Decision No. 395-R-2014

APPLICATION

[1] The Canadian Pacific Railway Company (CP) requests the Canadian Transportation Agency (Agency) to confirm the legal obligation of the City of Montreal West (City) to pay maintenance costs incurred by CP in 2011 for work done at the Westminster Avenue level crossing located at mileage 0.04 of CP’s Vaudreuil Subdivision. CP submits that these maintenance costs are in accordance with the Agency’s 2011 Guide to Railway Charges for Crossing Maintenance and Construction (Guide).

Background

[2] In 1994-R-217">Order No. 1994-R-217 dated June 10, 1994, the National Transportation Agency of Canada (NTA), a predecessor of the Agency, authorized the City to reconstruct the Westminster Avenue, by widening and refitting the sidewalks. The NTA also apportioned in that Order the costs of reconstructing and maintaining the crossing and the highway approaches to the crossing.

[3] Clauses 4 and 5 of NTA 1994-R-217">Order No. 1994-R-217 provide that:

4. The cost of reconstructing and maintaining the crossing and the highway approaches to the crossing shall be paid by the [City].

5. [CP] shall prepare all accounts using rates not in excess of those stipulated in Schedule “A” entitled Directives, attached to [NTA] Order No. 1994-R-70 dated March 8, 1994, or its replacement, for any construction and maintenance work carried out by [CP] pursuant to this Order.

[4] The widening of the crossing between Westminster Avenue and CP’s railway was completed in 1994.

[5] In 2011, CP determined that work was required at the level crossing. CP removed the surface of the level crossing and replaced it with a new asphalt surface. CP and the City were not able to reach an agreement. An estimate of the necessary work and associated costs was prepared by CP and sent to the City. The City informed CP that it would not pay for this work.

ISSUES

1. Do the costs claimed from the City for the work done by CP constitute maintenance costs within the meaning of Clause 4 of NTA 1994-R-217">Order No. 1994-R-217?
2. If so, were the costs claimed from the City calculated in accordance with Clause 5 of NTA 1994-R-217">Order No. 1994-R-217?

DO THE COSTS CLAIMED FROM THE CITY FOR THE WORK DONE BY CP CONSTITUTE MAINTENANCE COSTS WITHIN THE MEANING OF CLAUSE 4 OF NTA 1994-R-217">ORDER No. 1994-R-217?

Positions of the parties

CP

[6] CP states that after completing the widening of the road in 1994, it did not incur any significant costs for the maintenance of the level crossing; CP only carried out routine cleaning of the track and verification of the ballast under the ties and minor repairs to the asphalt. CP points out that the City paid the invoices.

[7] According to CP, in early 2011, CP engineers found that the level crossing needed significant repairs due to the poor condition of the track and the surface of the road. According to CP, this need was the result of wear and tear on the road over the past 17 years and the minimal maintenance of the level crossing that was carried out during that time.

[8] CP states that in response to an estimate, the City advised that it would not pay for the work because it consisted of a “future reconstruction”, which did not fall under NTA 1994‑R-217">Order No. 1994‑R-217.

[9] CP points out that the cost apportionment responsibilities were established in NTA 1994-R-217">Order No. 1994-R-217 which provides, in part, that the cost of maintaining the crossing and the highway approaches to the crossing shall be paid by the City.

[10] CP argues that while the term “maintenance” is not defined in the Canada Transportation Act (CTA), decisions of the Agency and its predecessors reflect that the term “maintenance” of a crossing comprises all the work necessary to keep a crossing in good condition, including replacing any materials that have deteriorated over time due to the passage of vehicles. CP maintains that the work undertaken was necessary to return the crossing to a safe and usable condition following periods of prolonged and frequent use by vehicles.

[11] CP contends that the work done for the City at the level crossing was strictly maintenance because it did not include any work, maintenance or otherwise, affecting the railway company’s assets or infrastructure. CP also maintains that the work was not any type of reconstruction.

The City

[12] The City disagrees with CP as to the nature of the work done. The City maintains that this work cannot be considered maintenance to keep the level crossing in good condition or keep it operational and, therefore, it does not have to assume the costs of the work. In support of its argument, the City refers to 105-R-2004">Decision No. 105-R-2004.

[13] The City argues that CPʼs initial description of the work carried out and its subsequent description suggest that the work consisted of a complete reconstruction of the crossing and replacement of the track crossing surface. According to the City, CPʼs own engineer indicated that this was reconstruction and not maintenance. The City states that CP is now claiming that the engineer has made a mistake.

