|
2. IMPACTS OF RISING CONSTRUCTION COSTS ON DELIVERY OF 2008
resurfacing program Répercussions de
l’augmentation des coûts de construction sur l’exécution du programme de
réasphaltage de 2008 |
committee recommendation
That Council receive this report for information.
Recommandation du comité
Que le Conseil prenne connaissance du présent rapport.
Documentation
1. Deputy City Manager’s report (Public
Works and Services) dated 22 September 2008 (ACS2008-PWS-INF-0011).
Report
to/Rapport au :
Comité des transports
and Council / et au Conseil
22 September 2008 / le 22 septembre
2008
Submitted by/Soumis par : R.G. Hewitt,
Deputy City Manager/Directeur
municipal adjoint,
Public Works and Services/Services et
Travaux publics
Contact Person/Personne ressource : W.R. Newell, Director/Directeur,
Infrastructure
Services / Services d’infrastructure
(613)
580-2424 x 16002, wayne.newell@ottawa.ca
REPORT RECOMMENDATION
That Transportation Committee and Council receive this report for information.
RECOMMANDATION DU RAPPORT
Que le Comité des
transports et le Conseil prenne connaissance du présent rapport.
BACKGROUND
On 10 July 2008, the Director of Infrastructure Services issued a memo to Members of Council (see Document 1) indicating that as a result of substantial increases in construction costs this year due to rising fuel prices, the ability to deliver the resurfacing program has been impacted. As a result, fewer road resurfacing projects would be undertaken this year and deferred to 2009. Based on this information, Councillor McRae, Chair of Transportation Committee, requested the Department submit a report providing more detail on the impacts on our Capital programs.
DISCUSSION
The 2008 Capital Budget identifies $184M in road, water and sewer renewal projects, of which $57M is for road renewal. This includes $13.5M from the 2% infrastructure levy. The Department expects to deliver on the majority of the integrated rehabilitation projects identified in the 2008 Capital Budget, such as Preston Street, King Edward Avenue, Bank Street, Wellington Street, Carling Avenue, Third Avenue and Bronson Avenue Canal Bridge, etc. However, since the rising fuel prices has most impacted the cost to supply and place asphalt, the ability to deliver the 2008 resurfacing program, as identified in the Capital Budget, has been compromised. The funding for the 2008 program is approximately $20M. It is anticipated that approximately 15% of the program will not be delivered and will be deferred until 2009.
Why
fewer roads will be resurfaced in 2008
In developing the Capital Program, the Department relies on industry trends to forecast the cost of construction projects. Over time the Department has developed project cost estimates that are reflective of market conditions. These estimates include allowances for inflationary pressures, however, they do not include provisions for unexpected spikes in market conditions, such as those experienced recently with rising fuel prices.
The list
of roads to be resurfaced under the 2008 program was based on an estimated cost
to supply and place asphalt in the range of $75 to $85 per tonne. Tenders received in March 2008 had bid
prices in that range. However, tenders
received between April and August has seen unprecedented increases to $115 per
tonne, representing approximately a 45% increase ($30 per tonne).
There are two major factors for this significant increase. The first is related to the rise in liquid asphalt cement prices. Liquid asphalt cement represents approximately 4-5% of an asphalt mix. During the period of March to August 2008, liquid asphalt cement prices increased from $436 per tonne to $932 per tonne (refer to Figure 1). The second is the increased fuel costs that impact the construction operations costs to produce, deliver and place the asphalt.
Figure
1 – Liquid Asphalt Cement Prices ($ per tonne of liquid asphalt cement)
The significant increase of the liquid asphalt cement rising nearly $500 per tonne in the March to August period accounts for approximately two-thirds of the increase to supply and place asphalt. The remaining increase is related to the increased fuel prices (approximately 20-30%).
