Letterbox: How to fix Metro Vancouver

Coquitlam Councillor and Metro Vancouver Water Committee member Brent Asmundson offers his thoughts on how to control spending at the regional organization.

There is a lot of complaining about Metro and the biggest cost driver is high cost of the major capital projects so here is what is wrong and what should be done to correct it.

The need for probability and risk analyses

Large infrastructure expenditures should be based on a proper analysis of the risk of failure and the resulting cost of mitigating that failure compared to the additional costs of building the infrastructure to a higher standard. There should also be some analysis of which service is the most important to ensure the entire system operates seamlessly in extreme emergency situations. Finally there should be a review of who is best situated to assume the risk of infrastructure failure.

These reviews do not occur at Metro. Rather very high standards are approved in a theoretical manner and then applied holistically against a wide variety of situations even when the resulting costs are very high and the projects do not significantly improve the likelihood of the infrastructure continuing to serve the public.

If you think about this as insurance, society is being asked to pay a very high premium for protection that is simply not worth the cost. When the earthquake or flood occurs, the rest of society will be decimated while the sewage treatment plant will sit unused as sewage will not reach it. The lack of proper risk analysis with a focus on reducing costs is a major problem.

At the same time, Metro takes every opportunity to transfer the risk of any failure to their consultants and contractors which results in few bids and very high costs. Often the bid packages are many hundreds of pages and are very difficult to fill out and reasonably cost the risk assumed by the private sector. The higher bid costs that result are usually well in excess of the value provided.

Needed additional analyses and Potential solutions:

As part of the process for determining what the design should be for a particular project, a risk and probability analysis of meeting various standards should be carried out This could include the following:

Estimate the probability of the event being designed for occurring during the lifecycle of the project. For example if the probability of a major earthquake occurs every 400 years and a pipeline is estimated to last 80 years a ratio of 20 percent is determined.

An estimate of the likelihood of any particular area being significantly affected. For example past earthquakes in other cities shows that only a small percentage of the overall area of the city is significantly damaged. The damage does not occur uniformly across the entire area. Often less than 1 percent of the city is severely affected.

An estimate of what it would cost to repair the damage post earthquake. Likely significantly less than the original cost to construct.

The expected probability cost of failure should be compared to the extra cost incurred to design the project to meet the higher standard.

Even if the entire pipe or plant is destroyed (unlikely), this type of probability analysis would demonstrate that the current design assumptions should be changed which would result in substantial costs savings. The above calculation will likely give an expected additional cost of more than 10 times for the current Metro approach compared to an expected cost probability approach.

An additional factor to take into account is the relative importance of a particular service and the likelihood of lives being lost. This could be utilized to refine the analysis further. For example building where people live or work, tunnels which accommodated vehicular traffic and major watermains are more important that a sewer outfall post treatment but they are currently designed in a similar manner.

Finally, an analysis should be undertaken to determine who is best situated to assume the risk and reward in these situations. The current approach of Metro transferring all the risk to the private sector simply results in few and very high bids which dramatically increases the cost to society.