Downtown BRT route over-budget as remaining routes face double-digit inflation

Inflation has driven the cost to build London’s first rapid transit route over budget and threatens to increase the price tag for the two remaining routes.

A new report to the Civic Works Committee (CWC) reveals building the $23.3 million Downtown Loop cost 1.7 per cent ($331,000) more than budgeted.

Cost overruns must be covered by the city.

“So far we’ve been really successful in limiting our budget exceedance to a small amount,” explains director of construction and infrastructure Jennie Dann. “But we know that the factors that are impacting the cost of these projects are not going away anytime soon.”

The report warns inflationary pressures are also anticipated to impact the more expensive East London Link and Wellington Gateway routes.

The budget approved five years ago did not anticipate construction costs to rise so quickly.

“Recent construction price escalations have been observed following approval of the EA (Shift BRT Environmental Assessment) cost estimates from 2018,” reads the CWC report.

Specifically, the 2018 Environmental Assessment estimated annual inflation at 2 per cent to 3 per cent, but Statistics Canada’s Construction Price Index is currently at 12.5 per cent.

In 2018, Dann responded to concerns raised by former mayoral candidate Paul Paolatto that the construction budget was overly optimistic:

At the time she wrote to CTV News, “to guard against cost overruns on this project, we have factored in a significant 50 per cent contingency fund— meaning we have done our financial planning in a way that ensures there are no surprises for Londoners.”

Dann now says a surge in construction costs of more than 30 per cent since 2018 couldn’t be anticipated.

“We made reasonable assumptions at the time, and so now we’re at a point where we’re trying to look at whatever options we can to refine our design and work with those pressures to find savings,” she says.

Cost pressures are impacting infrastructure projects across the city.

The cost to build the Adelaide Rail Underpass recently grew from $58 million to $88 million.

Earlier this week, city council supported a $10.2 million dollar adjustment to the city’s Capital Budget related to 18 smaller road projects.

Dann says the city continues to seek cost efficiencies as designs are finalized on the East London Link and Wellington Gateway.

The report also advises that additional funding might be sought in the 2024-27 multi-year budget this December.

“It’s really too early to tell,” adds Dann. “The team is using all of those same really great practices around value engineering and trying to find ways to tighten up the design for the cost savings.”