The Problem

The taxpayers of Edmonton need to be protected from runaway projects.  Too often our major capital projects ($100M+) are incorrectly estimated by the City of Edmonton and/or its partners.  This has led to billions of dollars of waste through avoidable mismanagement.

There is a clear and demonstrable pattern of unreliable information being given from our city administration to city council, including unrealistic costs of capital projects.  Council requires better tools available to offer an independent and transparent look at these projects to ensure better procurement, delivery, and accountability.

Figure 1: Major Capital Projects ($100M+) completing since 2015

Example: Runaway Projects

Sadly, the majority of large capital projects approved go beyond reasonable costs increases.  Nothing is more clear than the budget for the new Police Campus building.

Figure 2: Photograph of construction of Edmonton Police Campus, dated July 19, 2019 courtesy of CTV News Edmonton

  1. 2008: Our capital plan estimated $30.6M for a new police campus.
  2. 2012: City Council approved 2012-14 budget, increasing total budget $81.4M
  3. 2019: Police campus should open in early 2019
  4. 2019: Major leak discovered in roof of building
  5. 2019: City launches lawsuit at 30 defendants for the roof
  6. 2020: The city must spend an additional $8M in repair costs
  7. 2020: Latest budget update shows police campus costing $119.7M
  8. 2021: Police campus still not opened and nearly two years behind schedule

Figure A: Police Campus Budget

Misleading Information

Before we can tackle solutions we must first look at how information is reported within The City of Edmonton.  Currently the City describes its performance as 88% of Capital Projects are on time and on budget.  This does not measure projects by their true capital cost as it gives all projects the same weight.  For example: if a $10,000 project is completed on time and on budget and a $1B dollar project is not completed on time and on budget, the City would say “50% of these two projects are on time and on budget” regardless of their actual financial weight.

The City of Edmonton has struggled with not only Capital Project Delivery, but with the planning, approvals and oversight of the process.  

Despite the City’s assurances of performance, the clear evidence is to the contrary.  The City has had several significant scale projects (representing several billion dollars of investment): 

  • be delivered behind schedule;
  • be the subject of construction level failures;
  • be originally approved at modest cost levels, only to see them escalate over time to final approval;
  • be approved for construction only to be significantly over budget after the project has begun;
  • become the focus of issues that were created by decisions of City Council.

The Solution

The City of Edmonton will implement an Independent Project Management Office (IPMO) to ensure that Capital Projects are not only delivered on schedule and budget, but that the appropriate responsibility split between planning/approval and delivery is maintained. 

How Will The IPMO Operate?

With a fully Independent and autonomous Project Management Office, the City will have the confidence that the Capital investments it has approved through the Capital Budget Process will be delivered efficiently. 

The Core Mandate of the IPMO will be: Securing appropriate resources and methods to efficiently deliver the City’s approved Capital Construction Plan in the most cost efficient and effective manner.

As an independent organization (yet guided by the City’s policy objectives), the IPMO can implement procurement policies (within allowable Trade Legislation) to promote competition within the local construction industry as well as foster and grow a strong local pipeline of construction talent. 

Current Structure

The City currently uses a 5 stage approach to deliver Capital Projects defined as: Strategy; Concept; Design; Build; Operate.

The City is the Planner, Owner, Decision Maker as well as the Delivery Body.  Often when projects go wrong, the blame is shifted to ‘the last one to touch it’ – the Delivery Body.  There is incentive to brush over issues, and keep them from the public eye.  

At other times, project decisions made earlier in the process don’t come to light until construction and/or operation.  These earlier decisions are often pointed at the construction arm, when they should be owned by the Planning and Decision arm.   Accountability is lost, and potential missteps are repeated into the future. 

Long Term Liabilities related to construction projects are often downplayed.  With long life projects or after the fact court/arbitration cases, there is limited recognition of the potential downstream cost implications of capital works.   If costs are recognized, they are not clearly indicated in the same transparent manner as a private corporation.  This visibility into short and long term cost implications (and obligations) will enable the City to make sound decisions with the full understanding of the financial landscape.

