GCT has provided commentary in-line (in red italic font) on this article that appeared in the Delta Optimist on April 12, 2020 and subsequently re-published in other outlets.
The Port of Vancouver is laying the groundwork for the next search for an operator for the proposed Terminal 2 container expansion project at Roberts Bank, a search that won’t include the current operator of Deltaport.
This does not sound like a fair process. How can a federal government organization –
the Vancouver Fraser Port Authority (VFPA) – arbitrarily decide not to undertake an open, transparent
and competitive process for its expansion project at Roberts Bank, excluding one specific service
provider? On what basis does the VFPA make this arbitrary decision?
In a news release this week, the port authority noted
it conducted an initial round of market research as part of preparing for the procurement process.
“An initial round”??? In fact, this is the third time they have gone to the
market with this project. How many times can ‘initial’ be used? Please be honest and transparent, and
don’t mislead the public, industry or government.
By conducting market research, the port authority
says it is able to hear from a cross-section of concessionaire leads, financiers, operators and infrastructure
developers about their thoughts on possible procurement options for construction and operation of the proposed
project.
Information received during market research will help
inform selection of a procurement delivery model.
Why would the VFPA not want input from Global Container Terminals or other successful
Canadian marine terminal operators? GCT is one of the country's largest marine industry employers and
has been operating in Lower Mainland British Columbia for over 100 years. During this time, GCT has
completed several successful expansion projects, including collaboratively with the Port Authority. VFPA
does not actually run marine terminals and does not have any practical experience with the risks and
challenges of running a high-velocity, high-volume terminal as a profitable business.
With the first round of market research now complete,
the port says it may follow up with participants to explore ideas and questions that were raised.
“First round”??? This is the third round!!! We expect honesty and transparency from a
government agency.
The port also says it is currently seeking input on
questions related to rail operations for the project.
Last fall the port authority announced it had decided
to restart the procurement process.
They did this because all
five of the bidders they short-listed walked away.
This is the third time the
VFPA will restart the procurement process for its expansion project at Roberts Bank. Each time, they are
spending funds contributed by the current port users and tenants. Who is holding this government agency
accountable?
Take a moment and think about the global industry and the rationale that no operator
remained standing. There are very few successful and economically sound operators in the world who could
run a RBT2 effectively, efficiently and with a focus on customers. The operators who participated in the
failed processes so far, all stepped away for many reasons…..the project makes little sense, the
economics do not work, and there are already two highly competitive and very successful container
operators in the port. The potential rewards don’t justify taking on a project of this complexity, cost
and duration.
“We began our search for a terminal operator in 2013
when we expected the federal environmental assessment to be completed by 2016. Procurement decisions are
informed by market conditions. Since so much time has elapsed, we think it is prudent to re-assess these
conditions and re-evaluate procurement options for both construction of the land mass and terminal operations,
to be sure we are pursuing the right model for Canada. This fall, we will go out to the infrastructure and
terminal operator market to learn more about choosing the best possible delivery model for construction and
operation of the terminal,” the port explained in a statement.
Indeed, decisions ought to
be informed by market conditions. So, why not look at GCT’s Deltaport Berth 4 (DP4) project? It is
Canadian. It is a smart, nimble, environmentally-conscious plan to incrementally add capacity at
Roberts Bank, as it is needed. It is important to note that the Review Panel evaluating alternative
means on RBT2 did NOT dismiss GCT DP4 as viable option.
Given GCT’s long history
and experience operating leading container terminals on Canada’s west coast, we have a track record of
delivering competitive capacity and services relevant to Asia-Pacific trade.
Why won’t the VFPA consider this approach, which would be funded by the private sector,
and not Canadian taxpayers? What is at play here?
“Over the past number of years, the port authority
has been in negotiations with a potential terminal operator for the project. In view of the delays and resulting
decision to initiate a procurement process, we have mutually agreed with the terminal operator to end those
negotiations. Our decision is in no way a reflection of the capability of the proponent with whom we have been
negotiating or the project’s feasibility,” the port added.