[14] The City refers to the Railway-Highway Crossing at Grade Regulations, SOR/80-748 which define the term “construct” as follows: “‘construct’ includes improvement by reconstruction.”

[15] The City contends that all the elements of the crossing have been replaced and that the work done at the crossing in 2011 is reconstruction, not maintenance, and that NTA 1994‑R-217%20">Order No. 1994‑R-217 does not apply.

CP

[16] CP submits that it has established in its application how the work and services it provided in 2011 at the crossing legally represent “maintenance” as this term appears in the enabling regulatory NTA 1994-R-217">Order No. 1994-R-217. CP states that the Agencyʼs and its predecessorʼs treatment consistently demonstrates that this work was, in fact and in law, “maintenance”.

[17] In response to the City’s argument that CP’s own staff member characterized the work as “reconstruction”, CP asserts that its employee “misspoke” by characterizing the work as reconstruction and that, later in the same communication, that employee confirmed that this constituted “maintenance” work.

[18] CP states that the fundamental character of the crossing was not changed by the work CP carried out during the summer of 2011. CP maintains that the crossing surface was not widened, raised or extended. CP adds that it lifted the old ballast, ties and rail due to their bad and irregular shape, and replaced these assets with the same or comparable materials, in terms of amount and quality.

[19] CP submits that the work it undertook in 2011 at the crossing was catalogued, invoiced and charged to the City, all in accordance with relevant Agency standards, guides and precedents.

Analysis and findings

[20] The City contends that the work is not maintenance because the elements of the crossing were replaced, which the City states is in effect reconstruction.

[21] In this regard, the Agency and its predecessors have previously addressed the question of what constitutes maintenance.

[22] In 354-R-1999">Decision No. 354-R-1999, the Agency stated:

The Agency recognizes that complete rehabilitation of the deck was the best choice. The work performed restored the existing structure to good condition without altering its alignment or width. The Agency therefore finds that the rehabilitation of the deck, the steel beams, the approach slabs, the sidewalks and the abutment walls, as well as the replacement of the lighting are maintenance work required by the normal wear of the structure.

[23] In 105-R-2004">Decision No. 105-R-2004, the Agency found, at paragraph 35:

The Agency is of the opinion that maintenance means those ongoing works necessary to keep a facility in good repair and in an as-constructed condition, while reconstruction means building again to a higher standard, qualitative change, modification, improvements and/or alterations that add to the value or improve the original design of the structure.

[24] In 476-R-2000">Decision No. 476-R-2000, the Agency stated:

While it is understandable and may be efficient to carry out other crossing rehabilitation work when installing new rail joints, the Agency is of the opinion that since the capacity or design of the crossing has not changed, this work does not constitute construction or reconstruction but merely maintenance to the crossing.

[25] The Agency agrees with CP that the work in question was to make repairs due to normal wear and tear of the road crossing to keep it safely operational. The evidence shows that CP maintained the Westminster Avenue crossing in the condition it was at the time of its construction, without modifying its alignment, width, capacity or design. Based on the evidence presented by the parties, the Agency concludes that the work did not bring the crossing to a higher standard.

[26] By applying the principles established by the Agency in previous decisions to this case, the Agency concludes that the work done by CP at the crossing constitutes maintenance.

WERE THE COSTS CLAIMED FROM THE CITY CALCULATED IN ACCORDANCE WITH CLAUSE 5 OF NTA 1994-R-217">ORDER No. 1994-R-217?

Positions of the parties

CP

[27] CP states that it provided the City with a cost estimate of the work to be undertaken. CP contends that this communication supports that CP provided an estimate, but that it would bill on actual costs. According to CP, the estimate was not a fixed-cost, lump-sum price; rather, it only provided guidance and was followed post-work with the actual bill based on actual labour hours, materials, etc. CP states that, in estimating the necessary work and related costs and sending this to the City, CP deemed that the City’s maintenance obligation was only for the road and the sidewalk surfaces. According to CP, the other project costs (40.9 percent) were related to the replacement of the track and track materials and were assumed by CP. At that time, CP estimated the City’s share at 59.1 percent of the estimated costs.

[28] CP states that following the completion of the work, it prepared an invoice indicating that the total costs to be assumed by the City were $108,671.14. CP points out that the invoice was accompanied by a detailed breakdown of the work done by CP and the associated costs. According to CP, the portion due to CP represented 55.9 percent of the total costs rather than the 59.1 percent indicated in the initial estimate.

