Bechtel’s contract for the Toronto-York Spadina Subway Extension signals privatization of new transit delivery

For the most part, mainstream media has bought the political spin about the Toronto-York Spadina Subway Extension (TYSSE) being pulled from the brink of disaster to become a win-win for the TTC and the people of Toronto and Vaughan.

The reality is that this project marks another private-sector takeover of transit megaprojects – and a harbinger of crippling indebtedness for the TTC and Toronto as a whole.

The top-notch TTC managers overseeing construction of the TYSSE were replaced with American construction and engineering firm Bechtel in March 2015, and privatization of the TTC has continued ever since. This has opened another major front in a three-pronged attack on the TTC: to de-fund existing services, dismantle public control over the delivery of new transit lines and download regional responsibilities and costs (TYSSE to Vaughan, Yonge subway extension to Richmond Hill) onto a local service provider. Correspondingly, it has contributed to a drastic hollowing out of TTC expertise gained over decades of managing transit projects.

In March 2015, the TTC and the city of Toronto, together with York Region, committed to paying $150 million for 46 Bechtel personnel to manage delivery of the TYSSE by December 2017. This was a silent coup. While Toronto Mayor John Tory and TTC Chair Josh Colle demonized in-house TTC management, TTC CEO Andy Byford beheaded the TTC’s Project Expansion Department to provide cover for the huge multinationals takeover of new-project management.

In his December 16, 2017, newsletter, Tory glories in the TYSSE opening and revisits the original delays and cost overruns of the project, describing himself and Byford as saviours:

The day after I was elected, TTC CEO Andy Byford told me that this project was badly behind schedule and over budget. He developed a plan to fix the schedule and focus the work. Because the previous administration has completely mismanaged the project, the subway was looking like it was going to open in 2019. Because of my interventions, and the good work of Mr. Byford and his team of the TTC, we got the subway back on track and it will open to the public on Sunday.

However, a close look at the two studies on the TYSSE that Byford commissioned in early 2015 shows that the mayor’s pronouncements are disingenuous.

Enter Bechtel

The $3.2-billion TYSSE is an 8.5-kilometre, six-station extension running between Sheppard West station in the south and Vaughan Metropolitan Centre in the north. It was supposed to open in 2015 but was delayed by the death of a worker, design changes and disputes between TTC management and contractors.

At the TTC’s March 2015 board meeting, Chair Josh Colle endorsed Byford’s prior decision to fire TTC managers Sameh Ghaly and Andy Bertolo, blaming them for TYSSE delays and the subsequent $400 million in cost overruns. To support his position, Colle cited the two reports: a peer review by an Expert Panel of the American Public Transportation Association (APTA), and an assessment conducted by Bechtel, the San-Francisco-based, global engineering, construction and project-management firm.

The APTA Peer Review Panel had been asked by Byford to examine the “scheduling and budgeting strategy of the TYSSE.” Contrary to Colle’s statements about the APTA report, the panel members did not blame TTC management for the delays. In fact the panel praised managers, stating, “TTC is devoting considerable effort to reset the project” and that delays were not due to TTC management, but to “contractor work, funding-decision making, and inexperience of contractors working in Canada.” In general, the APTA peers expressed great respect for the TTC’s management capacity under Chief Capital Officer Sameh Ghaly and Project Manager Andy Bertolo. Previously, the TTC’s professional excellence had been recognized with an international award for having delivered the Sheppard subway project on time and on budget.

In contrast, Bechtel Canada Co.’s assessment blamed TTC management for the delays and cost overruns. The Bechtel report said, for example, that TTC management adopted a “non-collaborative approach,” and that “[t]he relationship between each Contractor and the [TYSSE] Project [managers] is strained due to friction over how the contract is being administered.”

The Bechtel report also asserted that contractors appear to be capable of delivering the project and finishing the work as soon as possible … The consistent complaint from the Contractors is that, without the required support from the Project staff on resolving issues, the present schedule dates will be pushed out farther.

Curiously, the Bechtel report analyzed costs and contractor claims for the TYSSE project, even though financial information of such a commercial nature is normally privileged (the TTC may make such information accessible to an accounting firm it hires). A freedom of information application produced Order MO-3347, stating (page 7, [33]) that Bechtel’s review of the TYSSE project “is not dissimilar in form and content to an audit report.”

Whether or not it was proper to grant Bechtel access to financial and other information about the project, this access indisputably gave Bechtel Canada Co. an unfair advantage from which to advise and influence the TTC Board regarding replacing TTC project staff with 46 Bechtel personnel. As Stephen Bauld, a Canadian government- procurement expert, wrote in Daily Commercial News,

“Conflict of interest problems also arise where the consultant has an interest in the outcome of the study that the consultant is hired to conduct, or where the consultant’s prospect of further employment is likely to be influenced by the advice given,”

The Bechtel report was never released publicly. Brenda Thompson obtained a heavily redacted copy through a Freedom of Information appeal 17 months after Ghaly and Bertolo were fired and the $150-million, sole-source contract (for delivery of the TYSSE by December 2017) had been awarded to Bechtel.

