Stage 1 LRT budget did not account for hundreds of millions in inflationary costs, inquiry told

Inflation forced changes to LRT design CTV’s Leah Larocque on Day Two of the LRT public hearing and how the City had to adjust to rising costs early in the project.

The true cost of Stage 1 of Ottawa’s light rail transit line was in the spotlight Tuesday on the second day of public hearings in the inquiry into the problem-plagued system.

Former city treasurer Marian Simulik testified in front of the public inquiry commission, taking questions from commission lawyers on the LRT budget and the procurement process.

Simulik testified that the $2.1 billion dollar budget for Stage 1 did not take into account more than $400 million dollars in inflation as well as $177 million dollars in other costs, such as construction and transportation. Simulik said the city would be responsible for absorbing those extra costs.

Co-counsel for the commission, Kate McGrann, asked Simulik for examples of how the city would try to save and absorb the extra costs. The commission learned the city did “value engineering.” The tunnel underneath downtown was not as deep, and the uOttawa station was supposed to be underground, but was switched to aboveground in order to save on costs.

A focus of testimony also centred on the procurement and bidding processes. Simulik told the commission that the city used an “affordability cap,” meaning the winning bid would need to be at or under the $2.1 billion dollar budget. If one LRT bid came in under the affordability cap threshold, others that were above that threshold would be eliminated from the bidding process.

McGrann asking Simulik, “At any point before contract close, were there discussions about whether the budget was insufficient for what the city of Ottawa was trying to accomplish with the LRT?” Simulik responding, “I don’t remember any discussion of it being insufficient.”

Simulik said, “We basically trusted the private sector to act reasonably and produce a document or a bid that reflected what they thought the cost was going to be.”

McGrann later asked Simulik if there were concerns and “were there discussions about whether the budget or the cap introduced a risk or increased a risk that the private sector might overpromise in order to get under the cap or meet the budget?” Simulik responded, “No.”

Simulik was also asked how the city saw its relations with Rideau Transit Group. Simulik says it was considered a true partnership and a 30-year relationship. She said both parties wanted to deliver a reliable system.

The public hearings continue Wednesday with more testimony from City of Ottawa officials and contractors.

Witness Schedule (subject to change)

DAY 3 – June 15

DAY 4 – June 16

DAY 5 – June 17

DAY 6 – June 20

DAY 7 – June 21

DAY 8 – June 22

DAY 9 – June 23

DAY 10 – June 24

DAY 11 – June 27

DAY 12 – June 28

DAY 13 – June 29

DAY 14 – June 30

DAY 15 – July 4

DAY 16 – July 5

DAY 17 – July 6

DAY 18 – July 7