Allocating risk in transportation megaprojects: the case of the Canada Line

Author/s:  Carolyn Gisborne (née Ruhland)

Creation date: 2010 

Contact info: carolyngisborne@gmail.com

Senior supervisor:  Peter V. Hall

Keywords:  Canada Line, Megaprojects, Urban transportation, Risk allocation, Risk mitigation

Geographic focus: Vancouver, BC; British Columbia; Canada

Research question/s: How did the Canada Line P3 process allocate construction risk and the associated costs?

Significance

The Canada Line was a groundbreaking transportation megaproject in several ways: It was the country’s first airport-rail link, as well as Metro Vancouver’s first major underground transportation infrastructure project. The Canada Line was also the first rail project in B.C. to employ a public-private partnership (P3) for project design, construction, financing and operation. The literature on megaprojects identifies cost overruns and ineffective risk allocation as typical features of megaprojects and recommends improving accountability and transparency throughout project planning and implementation. With that context in mind, the author analyzed the legal case brought by a Cambie merchant against the Canada Line. She also used systematic process analysis to compare the allocation of construction risks in the Canada Line project to three other rail megaprojects. This research contributes to the literature on megaprojects and P3s, both of which have increased in number over the past decades. It also comments on how the Canada Line set precedents for future transportation megaprojects.

Findings

The author found that the Canada Line P3 contract was not as effective at risk-allocation and mitigation as similar projects in Sydney, Toronto and Seattle. More generally, the author concluded that the more accountable a project’s administrators are to the public, the more accurate and effective risk allocation strategies will be. Also, whether the private sector is involved or not appears secondary to the need for transparency and comprehensive risk analysis and management at the planning stage. In the Canada Line case, planning and execution suffered the shortcomings typical of megaprojects, including serious flaws in transparency. Further, the lawsuit brought by a Cambie merchant illustrates how cutting costs up front can ultimately backfire, imposing unacceptable burdens on the private sector. The author concluded that tender specifications for megaprojects need careful consideration and ideally should include a total-cost analysis with emphasis on third party costs, as well as comprehensive risk analysis and allocation schemes.