Rash of delayed city projects means millions in penalty payments
Three major projects, three serious construction delays: the city makes sure contractors pay for mistakes
Delayed, delayed, delayed.
Three major city projects are expected to open more than a year behind schedule.
But there is a silver lining; and this one you can take to the bank.
The city stands to bring in millions of dollars in penalty fees from contractors who haven't met their deadlines.
"It's the contractor who let the city down, as far as the schedule," said Barry Belcourt, the city's branch manager for road design and construction.
And it's the contractors who will have to pay for the cost of delays.
This year the city can expect to bring in as much as $10 million in penalties, which will go toward the final cost of the delayed projects.
A city spokesperson couldn't confirm if the city is collecting more financial construction penalties this year than previously. But Belcourt said this year is "a rarity."
The city has only invoked penalties about half a dozen times for delayed transportation projects since 2006, Belcourt said.
But over the last several months he's had to stand in front of TV cameras to explain why major transportation projects keep hitting roadblocks. That includes the buckled girders on the 102nd Avenue bridge and the delayed steel delivery for the Walterdale Bridge arches.
As well, problems with the signalling system for the Metro LRT line saw its opening delayed a year.
In each case, the contractor faces some sort of penalty:
- 102nd Avenue bridge - $11,500 per day starting in October
- Walterdale Bridge - $10,000 per day starting in June
- Metro LRT line - The contractor won't be paid until the work is done
"It's not about making money, it's about offsetting costs," Belcourt said.
Those costs include the extra time city staff have to spend on the project, the consultants who have to be kept on longer, and in some cases, transit and traffic detours.
But construction lawyer Corbin Devlin said the city doesn't have to justify the penalty amounts unless they're challenged in court.
"In a private construction project it would be the subject of negotiation," Devlin said.
But for a public project, contractors can choose to take or leave the amount the city sets in a contract.
Legally, he said, the amount just has to meet a "reasonable estimation of damages," which means any leftover money will go back into general cofffers.
Devlin said the penalties act as "a big stick" to make sure contractors work as quickly as possible to limit the inconvenience for commuters and nearby businesses.
So why aren't there penalties for every project?
There's a catch to all this cash.
Although Devlin said it's not legally required, Belcourt said the city can't add a penalty to a contract without also offering a bonus if the project is finished early.
Adding a bonus and penalty clause can make projects a financial gamble for the city.
Of the 170 transportation projects the city takes on each year, only about 15 include penalty clauses. Of those, the city cashes in on very few.
"We carefully pick and choose," said Belcourt.
"If I was to put a bonus penalty clause in every contract, I wouldn't be adding value."
He said the city only asks for a penalty if a delay would have a major impact on costs or inconvenience, such as major road closures.
The Quesnell Bridge is the one example that stands out in his mind. The $161-million project was years behind schedule by the time it opened in 2011.
Belcourt said the contractor went bankrupt paying penalties to the city for those delays.
"Thank goodness he went bankrupt after he built it," he said.
But the project delays this year are triggering questions about the city's performance.
"I've had people ask me, is everything falling apart?"
Belcourt said the answer is "no" and that each delay is an isolated issue.
Still, the city appears to be paying a political cost, as contractors can't pay back the public confidence that's been lost.