For some time now we’ve known that the cost and completion timeframe for the City Rail Link would increase. Yesterday we finally learned by just how much.
City Rail Link Ltd (CRL Ltd) today confirms it has submitted a formal funding request to its Sponsors – the Crown and Auckland Council – reflecting revised costs and time required to complete the project as a result of the Covid-19 pandemic, lockdowns and associated impacts.
The cost of the project is now estimated to be $5.493bn a $1.074bn increase on the previous estimate of $4.419 billion, which was approved by the Sponsors in May 2019.
While not being surprising, it’s obviously incredibly disappointing that the cost and the timeframe of the project have gone up again, with the cost having increased by a similar amount four years ago – though about a quarter of that increase was also better future proof the project, including building the Beresford Square entrance to the Karanga-a-Hape station.
City Rail Link Ltd are putting the cause of the increase almost entirely on the impacts of COVID, both from the lockdowns and subsequent supply chain and staffing challenges.
Chief executive Dr Sean Sweeney says the extra funding and additional time for completion is primarily due to Covid impacts – time lost on-site and the knock-on effect on the supply chain, resourcing, materials, and labour costs.
“People need to remember that in Auckland we endured two level four lockdowns, a further 280 days of restricted working conditions (Covid traffic light system) and we lost 3.2 million hours through illness among staff, with 800-plus workers infected.”
They also gave a bit more of a breakdown to some of these issues while noting that similar scale projects in Australia are on average about 30% over budget with COVID also being the most significant factor in the increases.
The cost increases and delays to large infrastructure projects like the CRL stem from a complex, interrelated series of factors that broadly fall under the Covid umbrella and are still impacting construction costs and timetable.
These impacts include:
- Direct Covid impacts – loss of hours worked due to lockdowns (two lockdowns; more than six months), Covid restrictions (traffic light system, 280 days) and illness (3.2 million hours lost by the year to June 2021; 800-plus workers infected)
- Labour costs
- Construction sector wage inflation
- Employing people for longer periods due to Covid delays
- Acquiring expert staff for upcoming phases in a highly competitive international construction market
- Materials costs, the majority of which are imported
- 70% of all building products are imported or rely in part on imported components
- Shipping costs – 785% increase between November 2019 and September 2021 (Global Container Freight Index)
Inflation has impacted construction harder than other sectors and has been one of the major drivers for New Zealand’s highest inflation rate since the June 1990 quarter.
Construction sector inflation is a global phenomenon but New Zealand still has the 7th highest construction price inflation in the OECD. NZTA figures show an increase of nearly 20% in the cost of building supplies in the 18 months to 2Q 2022.
Among the construction supplies sub-categories relevant to the CRL, are:
- Reinforced concrete floor slabs +13.4% since 2020
- D32mm rods +13.8%
- Fibre cement sheets +10%
- Steel cladding +9.5%
In addition are Covid impacts that are difficult to quantify but have had a material effect on the project. These include negative productivity and lost opportunity costs due to lockdown and illness, ongoing labour constraints, supply chain disruption and resource scarcity.
While COVID bears most of the blame, it seems there has also been some scope changes too.
The funding increase also included “additional scope” for “wider aspects of the job”, including increased property costs.
I assume this relates to other parts of the programme, such as the plans for Henderson Station – even though a cheaper and better solution exists.
One of the challenges with this increase is that Auckland Council are on the hook for half of it. But given lockdowns were outside of Auckland Council’s control, it feels like the government should be contributing a larger amount. But that seems unlikely to happen, with the Herald reporting.
Transport Minister Michael Wood appeared to dash any hope Central Government would come riding to the rescue of budget-constrained Auckland Council, by picking up a larger share of the project’s $1 billion cost blowout, announced this morning. Meanwhile, National warned that the CRL blowout is a taste of the cost increases to come if Auckland light rail gets the green light.
Wood reminded the Council that City Rail Link is a 50-50 partnership with Auckland Council, when asked about who would fund the latest $1 billion cost blowout on the project.
“That is just a point of fact: it’s a partnership that is 50-50 in terms of governance, in terms of costs,” Wood said.
I’m sure that over the coming days and weeks we’ll hear from some naysayers that we need to stop the project, maybe quoting the sunk cost fallacy. But the reality is, the tunnels are already built with tracks and other rail systems already being installed. Sure there’s still a lot to do but it would be short sighted to stop such a massively transformational project now. It will also be interesting to any of those people also called for the stopping of projects like Otaki to North of Levin, which nearly doubled in cost two years ago and has apparently blown out again.
Personally, I’m far more concerned about the delay to the completion time as that means actual delays to the transformative benefits the CRL will provide. CRL say it will now take about a year longer but there’s also an additional caveat to that too.
As part of the request, CRL Ltd has also provided the Sponsors with a revised completion date, with construction of the stations and supporting rail infrastructure now expected to be completed by the Link Alliance by November 2025.
Following the end of the construction programme, CRL Ltd will hand over the completed infrastructure to KiwiRail and Auckland Transport, who will then carry out the additional work required to open the CRL to its first passengers.
Firstly, on CRL’s delayed completion, it seems this is mostly to do with the commissioning and testing phase, with them saying this to neighbours of the Te Waihorotiu station.
A large portion of the additional projected time is for underground testing and commissioning, that follows completion of civil construction. Surface level streetscape works are independent from these underground works.
Crucially, that completion date is only when the construction is completed and the project is handed over to Kiwirail and Auckland Transport. This image, from a presentation to the Council’s Transport and Infrastructure Committee back in December, highlights some of the steps those organisations need to do.
That seems like quite a bit to do so it wouldn’t surprise me if we don’t see trains carrying passengers till late 2026.
Kiwirail Track Upgrades
Kiwrail are currently upgrading the foundations and drainage under the tracks across the network through a series of rail network closures – the first section from Newmarket to Otahuhu is due for completion this week with services returning and the Eastern Line closed from next week. A large part of the justification for the very disruptive closures has been so that Kiwirail can get the works completed in time for the opening of the CRL.
With the CRL now opening a year or more later than previously planned, I wonder if this means they could take a less disruptive approach to the remaining sections of line?
Given the cost and timeframe increases for the CRL, this should put even more focus on the Light Rail project. It seems extremely unlikely they’ll be able to stick to the $14.6 billion previously suggested, and with building a tunnel about three times as long, it’s hard to see it not taking till 2035 or later till we actually see services running. That should give officials pause for thought given that based on overseas light rail projects, we should be able to get a surface solution from the city to at least as far as Mt Roskill or Onehunga built in 3-4 years