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Case study Transit System

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4 views

Case study Transit System

Uploaded by

tyagi.tyagi.aryan15
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Case study: Time limits and cost

overruns on a large-scale transport


infrastructure project
Public and Parapublic, Transportation

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:

• Clearly explain cost and time variances and their causes;

• 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


Margin of accuracy Difference
Target Real
Value % Value %
$195.5 M to – 5%
+
Cost $205.8 M $236.7 M to $239.1 M 16.20%
$33.3 M
15%

40 65 + 25
Schedule + 62.5%
months months months

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 unrealistic time frame

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 “a 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 contingency in 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).

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