRT secrecy still a concern

Multimillion-dollar settlement talks prove LRT secrecy still a concern
Multimillion-dollar settlement talks prove LRT secrecy still a concern

The recent legal troubles surrounding Ottawa’s light rail system highlight a problem that existed before the troubled system even got off the ground: transparency.

From questions about the bidding process to a confidential deal give millions to builders of dollars in back payments, taxpayers remain in the dark about many of the city’s financial entanglements.

The legal confidentiality is far from unusualbut with so many ongoing problems Many residents, taxpayers and passengers are demanding more information.

This next round of settlement talks, which sources with knowledge of the claims say could be in the tens or hundreds of millions of dollars, is even more unclear. The city refuses to even confirm which companies are asking for money.

After nearly five and a half hours of debate spread over two council meetings, council members introduced a motion late last month to direct the city manager to conduct these conversations. No one dissented, and no one requested a recorded vote.

But that show of unity came after a debate about transparency behind closed doors, sources told CBC, with one saying everyone involved is concerned about the amount of information that can be shared.

The cost of building extensive infrastructure soared during the pandemic, leaving cities and contractors scrambling to figure out who was responsible for what. (Sean Kilpatrick/The Canadian Press)

Pandemic delays some claims

Mayor Mark Sutcliffe did provide some details, including that the claims stem from the next phase of light rail construction. That means the eastern and western extensions of the Confederation Line and the recently expanded north-south Trillium Line.

He blamed the delays on the pandemic, but sources suggest there is more to it.

“These are not uncommon. They are common in infrastructure projects. There are some that have been resolved and discussed publicly. There are others that are still ongoing,” Sutcliffe said.

“There are a few that have been resolved, but we haven’t heard about them because they are confidential.”

Matti Siemiatycki, director of the University of Toronto’s Infrastructure Institute, said cost increases on major projects have been “rampant” since 2020, sometimes blowing budgets by 40 per cent.

“This is a huge increase when you’re talking about billion-dollar projects,” he said. “And in many cases, the fallout is now working its way through the system, and there are disputes that need to be resolved as to who’s going to pay.”

A Stadler FLIRT train arrives at South Keys station during ongoing training and testing for Ottawa’s extended north-south Trillium Line. There is still no news on when it will open. (Patrick Louiseize/CBC)

The builders allege that the government imposed restrictions on the work due to COVID-19 policies, affecting their progress in ways they could not have anticipated when they signed the contract, he explained.

As council members met in private, Siemiatycki said lawyers were likely explaining how to determine what constitutes a pandemic-related expense and how to fairly distribute the financial blow across the public-private partnership.

A Legal Lesson from the GTA

To see Ottawa’s legal future, perhaps we only need to look to the Greater Toronto Area.

The Eglinton Crosstown project bears striking similarities to Ottawa’s LRT. The public inquiry into the city’s transit woes points to contractual elements and even to the key players themselves.

As in Ottawa, major delays have led Metrolinx to stop issuing intended start datesand the project deserved its fair share of criticism over transparency issues.

But when Metrolinx and Infrastructure Ontario faced a legal challenge from P3 contractor Crosslinx, they went to court – and lost.

A higher court judge would not stay the case, saying the contractors could not have foreseen or accepted the risks of the pandemic and should not have to bear the irreparable harm that could result if a decision is delayed until the project is completed.

The public partners pledged to oppose the “broad implications” of the case and announced about six months later that they had reached a $325 million settlement with Crosslinx.

Delays to the Eglinton Crosstown LRT project due to the pandemic have led to a legal ruling that could impact how Ottawa processes its own claims. (Michael Wilson/CBC)

‘Bloom off the rose’ on P3s, says expert

According to Siemiatycki, this situation has exposed the shortcomings of P3s, which have long been presented to taxpayers as a way to finance large projects without putting cities at great financial risk.

“Ultimately, the risk that is transferred on paper is not necessarily a risk that is transferred in practice. On these types of large projects, the contractor can only bear a limited amount of risk,” he said.

“The public-private partnership model, especially in Ontario, is a thorn in the side when it comes to public transportation.”

In particular, governments are moving away from fully bundled construction and maintenance contracts, which lock them into contractors for decades after new lines are built, he said.

That would solve one of the most difficult aspects of Ottawa’s ongoing LRT problems: the need to maintain trust in the contractors they must continue to work with while trying to resolve disputes.

Maintaining relationships

In Ottawa, many of the city’s private partners are involved in several large projects, a situation that Siemiatycki says is common in the construction industry.

For example, AtkinsRéalis, formerly known as SNC-Lavalin, has a 40 percent stake in construction company Rideau Transit Group, which is executing phase 1, and a 25 percent stake in Crosslinx.

Through its subsidiary TransitNext, it also won the contract for the Trillium Line.

Councillors first discussed a claim by TransitNext against the city last year, when it emerged following an independent investigation into the risks associated with the line.

The February 2023 report called on the city to quickly resolve the issue, warning that “the claim limits transparent communication between both parties, potentially leading to a lack of trust and potentially an inaccurate view of the city’s actual progress on the project.”

Renée Amilcar, general manager of OC Transpo, said the city’s relationships with its contractors remain strong. (Jean Delisle/CBC)

While the claim is still pending, the Trillium line remains idle

Renée Amilcar, general manager of OC Transpo, assured the public transport commissioners that informal discussions were underway, with the aim of maintaining a “very good relationship”.

At the time, the line was scheduled to open that fall.

City officials are no longer providing timelines for the launch, but told CBC Friday that teams are still “testing, training and building.” They would release more details as the city gets closer to the start of a 21-day trial.

While the city has not officially confirmed this as one of the active claims, CBC confirmed this detail to sources not authorized to speak publicly.

AtkinsRéalis is also facing legal problems from subcontractors who claim they are owed money for work on the track and road.

Prime Minister Justin Trudeau, right, greets Ottawa Mayor Mark Sutcliffe during his attendance at a meeting of the Federation of Canadian Municipalities in Calgary last month. Sutcliffe has been asked to seek funding from the provincial and federal governments. (Jeff McIntosh/The Canadian Press)

What’s next?

As the city works through a potentially costly scheme, it continues to grapple with the financial viability of providing public transit and the need to find a lasting solution to ongoing technical problems that have caused delays, derailments and a decline in public confidence.

The city told CBC it had spoken with partners earlier this month about solutions to a bearing problem that caused a derailment on the Confederation Line nearly three years ago, but no details were released.

As councillors gather on Wednesday for their final meeting before the summer break, they are likely to face another closed legal briefing on the first LRT phase.

The city does not want to say what will be discussed and may never do so.