Thursday, March 11, 2010

Niagara Tunnel Cost Estimate

Although I've given up bitching at them, this was an interesting financial note.

Uncertainty with respect to the cost and schedule for both the tunnel excavation and liner installation continues. There are a number of factors which contribute to this uncertainty, including challenging rock conditions. Allowances for differing rock conditions have been included in the cost estimate and schedule. Major equipment breakdown is also a risk factor. To mitigate this risk, the contractor is monitoring the equipment and maintenance programs are in place, with critical spare parts available, to minimize potential delays. In addition, there is risk with respect to the rate of progress for the restoration of the circular cross-section of the tunnel. Mitigation measures such as extended operations and use of additional equipment are planned by the contractor.

The latest report has no overbreak, but they are nursing the machine down to 10m per day, when they should be hitting 70. I don't know what happens when the main bearing breaks. The note shows how they are financing this, but, despite the uncertainties, they are sticking with their very optimistic $1.6 billion. I suppose if you slipped the cost estimate to the other side of the bell curve, it would be quite high.

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