The Department’s construction contracts include a price compensation specification for asphalt, which compensates either the constructor or the City should liquid asphalt cement prices fluctuate between the time the tender closes and the asphalt is placed. This provision is used by most municipalities in Ontario, as well as the Ontario Ministry of Transportation (MTO). The Department does not have a price compensation specification for fuel on construction contracts, although there is ongoing dialogue with the construction industry on this issue.
As a result of the construction cost impacts, ten (10) roadway sections
were eliminated from this year’s resurfacing program. Should funding become available in the remainder of the year, the
Department will endeavour to complete additional works. Roads that are not completed this year will
become top priority for 2009.
How road needs are identified
The City of Ottawa utilizes a Pavement Management
Application (PMA) software package that maintains an inventory of all roads
(approximately 5,500 kms) within the City.
It catalogues information on each road such as daily traffic volume,
riding comfort, surface distresses, structural adequacy of the pavement
structure and soils, past maintenance history and other road inventory
data. The system is continually updated
with condition data collected annually on a 3-year cycle for arterial roads and
a 5-year cycle for remaining roads. The
software uses the pavement condition data to calculate a Pavement Quality Index
(PQI) on a scale of 0-10 for each road section. Based on the established thresholds of what is considered
acceptable, PQI scores of less than 4.0 for local roads, 4.5 for collector
roads and 5.0 for arterial roads are considered to be in need. Staff conduct visual inspections of the
highest priority roads to validate the ratings. Roads that fall below these thresholds will be considered for
rehabilitation under the annual resurfacing program or as integrated projects
in coordination with other infrastructure needs such as water, sewer,
intersection improvements, etc.
Based on current funding levels, approximately 2-3%
of the paved road network each year is resurfaced. Approximately 20% of the network is considered to be in
need. Since the funding does not match
the needs, a further cost/benefit analysis is undertaken. The ranking is based on a cost/benefit value
out of 10 points (a function of traffic volume, improved PQI and construction
cost) and theoretical need year out of 5 points. Roads with higher traffic volumes score more points as do roads
that have been in a backlog condition for a number of years. Arterial and collector roads, particularly
those that carry substantial bus and truck traffic, will be rehabilitated more
frequently than local roads.
Based on an overall prioritization of the road
needs, programs are identified in the annual Capital Budget for Council
approval. For the resurfacing program,
a list is provided in alphabetical order.
A “cut-off” line identifies the program that is expected to be delivered
based on engineering estimates.
Typically, the Department is able to deliver the program as
planned. If favourable tender prices
are received, additional roadways are resurfaced, on a prioritized basis,
within the funding limits of the approved program.
Renewal Options
The renewal treatments can vary from preservation treatments (i.e. crack sealing, microsurfacing and thin overlays), resurfacing (i.e. mill and pave) to reconstruction.
When establishing annual rehabilitation programs, various renewal options are considered to optimize the life-cycle of the roadways. Fixing only roadways that are beyond the warrant levels is not a cost-effective approach. It is necessary to intervene and undertake preventative works to extend the life of the roadways since rehabilitation or reconstruction is a very expensive renewal option. With limited funding, it is important to consider a balanced approach to extend the life of the road assets.
The table below identifies typical gains in useful life and the associated costs for various renewal treatments. Annual programs consider these options to ensure available funding is utilized effectively when determining the appropriate rehabilitation strategy.
|
Renewal Treatment |
Treatment Cost per lane-km $,000 |
Gain in Pavement Life (range for arterial and
local roads) |
|
Reconstruction |
$530-$650 |
18-25 yrs |
|
Resurfacing - Mill and overlay |
$100-$140 |
13-23 yrs |
|
Preservation - Microsurfacing - Thin overlays |
$25-$40 $40-$45 |
5-12 yrs 5-12 yrs |
Table 1 – Pavement Life and Costs
Associated with Various Renewal Treatments
What road renewal strategies
are being applied to maximize capital investments
The City is considered a leader in the application of innovative pavement technologies and has implemented a number of strategies to maximize capital investments. The following is a summary of key initiatives:
Performance Graded (PG) Asphalts – the City was extensively involved in the development and implementation of PG asphalts. These are asphalts that can remain flexible at lower temperatures and resist rutting at higher temperatures. The application of PG asphalts has helped the City to extend the life of pavements and reduce the time between resurfacing cycles.