Too often politics can become influential in the project delivery phase of the work (rather than the planning or approvals phase).  It can be expedient to lay blame for project execution/implementation when the root of the issue can be found much earlier in the process – at the Conceptual, Planning, or Design phases of the project.  Effective Project Management is a commercial, transactional activity, which ensures the physical infrastructure is completed on time, on budget, and within the scope originally conceived by the approving body.   Perceptions about the efficacy of the work should not be conflated with the originating decisions about what work to undertake in the first place.

New IPMO Office

The IPMO would have sole responsibility for the Build stage of the City’s Capital Project Lifecycle.  

After the City has a project greenlit for construction, it is the IPMO’s responsibility to ensure:

No Project will Proceed unless the IPMO has High Confidence that it has been properly planned, scoped and budgeted and that it has a high probability of being delivered on time and on budget.

Legal Framework

  • The City of Edmonton Creates a municipally controlled corporation (IPMO Inc.) with the express intent to deliver the City’s Capital Project Portfolio. 

Structure

  • The IPMO will be governed by a Board of Directors appointed by the City Council.  The Board will use a competency based approach encompassing expertise in the areas of Finance, Construction, Risk, Legal, Communications,   No elected Councillors or City Staff will be part of the Board of Directors. 
  • This separation of responsibilities (from the City Decision Making process about *which* projects to build and the process of building them) will ensure that the primary focus is on effective delivery of capital works on time, on budget and within the original approved scope. 

Operations

  • The IPMO will be led by an appointed CEO hired by, and accountable to, the Board of Directors.  
  • The CEO will hire the appropriate staff and expertise to effectively deliver the suite of approved projects that have been turned over to the IPMO. 
  • Where internal or backoffice (corporate) resources are required, the IPMO will either contract the services from the marketplace or obtain resources through the City of Edmonton on a shared services (and paid for) basis.  Internal resources may be services such as Human Resources, Payroll, Corporate Accounting, IT, etc. 

Financial

  • Annually, the City of Edmonton will fund the IPMO with the approved Capital Budget Allocation for the fiscal year
  • The IPMO will be required to fully operate within the annual allocation.
  • Cost Validation: Upon receiving Budget approval for a Project to be delivered, the IPMO will undertake a Cost Validation Exercise (similar to Value Engineering) to determine the accuracy of the City’s budget estimation, and determine the optimum construction / delivery strategy.

Vendor Performance

The IPMO will take an active role in managing Vendor Performance to ensure that  the City continues to obtain outstanding value from proponents who demonstrate the highest level of capital project delivery.  The IPMO will develop a Vendor Performance Framework that will incorporate dimensions such as: 

  • Schedule Adherence
  • Budget performance and Change Order history
  • Social Procurement Objectives

Accountability & Reporting

As an independent and fully separate corporation, the IPMO is accountable to its Board of Directors.  The Board, as the mind of the corporation, is responsible to the Shareholder – the City of Edmonton as represented by Council.   The CEO will provide regular reporting on its activities to the Board, and the Board in turn will provide regular reporting to City Council in the form of:

  • Monthly Financial, Performance and Risk  Reporting to be done by the IPMO CEO to the Board
  • Quarterly Financial, Performance and Risk Reporting from the Board to Council

To ensure as much political independence as possible, the term of Board of Directors will be appointed on terms of 4 years (on a rotational basis). The term of the Chair of the Board will begin at the mid point of a Council Term.

Social & Ethical Benefit

Capital projects should provide not only greater value for the dollars spent, but greater social impact as well. In addition to being on time and on budget, municipal projects should result in the maximum possible benefit to the community during their execution.