The City

[29] The City states that CP’s request did not contain an explanation of how it determined the City’s share.

[30] The City contends that if it has to repay a certain amount to CP, this amount is undetermined for the time being, and therefore cannot give rise to an obligation to repay. According to the City, CP’s request does not constitute a definitive, liquid and enforceable claim, and it should be rejected solely for this reason.

[31] However, the City states that if the Agency concludes that the City must assume a portion of the costs of the work done, CP did not provide any explanation or rationale for the different rates on which the invoice attached to the correspondence of November 6, 2013 is based, for both the materials used and the labour costs.

[32] The City advises that it requested explanations of the breakdown of the amounts invoiced. It states that, despite the documents received, the claim remains incomprehensible and indeterminate. The City maintains that it cannot be required to pay an indeterminate invoice and that a claim must be definitive when invoiced.

[33] The City is of the opinion that a detailed study of the invoices and rationale provided by CP to the City reveals a number of anomalies and inconsistencies; for example, the invoice from Les Pavages Chenail inc., mileage allowances, and meals and business travel costs of employees who worked at the site. The City states that it is impossible for it to verify whether what was invoiced by CP is justified and related to the work done at the crossing.

[34] In particular, the City considers that if CP does not provide a rationale for the amounts that it invoiced in terms of the calculation of these amounts, and a confirmation that the allowances are related to the work done at the crossing, the total of the City’s share for mileage and meal allowances should be deducted from CP’s claim.

[35] Regarding labour costs, the City argues that it should not have to pay the costs (for the number of hours worked and the physical presence of employees at the work site) for which CP is not able to provide supporting documentation. The City submits that the total of the share pertaining to hours of labour for which it is accountable should be deducted from CP’s claim.

[36] Moreover, the City states that it was not informed of any rationale for the amount invoiced for the costs of vehicle use and materials. Consequently, the City asserts that it should not have to pay the amounts that CP was not able to justify and the share that CP demands from the City should be deleted from the claim.

CP

[37] CP indicates that each line item of cost has a crossing surface share percentage that may vary between zero and 100 percent, with variances depending on the assessments of work undertaken for this project and similar ones. The percent shares per line item are based upon years of regulatory experience in this sphere, costing submissions to the Agency and its predecessors and vetted with/consented by Transports Québec on comparable crossing projects.

[38] CP provided specific answers to Les Pavages Chenail inc.’s invoice, personal expenses, travel expense, labour costs, employees and hours worked by date, and costs of materials and equipment.

[39] CP states that it will typically strive to come to an agreement with a municipality in advance of crossing work on an overall percentage share of the total project based on the cost estimates provided. CP adds that the percentage is then applied post-work to the grand total of the actual costs of the project. CP argues that it is an extremely difficult and nearly impossible task for both parties to determine and debate separate percentages for every crossing for each item of labour, material and overhead actual costs given the variety, complexity, processing and number of inputs.

[40] CP maintains that the invoiced amount that CP provided to the City in Invoice No. 11033518 dated October 26, 2011 represents the valid costs of the maintenance work performed by CP at the crossing, which was undertaken in accordance with NTA Order No. 1994-R-217 and the Agency’s Guide.

Analysis and findings

[41] Clause 4 of NTA 1994-R-217">Order No. 1994-R-217 unequivocally establishes the parties’ responsibilities regarding the allocation of maintenance costs for the level crossing. This Clause states that the cost of reconstructing and maintaining the crossing and the highway approaches to the crossing shall be paid by the City. In addition, Clause 5 states that CP shall prepare all accounts using rates not in excess of those stipulated in the Schedule A Directives, or its most recent version, for any construction and maintenance work carried out by CP pursuant to NTA 1994‑R‑217">Order No. 1994‑R‑217.

[42] In accordance with their mandate to apportion costs, the Agency and its predecessors have been developing rate schedules applicable to work performed by railway companies at crossings since 1935. Prior to 1992, a schedule of rates was attached to or referenced in each individual crossing order. In 1992, the NTA produced the Schedule A Directives which included, among other things, rates and overheads for maintenance work done at railway crossings.

[43] In January 2004, the Schedule A Directives were replaced by the Guide, which is intended to assist railway companies and road authorities in determining, among other things, what allowable costs are incurred by railway companies for work performed at crossings either agreed to by the parties or authorized by an order of the Agency. The rates set out in the Guide are based on actual work performed by personnel of the railway companies.

