Wednesday, December 24, 2008

Port Delay may bring benefits in reduced construction costs when it comes time to build Phase Two

With BC about to enter into a recession, the delayed construction of phase two of the Fairview Container Port may at least benefit from a re-evaluation of labour and construction costs for such huge projects.

That is one of the small silver linings that a UBC professor has outlined for the Daily News on the details of Friday's Globe and Mail story on an eighteen month delay of the much anticipated expansion project.

The UBC professor put labour and construction costs as a possibility in the plus side of the ledger, an accounting of the project which features any number of other plus and minus situations for the eighteen month push back on the timeline for Phase Two.

The full review from UBC Professor Garland Chow was the featured front page, headline story in Tuesday’s paper.

UBC professor says easing off now may mean more affordable construction costs
The Daily News
Tuesday, December 23, 2008
Pages one and three

According to one UBC port expert, there are pluses and minuses to Friday's news that the port will not begin Phase 2 of its expansion plans as soon as once hoped.

Garland Chow, an associate professor with the operations and logistics division of the UBC Sauder School of Business, said there are repercussions of slowing progress on Phase 2.

"There are two phases of economic development with regards to the port. One of them is the actual business that you have generates jobs.

"You have a terminal there, you have a port there, you have ships making calls and, yes they may lose some of that in this economy, but that's not going to stop the port from running and ensuring the jobs from what I can see," said Chow from Vancouver.

According to his UBC bio, Chow has been a consultant to a number of U.S. and Canadian firms in distribution and transportation as well as to provincial and federal government in both the U.S. and Canada.

His logistics and supply chain publications have dealt with the transportation purchase decision, the measurement of carrier service quality, the use of microcomputers in logistics, shipper evaluation of carrier financial stability, just-in-time logistics in Japan, global logistics trends, retailing and logistics strategy, outsourcing and location of warehousing and distribution in transportation sensitive industries.

"The actual benefit that the port provides to Prince Rupert today will be marginally impacted."

Chow said there is a plus and minus to Friday's revelation.

The plus is that the shortage of good labour and personnel in the province at the moment is mitigated by a down turn in construction activity, eliminating some of the inflationary costs from the past two years where original estimates for construction jobs were inflated by 25, 50 and sometimes even 100 per cent. Chow estimated that the construction plan then included the paying of very high end wages. So, if the PRPA delays that a little bit, possibly by a year, it may mean more reasonable construction costs.

"Let's face it. The economic downturn is happening all over North America and to be honest if (PRPA) had already negotiated construction contracts it would have probably needed to renegotiate them anyways, said Chow.

"But all over North America it's the same situation."

Chow said that the port cannot be blamed for the financial downcast and that even he would not have predicted this current money climate.

As for the minus, Chow said the multiplier effects (income and employment) that come with mega construction projects would be differed, as well as shipping business spin offs.

While the port has seen an increase of ships making call at Fairview bringing the total to 28,296 TEUs for the month of October and 131,084 TEUs for the year to date.

The October throughput is 52 per cent higher than September and a 177 per cent increase over the first month of operations in November 2007 when the terminal handled 10,225 TEUs.

Still the port can handle more, said Chow.

He added that Prince Rupert has in the past offered reliability because it was not at capacity.

"Prince Rupert still has the capacity to take more freight and still make a good claim to their potential customers that it has a better chance of moving freight reliably then the competitors down south because it is not even near capacity," said Chow.

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