Social procurement weighting should focus on the following:

  • Local workforce recruitment plans to support apprenticeship opportunities and programs
  • Diversity and inclusion plans for signatory bodies
  • Opportunities to assist veterans, displaced workers, and our indigenous peoples

Procurement must focus on contractors that provide meaningful and tangible employment of local tradespeople and at-risk and underrepresented communities. The advantages to the City of Edmonton of this approach include:

  • Ensuring that local tradespeople and their families directly benefit from construction of the region’s public and civic infrastructure
  • Supporting a diverse and inclusive local trades workforce
  • Supporting the investment made in training local tradespeople.

Inclusion of social procurement parameters in contracts also results in:

  • Better project value
  • Overall increase in the skill level of the local workforce
  • Retraining of existing workforce for new economic opportunities 

Protecting Future Generations

The overall objective of the IPMO is to deliver the City’s capital projects with higher reliability for cost and schedule performance, greater accountability for construction performance, and to ensure that the City’s limited capital resources are invested in the most efficient manner possible.

In operation, it is conceivable that the IPMO may cost more to operate annually than with the internal resources of the City.  While annual costs may be overall more than currently expended by the City, the long term value will be in the greater visibility in project control and long term cost implications. 

Additional Considerations

Additional considerations are:

  • Annually, the IPMO will submit to City Council a 5 Year Business Plan that takes into account the implementation of all Council approved Capital Projects.  
  • The Business Plan will outline an Operating component (for staff and operations resources) as well as a Capital investment requirement.
    • Upon finalization of the City’s annual Operating Budget (and Supplementary Budget Adjustments), the IPMO will update its Business Plan reflecting any changes made by Council. 
  • While there is a cost of getting it right…the cost of getting it wrong can be immense.  Costs such as: 
    • Direct costs and overruns
    • Long Term financial liability exposure
    • Impact on the public and community

Critical Stakeholders & Positions

  • Consulting Engineers of Alberta
  • Alberta Roadbuilders and Heavy Construction Association
  • Edmonton Construction Association
  • Building Trades of Alberta

Third Party Research

  • DeloitteDelivering with confidence – Transforming capital project delivery through world class project controls” 2018
  • PWCSuccessful Capital Project Delivery – The art and science of effective governance” 2014

Applicable legislation

The IPMO can be created through the provisions of the following Legislation: 

  • Section 75.1 of the Municipal Government Act authorizes municipalities to create a Municipally Controlled Corporation to conduct its business and deliver services.  As part of this authorization, Council must receive and consider a business plan for the Corporation, and must hold a Public Hearing as part of the approval process. 
  • Part 9 of the Companies Act provides for a corporation to be created for the purposes of useful objects and prohibiting the payment of dividends.  The IPMO will be funded by the City, and expend the resources to deliver capital projects on behalf of the City.  There will be no dividends paid and revenues will stay within the IPMO consistent with its Business Plan. 

Appendix A: Tables

Police Campus Budget

Original Budget: $30.6 M

Final Budget: $119.7 M

Project On Time: No

Behind Schedule: 2 years

Figure A: Police Campus Budget

LRT: Metro Line Budget

Original Budget: $660 M

Final Budget: $665 M

Project On Time: No

Behind Schedule: 7 years behind

Figure B: Metro Line Budget

LRT: Valley Line South Budget

Original Budget: $900M

Final Budget: $1.8 B

Project On Time: No

Behind Schedule: 13+ months behind schedule

Figure C: LRT Valley Line South Budget

LRT: Valley Line West Budget

Original Budget: $1.1B

Final Budget: $2.7 B

Project On Time: Just starting

Figure D: Valley Line West Budget

Walterdale Bridge Budget

Original Budget: $132 M

Final Budget: $155 M

Project On Time: No

Behind Schedule: 27 months behind schedule

Figure E: Walterdale Bridge Budget

Lewis Farms Rec Centre Budget

Original Budget: $134.3 M

Final Budget: $321 M

Project On Time: Not started

Figure F: Lewis Farms Rec Centre Budget

Blatchford Redevelopment Budget

Original Budget: $561.4 M

Final Budget: $660 M

Project On Time: In Progress

Figure G: Blatchford Redevelopment Budget