Infrastructure: Counting the cost: CRL's battle with the pandemic

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Infrastructure: Counting the cost: CRL's battle with the pandemic

These past few weeks have, rightly, been a time of celebration for New Zealand’s largest transport infrastructure project with some hugely significant milestones ticked off. But our successes are tempered by the very long shadow Covid-19 continues to cast across our construction sites.

It should not be a surprise to anyone that the pandemic has had serious impacts on City Rail Link’s (CRL) costs and on our construction timings. Assessments are underway now so that we have a much clearer picture of the extent and depth of Covid’s effects, but one thing is clear already — that Covid shadow is becoming a numbers game for CRL.

Risk assessment is an important part of any contractor’s submitted bid but it’s fair to say the impact for CRL from a pandemic that respects neither border, nor person, nor project could not have been reasonably foreshadowed, even by the most experienced.

Since March 2020, we have endured over 230 days of lockdowns or restricted working conditions under Levels 4, 3, 2.5 and 2.

Even though the alliance model for delivering CRL provides a great deal of flexibility, including the ability for our engineers, planners, and designers to continue to work from home, 230 days-plus still adds up to an awful lot of disruption.

Restrictions from the lockdown and other Covid-related issues materially impact CRL, and the wider infrastructure industry. Broad and complex challenges are emerging around costs and timetables.

Immigration’s ‘trickle’

The first visible impact for CRL is New Zealand’s closed border and an extremely restricted managed isolation system to control immigration.

The plan submitted by the Link Alliance for CRL’s main tunnels/stations/rail systems contract was based on international workers with scarce rail/tunnel skills being able to freely enter or freely leave and re-enter New Zealand.

We were successful in getting our first tranche of overseas workers across the border. More are needed as the project advances. It’s not just flights to and from New Zealand, our overseas workers are also in a very long queue for the few places available in MIQ facilities.

Migration to New Zealand fell from 96,000 in 2019 to 6000 last year. Winding back the migration ‘tap’ to a trickle clearly illustrates New Zealand’s dependency on short-term migrants in many key industries like construction.

Two homegrown impacts compound immigration concerns: very high levels of domestic construction activity and very low levels of unemployment. Combined, their impact makes it difficult to source and replace New Zealand workers. (A 6000 shortfall according to media reports due to immigration restrictions and current workload demands.)

Another surprising consequence of the Level 3 restrictions for Auckland is losing skilled workers we had sourced and who were going live in Auckland during the weekdays. They are now unwilling/unable to relocate as they would not be able travel home at weekends to families beyond the Level 3 border.

Tasman competition

With the national borders closed there is increasing competition within New Zealand for skilled workers. It is particularly noticeable in the heavy construction infrastructure sector. CRL suffers a distinct labour shortage with steel reinforcement fixers, skilled carpenters, blocklayers, mechanics and crane crew all difficult to source.

Challenges at home are exacerbated by fierce competition from across the Tasman. Recruiters for Aussie projects have deep pockets and are offering 50-100 per cent higher wages.

Labour shortages is one issue, material shortages another. There are large scale shortages of New Zealand materials. There are significant shortages of timber. Timber substitution products are also in short supply, concrete costs are rising dramatically, and the supply of reinforcing steels is an ongoing problem.

The impact is twofold — projects cost more to build and take longer to finish.

Construction cost increases are rising at a far greater rate than anyone predicted two years ago when City Rail Link Ltd (CRL Ltd) signed its contract with the Link Alliance, or even one year ago.

The property and business intelligence company, CoreLogic, estimated a 2.2 per cent cost increase across all the construction industry in the June quarter. Locally, that may be far too conservative.

Broader building costs are increasing by up to 30 per cent in specific instances on projects in Auckland. There are numerous individual examples where the increase could be 35 per cent or more.

Broken supply chain

None of these challenges are being helped by ongoing port restrictions, especially at the Ports of Auckland, the planned destination for most CRL-related imports. Imported supplies are being directed to Tauranga, with cost and time implications.

More broadly, the pandemic has broken the international supply chain that relies on global shipping. It is difficult to get the required shipping capacity to service New Zealand’s needs. Business model reviews by shipping and building supply companies mean this country is no longer on their direct supply route.

Infrastructure: Counting the cost: CRL's battle with the pandemic

The tunnelling breakthrough at Karangahape Rd. Photo / Michael Craig

That route now ends in Australia, severely disrupting CRL’s planned global procurement and supply chain planning. A recent copper order for the project was placed at more than 100 per cent above the pre-pandemic cost estimate.

The wider construction sector on both sides of the Tasman is dealing with similar issues. Executives in Australia’s heavy construction industry tell me they are dealing with the same issues CRL and other projects here are facing. The chair of an Australian mega-project advisory company made one encouraging observation — CRL and the Link Alliance are doing far better than comparable Aussie mega projects at managing these challenges.

This observation may be a reflection of the alliance model we are using and the flexibility and acceleration it brings to the project.

The Link Alliance has embraced new health and safety protocols on site, modified work hours, introduced widespread training to upskill workers, and re-designed its programmes of work to accommodate the Covid environment.

Celebrating milestones

Those measures played a significant part in one of the milestones I mentioned earlier — the breakthrough in October of our Tunnel Boring Machine (TBM) at Karangahape Station after an 860-metre-long drive from the Mt Eden site.

The country’s five-week-long Covid lockdown delayed the TBM’s planned September breakthrough.
The Link Alliance operated the TBM during the lockdown, well below full capacity, to stop earth settling around it. Tunnelling accelerated when lockdown restrictions eased and its arrival in great shape at Karangahape was well ahead of our rescheduled time in November — a real bonus.

The TBM has resumed tunnelling again — around 500 metres from Karangahape to Aotea Station in the heart of the CBD.

Our second celebration marked the end of our very first CRL contract (C1) at Britomart — a contract so complex and challenging that it set new boundaries for the way very complicated pieces of work are constructed successfully in our country.

C1 was critical to revitalising Auckland’s rail network for a modern city while preserving its historic past.

Safely shifting 14,000 tonnes of the heritage-listed Chief Post Office on to temporary foundations without so much as a crack to build a couple of tunnels in its basement reflects an extraordinary “can do” attitude. All involved has every right to be proud of what they achieved — and so, too, should the rest of New Zealand.

Work continues at pace across all our sites.

Just over two years ago, CRL Ltd and the Link Alliance put pen to paper on a contract to make a transport dream come true — construction of a world class underground railway for Auckland.

None of us could have predicted back then the marked impact the pandemic would have. But the really important point is this: the Link Alliance, has through all this disruption, continued to work and progress the construction of a vital piece of Auckland’s transport.

Dr Sean Sweeney is Chief Executive, City Rail Link. City Rail Link is a sponsor of the Herald’s Infrastructure report.

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