[44] The Agency’s Guide sets out how costs for work at crossings should be invoiced. In particular, the section of the Guide dealing with general billing guidelines states that these guidelines apply to all work done at crossings and defines the accounting of costs incurred by a railway company. This section applies to all work done at crossings, except scheduled maintenance of crossing warning systems. In addition, for unscheduled maintenance and construction projects, the Agency’s Guide provides that railway companies should bill their actual time worked and the actual price paid for materials used for the construction project, and apply the Guide’s applicable overhead rates.

[45] The Guide establishes general billing guidelines related to labour charges; material charges; contracting equipment services; transportation and equipment charges; meals and lodging; and rental rates of railway equipment. The charges imposed under the Guide should include a detailed description of the actual work done and the associated costs. These costs are subject to overhead rates and should be calculated using the appropriate rates from Schedules B to D of the Guide.

[46] CP states that its accounts were prepared in accordance with the Agency’s Guide. In this regard, the Agency notes that the City did not contest the applicability of the Guide.

[47] The City contends that it has nothing to pay in this matter as it claims that CP has failed to provide a rationale and details. The City also questions its share of 55.9 percent established by CP and maintains that there are certain anomalies and inconsistencies in CP’s invoice; for example, the invoice from Les Pavages Chenail inc., the mileage allowances, the meal and business travel costs of employees who worked at the site, and the labour costs. However, the Agency must rely on what the evidence shows, not on what one of the parties alleges. The Agency is satisfied that CP has met its burden of proof related to the amounts claimed. The burden of proof therefore shifts to the City. While the City states that CP’s claim is unfounded, it provides no evidence to corroborate its allegations.

[48] According to CP, the share that CP allocated to the City is 55.9 percent of the costs of the maintenance work done at the level crossing, the road and the sidewalks. CP provided a document dated February 8, 2011 which explains how it established the share. The document consists of two sections, one for the asphalt and the other for the rail seal. Each of the line explains the percentage of the share allocated to the City. The breakdown and pro-forma compilation of Invoice No. 11033518 show that CP billed the City for a portion of the work based on this share, which corresponds to the portion of the road and highway approaches to the level crossing. The amounts attributable to replacing the track and track materials were not billed to the City. The Agency concludes that this allocation of costs is consistent with NTA 1994-R-217">Order No. 1994-R-217 which provides that the City must pay the maintenance costs for the crossing and the highway approaches to the crossing.

[49] The Agency finds that the evidence presented by CP specifies the work and the applicable overhead costs, consistent with the Agency’s Guide. This includes, among others, the amounts claimed by CP for mileage allowances, meal and travel costs, labour costs and material costs.

[50] With respect to the work done by Les Pavages Chenail inc., the amount claimed by CP corresponds with the amount billed by that company, with the 55.9-percent share applied and the three-percent overhead rate applicable to contracted equipment and services. The Agency finds that CPʼs billing is consistent with the Guide. A review of the bill from Les Pavages Chenail inc. and the breakdown and pro-forma compilation of Invoice No. 11033518 reconcile the amount claimed by CP.

[51] CP provided explanations regarding the billing of mileage allowances, and meal and travel costs. CP justified the hours worked by project, by employee and by period worked. Specifically, a review of the employee travel expense reports provided by CP and the breakdown and pro-forma compilation of Invoice No. 11033518 make it possible to reconcile the method of calculating the amounts claimed by CP regarding mileage allowances, and meal and travel costs of employees involved in this work.

[52] As for the billing of material costs, CP applied the 55.9 percent-share to these costs and then added the overhead rate of three percent to contracted equipment and services, or 50 percent for material overhead. This is consistent with the Guide. CP provided the information needed to identify the rates applicable to the construction project. The breakdown and pro-forma compilation of Invoice No. 11033518 make it possible to reconcile the method of calculating, including the application of overhead costs and contracted equipment costs set out in the Guide.

[53] With respect to labour costs, the breakdown and pro-forma compilation of Invoice No. 11033518 make it possible to identify the actual hours worked and the hourly labour rates by employee category or by group for each workday.

[54] As the City has not submitted any compelling evidence that would refute CP’s evidence, the Agency concludes, on a balance of probabilities, that CP’s accounts were prepared consistent with NTA 1994-R-217">Order No. 1994-R-217.

CONCLUSION

[55] The Agency concludes that the work done by CP constitutes maintenance. The Agency also confirms that the City has the legal obligation to pay the maintenance costs incurred by CP.

[56] The Agency also concludes that CP’s accounts were prepared consistent with NTA 1994-R-217">Order No. 1994-R-217.