Is a change in contracts the reason behind financial hardship for Canadian light-rail builder?

Written by RT&S Staff
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The Ontario Line project has officially begun, joining the Eglinton Crosstown project in Toronto.

COVID, inflation, and supply chain issues have tripled down on productivity for builder SNC-Lavelin.

On March 3 the contractor announced a $231 million pretax loss on its project unit due to cost reforecasts on three light-rail contracts in Canada. In a worse-case scenario, SNC-Lavelin is projecting additional losses of as much as $300 million on the Reseau Express Metropolitain project in Montreal, Ottawa’s Trillium Line, and the Eglinton Crosstown in Toronto.

SNC Chief Executive Ian Edwards said during a teleconference on March 3 that forecasting that was done a year ago did not go as planned. The contractor reported a 2021 fourth quarter loss of $15.3 million, including a $90 million loss on the three light-rail jobs in Canada.

Since 2019, the goal of the company has been to end the process of bidding on fixed-price construction work and focus more on lump sum turnkey contracts. With those contracts, construction firms agree to a set price for a project and do not pass along any cost overruns.

COVID-19’s Omicron variant depleted work forces over the last few months. According to SNC, absenteeism was as high as 50% on some jobs. In addition, inflation has tacked on another 10% on costs, and supply chain issues have crippled productivity.

The Trillium Line is about 70% complete, but SNC recently pushed the completion date back to 2023. Building inflation in the Ottawa area has been severe—17% during the last three months of 2021 compared to 3.1% during the same time in 2020. Toronto and Montreal recorded inflation increases of 15% and 12%, respectively. The Eglinton Crosstown project is 90% complete, while the REM is 60% done.

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