Metrolinx CEO Phil Verster says in the agency’s latest podcast that projects being brought to market are being adjusted as commodity prices spike and that a special concern is the availability of skilled workers to carry out those projects.
A confluence of factors has come together to reduce the number of bidders of projects, Verster said, noting supply chain disruption is another source of headaches. Metrolinx currently has $80 billion worth of projects either in market or in various stages of procurement.
The CEO was interviewed by Metrolinx podcast host Matt Llewellyn.
“It’s a challenging environment,” said Verster.
“We are keeping a close eye on all the different market sectors that are affected. The ones that are very prevalent for us is everything that feeds into our construction, for example. We’ve seen commodity prices such as steel, lumber, even concrete prices have increased dramatically.”
Metrolinx has made adjustments to its current projects that are in market and brought in mechanisms that track inflation and adjust the price levels that its bidders are bidding at, Verster explained. Metrolinx is also looking at fuel hedging to attempt to bring in a degree of “sensible control.”
“But the one that really bothers me is skills and skills shortages, human capital. A very weird mix of factors that have affected skills competencies in the skills markets segment,” he said, acknowledging the COVID “great resign” trend.
“We see constraints and bottlenecks in the supply side of the market and where there were in the past three, four or five players that would have bid, there’s now two or perhaps three.
“It’s very difficult to pinpoint it and to figure out where to provide a solution…what we do is we just listen and figure out what we can do in the realm of what we control to make it possible for the best possible prices to be bid to us in the best possible participation in our projects.”
Metrolinx is finding that different projects have different sets of issues, and it is working closely with its partners to find solutions.
“Every aspect of project delivery is affected,” Verster said.
“If there was a projection of buying three or four specialized pieces of equipment, those specialized pieces of equipment now take literally months longer to arrive and be delivered than what was the intention as little as six to nine months ago.”
Verster said it’s time to think deeply on longer-term strategies for controlling costs.
“It looks as if it is not temporary, but more of an upwards ratcheting of prices with no downward ratchet evident,” he said.
“What we are thinking of is how do we phase expenditures in projects that can be phased. In projects where we can’t phase expenditure, we’re thinking very carefully on how to make sure that the supply chain is protected and able to deliver and just make difficult choices now.”
Meanwhile, Metrolinx will use its progressive, co-operative procurement models such as Alliance, being employed at Union Station, to seek innovations in cost containment, Verster said.
He recently toured the project with a team from Kiewit and saw how “fabulous innovation” had resulted in significant savings on the project.
“So I definitely think the shift that we’ve made towards more progressive contracts over the last two years or so is now fortuitously exactly where we need to be,” Verster said.
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