Dr Sean Sweeney, Chief Executive, City Rail Link Ltd (pictured right)
07 September 2022
The impact of Covid on major construction projects has been far more wide-ranging than first anticipated in early 2020. Unsurprisingly, this has cast a long shadow over the City Rail Link project since the first lockdown in March 2020 too.
Understandably people want and deserve an explanation about what those impacts are and why it’s taking so long to give a definitive answer around costs and finish date.
There has been the direct impact of almost three months of full lockdown of our sites, the ongoing impact of over 280 days in which Auckland was either at Lockdown, Level 3 with borders closed or level 2 with ongoing restrictions to site operations.
In addition has been the impact of closed borders on site resources. Like other global infrastructure projects, City Rail Link endured shortages across a number of critical trades such as steelworkers and block layers. These resources were usually solved via greater movement of international skills.
These shortages meant at times entire work areas were not able to be progressed for weeks at a time. The closed borders also meant a loss of skilled overseas workers in critical construction and engineering roles.
As a result, poaching of workers became a major issue and added further uncertainty. One day, I turned up at a City Rail Link site to find a steel working crew of eight workers had been poached by another company and simply left that day.
Finding and keeping skilled resources throughout 2021/22 has been an exceptionally difficult task and has directly impacted cost and schedule.
The global supply chain was also severely disrupted in direct ways, such as when a global shipping company dropping New Zealand of their supply routes, and indirect ways when key goods were marooned off the Port of Shanghai for months whilst all of Shanghai was in hard lockdown.
All these effects have delayed the project but also combined to push building cost inflation up to levels unheard of since the high inflation years of the 1970s and 1980s. Some elements such as copper increased in cost by more than 200%.
City Rail Link has been working with our design construction partner, the Link Alliance, to attempt to quantify and agree what the actual time and cost impacts to the project are.
The difficulty was that every time we conducted an updated assessment, another variant of Covid (Delta then Omicron) emerged and further impacted the project. This has made re-estimating the overall completion time and completion cost extremely difficult.
In April 2021, because of the challenges listed above and the unknown future progression of Covid, we advised our Project Sponsors (The Crown and Auckland Council) that we would not be in a position to give a revised project time and cost status UNTIL such time as the effects of Covid appeared to be diminishing into the medium term.
We advised, at the time, that we did not think we would be in a position to do so until the end of 2022. This is what we are now doing.
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 some complex commercial negotiations to be concluded before we will have any clarity about the full impacts from June 2021 up till the middle of this year.
As this work is ongoing, any attempt to provide a time and cost adjustment would require us to guess. This is something that we do not think would be useful for anyone.
However, we certainly recognise the continuing uncertainty is not helpful to anyone. Therefore, we are continuing to work with resolve to quantify all impacts to the project and then agree the time and cost consequences of what those impacts are.
Once negotiations are concluded, we will then be in a position to accurately advise Project Sponsors about a completion date and seek additional funds to covers these Covid costs.
As we have been advising since April 2021, we anticipate that this will take till the end of this year and this is of course contingent on no further Covid variants impacting the country.