Tory, Colle and Byford surely knew who they were going to dance with: Bechtel’s long and dubious history is well documented. In The Profiteers, author Sally Denton commented, “When I started out this book, I saw Bechtel as the corporate arm of the U.S. government. But by the end of the book I saw the government as the public policy arm of Bechtel.” The following summarizes an account of Bechtel’s past performance:

In 1985, Bechtel partnered with rival Parsons Brinckerhoff to oversee the Boston Big Dig Central Artery/ Tunneling Project, at a projected cost of $2.6 billion and expected completion in 1998. Numerous delays and overruns led to a December 2007 delivery and a price tag of $24.3-billion — the most expensive highway project in U.S. history. Various state and federal agencies spent millions on more than 15 separate investigations of the project’s managers, which included Bechtel-Parsons Brinckerhoff, for “shoddy design, construction and engineering, fraud and corruption.”

The overlooked TYSSE option

At the March 26, 2015, TTC board meeting, Byford presented his recommendations for speeding up the TYSSE completion, giving the commissioners four options, shown in Table 1, below (from the TTC report). However, Byford had already largely precluded options 3 and 4 with the pre-emptive firing of top TTC construction managers a week earlier, on March 19.

https://www.ttc.ca/About_the_TTC/Commission_reports_and_information/Commission_meetings/2015/March_26/Reports/4_1_TYSSE_Final_Report_and_Presentation.pdf

At the urging of Byford and Colle, the board approved Option 1: sole source management. This recommendation went to City Council on March 31, 2015.

What Byford and Colle neglected to tell either the TTC Board or city councillors was that an earlier study suggested two other options. In 2014, a recovery and risk-analysis workshop for TTC Project management, facilitated by Parsons Brinckerhoff, had created two options, shown below, indicating that $263 million was required to finish the TYSSE project.

Option 1 shows that by keeping TTC managers in charge of the project and spending $95 million to resolve contractor claims, delivery could be accomplished by December 2017 – as it was under Bechtel.

Taken from Bechtel Canada -Toronto -York Spadina Extension assessment, page 5-1, February 2015

TBM = tunnel boring machine

However, 2014’s Option 1 was not included in the report that Byford presented to the TTC commission’s March 2015 meeting. His report said only that contractor claims would be addressed “with a further report to the Board by the end of 2015.” Thus the TTC board presented City Council, at its March 31, 2015 meeting, with only the recommendation to authorize Byford to hire an unnamed “outside contractor” to manage the TYSSE project—sole source, with no tendering.

The recommendation raised suspicion amongst progressive councillors and a contentious, five-hour debate ensued.

Watch the March 31, 2015 Toronto Council meeting (1:07:10) video.

They were being asked to accept Byford’s reasoning without having access to the information that informed it. The TTC report was held back from councillors who were not members of the TTC Commission until the night before the council meeting. These same councillors were denied access to the Bechtel assessment and APTA peer review on the basis of confidentiality. To further limit debate, Tory had his deputy mayor Denzil Minnan-Wong introduce a motion to lump the TYSSE sole source recommendation item together with another item requesting a report on TTC delivery options which effectively reduced the time allowed for questions from ten minutes to five. The recommendation was approved 40 to 3.

Read a transcript of the council debate here.

Byford’s sole source turned out to be Bechtel, the same contractor hired to study the project—in contravention of normal conflict-of-interest protocols. On April 10, 2015, The TTC board approved the contract with Bechtel to take over management of the project for $150 million. Council gave final approval to take $60 million from York Region and $90 million from the city’s reserve fund to pay for the 46 Bechtel personnel.

A complaint was submitted to Toronto Auditor General Beverly Romeo-Beehler on May 24, 2017 but her office declined to investigate.

March to more privatization

Did the public pay $150 million to Bechtel to deliver the TYSSE by December 2017 for the benefit of Toronto and York Region residents? Or was this an opportunity for one of the largest construction firms in the world to move in on the TTC by demonizing in-house TTC management?”

Before Bechtel got the TYSSE project, Metrolinx had already taken over the Eglinton Crosstown LRT, which had also started under Ghaly and Bertolo at the TTC Expansion Department. As a result of the Metrolinx takeover, in-house TTC expertise was eliminated and the project was delayed by two years, while Metrolinx invited private consortia to bid on a complex contract to design, build, finance and maintain (DBFM) the Crosstown.

Now SNC-Lavalin, Grupo ACS, Dragados and OHL (a Spanish multinational that tunnelled the TYSSE) have a 30-year, $9.1-billion contract to design, build, finance and maintain the Crosstown line. Only the operation may be left to the TTC. Meanwhile, the project has significantly ballooned in duration and cost.

The Auditor General of Ontario has repeatedly brought to light poor cost- and project-control by Metrolinx and its contractors. Yet Metrolinx continues to do relatively little in response to these warnings, and allows costs to mount with little oversight. As well, study after study has also shown that privatization results in higher financing costs, ultimately passed on to the taxpayers.

Next on the horizon is the $3.35-billion – and climbing – Scarborough subway extension. This one-stop project is set to be a DBF (design, build and finance). If all new city transit infrastructure is to be delivered privately and the TTC loses in-house capacity to oversee these projects who will protect the public interest against the Bechtels of this world?

By Brenda Thompson with Joell Ann Vanderwagen and Rosemary Frei