Sean Sweeney: Explaining Central Rail Link delays and cost increases
A train passes the construction site of what will be Maungawhau/Mount Eden Station on the City Rail Link. Photo/Michael Craig
The impact of Covid on major construction projects has been much wider than expected at the start of 2020.
Unsurprisingly, this has cast a shadow over the City Rail Link project since the first lockdown
also in March 2020.
Naturally, people want and deserve an explanation of these impacts and why it’s taking so long to give a definitive answer on costs and end date.
There was the direct impact of nearly three months of full lockdown of our venues, the ongoing impact of over 280 days of Auckland being either in Tier 3 with closed borders or Tier 2 with continued restrictions on site operations.
In addition, there has been the impact of border closures on site resources. Like other global infrastructure projects, City Rail Link has suffered shortages in a number of critical trades such as steelworkers and blocklayers.
These resources have generally been resolved by greater circulation of international skills.
These shortages sometimes meant that entire work areas could not progress for weeks at a time.
Border closures have also led to a loss of skilled workers overseas in critical construction and engineering roles.
As a result, worker poaching has become a major problem and has added further uncertainty.
One day I showed up at a City Rail Link site to find that a crew of eight steel workers had been poached by another company and simply left that day.
Finding and retaining qualified resources throughout 2021/22 has been an exceptionally difficult task and has had a direct impact on cost and schedule.
The global supply chain has also been severely disrupted directly, for example when a global shipping company removed New Zealand from its supply routes, and indirectly when key goods were blocked off the port of Shanghai for months while all of Shanghai was under severe lockdown. .
All of these effects delayed the project but also combined to push construction cost inflation to levels not seen since the high inflation years of the 1970s and 1980s. Some elements like copper increased their cost by more than 200%.
City Rail Link worked with our design and build partner, the Link Alliance, to quantify and agree the actual impacts on project time and cost.
The difficulty was that each time we did an updated assessment, another variant of Covid (Delta, then Omicron) would emerge and further impact the project. This made re-estimating the overall completion time and cost of completion extremely difficult.
In April 2021, due to the challenges listed above and unknown future Covid progression, we advised our project sponsors (The Crown and Auckland Council) that we would not be able to give revised status of project time and costs up to that point as the effects of Covid seemed to lessen in the medium term.
We indicated at the time that we did not believe we would be able to do this before the end of 2022. We are doing so now.
Since January 2022, we have been working with the Link Alliance to quantify all Covid costs and impacts since June 2020. This process has taken eight months to date and there are still complex trade negotiations to be concluded before we have clarity on the full impacts from June 2021 until the middle of this year.
As this work is in progress, any attempt to provide a time and cost adjustment would leave us guessing.
This is something that we don’t think would be helpful to anyone. However, we certainly recognize that continued uncertainty is of no use to anyone.
Therefore, we continue to work with determination to quantify all impacts on the project, and then we agree on the temporal and financial consequences of these impacts.
Once negotiations are concluded, we will then be able to accurately advise project sponsors of a completion date and seek additional funds to cover these Covid costs.
As we have been advising since April 2021, we expect this to take until the end of this year and this of course depends on there being no other Covid variants affecting the country.
• Dr Sean Sweeney is the Managing Director of City Rail Link Limited.