We disagree, we know the
market. The project doesn’t make sense (or cents)… unless hugely subsidized. And now we see VFPA
trying to bail out their project as some sort of “stimulus” project in a post-COVID-19 world. No
shame.
The marketplace is letting the VFPA know that their Terminal 2 project isn’t making
sense…..not once but twice… and why would that change for the third time after the damage done to global
economies during this COVID-19 pandemic.
T2 is a proposed three‐berth container terminal that
would provide 2.4 million TEUs (20-foot equivalent units) of additional container capacity annually.
VFPA’s proposed expansion
is based on forecasts from a decade ago that have not taken into consideration significant market
changes over the last few years. GCT studies show that Canada’s west coast will not run out of
capacity until 2030-2035 at the earliest. Even without taking into consideration recent events such as
COVID-19 that may have long-lasting impacts on global trade.
Building RBT2 at $3.5B cost will make the port uncompetitive. How will shippers afford
to bring cargo to a terminal that will be so expensive – its capacity will cost over $1500 per
TEU? GCT’s Canadian, privately-funded DP4 project adds capacity incrementally, as it is needed, to
meet market demand. GCT is confident we can continue to deliver competitive capacity, building on our
legacy of winning for Canada.
Global Container Terminals, the current operator at
Deltaport, was not in the running to also be the operator of port expansion at Roberts Bank, but the port
authority noted it did not block the GCT from submitting a bid.
“Our role as a port authority is to ensure that we
are providing capacity at a reasonable cost to users. This is echoed in the Canada Marine Act, which states that
we are required to, among other things ‘…ensure that marine transportation services are organized to satisfy the
needs of users and are available at a reasonable cost to the users’,” the port explained in a statement to the
Optimist last fall.
“To be clear, no one was excluded from the bidding
process. However, to maintain a healthy and competitive market for users of the Port of Vancouver over the
long-term, the port authority established a target that a single operator does not hold more than two-thirds of
total capacity in the port. GCT was eligible to bid, provided they demonstrated how they would ensure their
market share did not exceed 60 per cent. They chose not to bid.”
The Canada Marine Act does
not state that a single operator cannot hold more than two-thirds of total capacity in a port. And, even
if it considers this competition clause so critical, why is the VFPA not looking at all commodities, for
example grain, coal, break bulk and cruise? Does the same rule apply to all those operators?
Will the VFPA attack their success too?
The Canada Marine Act does
not grant the VFPA powers of the Competition Bureau – there is a separate federal entity that deals with
those matters, and published studies also seem to challenge VFPA’s approach.
GCT understands the market and the community, we are a Canadian company with interest
in ensuring container capacity that works for Canada.
In response, a GCT spokesperson countered what was
unclear is what VFPA defined as “a reasonable cost to the users.”
GCT has been pitching an alternative to T2 with a
fourth berth expansion of the existing facility, a proposal that was shot down by the port authority.
Saying T2 would be the most expensive terminal
development ever built in North America, GCT noted it is not alone in calling for the port to reconsider and
look at other viable, quick-to-market options to provide capacity.
Indeed, the VFPA is now forecasting in their recently released documents RBT2 will cost
$3.5 Billion!!! Last year when asked about costs by the Review Panel they said $3 Billion. Next
year, can we assume it will be $4 Billion or more?
The DP4 solution would incrementally deliver up to
two million TEUs of new capacity to the west coast by the 2030s, GCT noted, adding that, until then, expansions
by private-sector terminal operators that are already underway will meet all projected demands.
“Unfortunately, the current VFPA governance model and
review process is not an impartial mechanism, and thus is obstructing proposals like DP4,” GCT
stated.
GCT is looking forward to the Government of Canada’s advancement of the Port
Modernization Review it started two years ago that will hopefully address issues of overreach, like this
one.
A federal independent review panel on the T2 application recently submitted its final report to the federal environment minister.