Recycled Asphalt – the City essentially recycles all of the asphalt removed during road renewal projects. All new asphalts include a percentage of recycled asphalts, reducing the amount of liquid asphalt cement needed to produce the final product. On rural roads, the existing asphalt is often pulverized and reused to stabilize the road base or rejuvenators are added to create a base asphalt layer (cold-in-place recycling). Both techniques increase the need for new liquid asphalt cement to produce the final product.
Warm Mix Asphalt – the City is piloting a process referred to as “warm mix asphalts” whereby additives make the liquid component more viscous therefore reducing the need for greater heat to achieve the same coating and binding of the aggregates. These additives do not change the quality of the final asphalt product. The benefits of warm mix asphalts are the reduction of energy required to produce the asphalt and reduction in fumes during placement, which results in lower greenhouse gas emissions. As performance results of ongoing pilots become available, the Department anticipates an increase in the application of warm mix asphalts on City projects.
Asphalt Additives – the Department has and continues to investigate the use of various additives to asphalt mixes; the latest being the use of recycled shredded tires. While additives represent good recycling opportunities, these benefits must be weighed against the lifecycle impacts of the final asphalt product.
Preservation Treatments – as previously indicated, approximately 20% of roads are in need of rehabilitation or reconstruction. Since funding is not available to renew all 20% of roads, the Department has been increasing the application of pavement preservation treatments. These include treatments referred to as microsurfacing and thin overlays, both involving the application of thin layers of asphalt. These have the benefit of extending the lives of existing pavements by sealing the road surface and correcting minor road imperfections at significantly lower costs.
Coordinated Capital Projects – before programming a capital project, road, watermain and sewer needs are assessed and where appropriate these are integrated into coordinated Capital Projects (e.g. King Edward, Wellington, Bank, Preston, etc). This coordination is extended to other stakeholders, such as development and regulated utilities, to reduce the duplication of works and cutting roads that were recently paved. This approach maximizes capital investments while reducing disruptions associated with renewing individual infrastructure assets within relatively short periods of time.
Road Activity By-law – a Road Cut Permit is a key element of the City’s Road Activity By-law. Permits are intended to control requests from third parties to cut into an existing road. A key advantage of this permit is that it limits the extent of the road to be cut and ensures that reinstatement is done as per City Standards. It can also serve to prevent newly paved roads from being cut through the application of a moratorium period that is applied on arterial roads for the first 3 years after a road has been paved. The permit also includes compensation to the City for road cuts on arterial roads through the application of pavement degradation fees. The Department is reviewing the option of extending the pavement degradation fees to all City roads.
How will the current
construction costs affect future capital budgets?
The Department will continue to monitor construction costs and implement strategies that maximize capital investments. The current rise in fuel, asphalt prices and other construction costs are expected to increase the pressure on the Capital Renewal Program. If is estimated that overall it will cost approximately 15% more to deliver the same program in 2009.
CONSULTATION
There has not been any public consultation related to the preparation of this report. Public consultation is undertaken as part of the specific construction projects.
FINANCIAL IMPLICATIONS
There are no financial implications associated with this report. However, rising construction costs are expected to increase the pressure on the annual Capital Renewal Programs. These pressures will be reflected in Capital Budgets and Long Range Financial Plans.
SUPPORTING DOCUMENTATION
Document 1 – Memo dated 10 July 2008 from the Director, Infrastructure Services.
DISPOSITION
Public Works and Services will continue to monitor construction costs and adjust Capital Programs accordingly. The Department will also continue to apply innovative technologies to maximize the value of capital investments.
Document
1
