The City is considering a framework to help eliminate cost overruns on future capital projects.
The recommendations are being made in light of a deficit on the budgeted $6.5 million fire hall to the tune of $528,034.
As for how the overrun was handled, according to the City, “the projects initial $300,000 budget deficit was addressed in the 2010 budget and the additional $228,000 for landscaping and other site-finishing requirements were absorbed into the 2010 operations budget with savings in other operational accounts.”
At a Committee of the Whole meeting Tuesday night, council discussed recommendations intended to address the oversight of future capital projects.
The recommendations include using a principal contractor model rather than a project management model as was used this case; having the City retain financial responsibilities should a project management model be used; informing council prior to work commencing on expected cost overruns; and establishing a project oversight committee that would report to council monthly. In this case, a committee was established but the reporting mechanisms were informal.
One of the main reasons for the overrun, according to Brian Carruthers, chief administrative officer for the City, was, despite prior geotechnical work completed on site, unexpected costs incurred addressing soil issues and the removal and cleaning of an area where a heating oil tank was found buried and leaking.
“Indications had come back that it was suitable but when we went to excavate the exact site it wasn’t,” Carruthers says.
Between the two, it was estimated that $400,000 worth of soil had to be removed and replaced.
Communication difficulties between the City and the project management company that oversaw the financial and on-site building operations further compounded the troubles.
Invoice tracking was also a concern.
“We found out in November (2009) the building was over budget, and an additional $300,000 was required,” Carruthers says.
“As April (2010) and May continued we were still getting invoices we weren’t aware of.”
The fire department became operational in the building in December 2009.
“Had we known early on in the project we would have had ample time to go back to council to let them know what happened …. It came out in November ‘09 at the 11th hour when we thought we were in good shape and were actually contemplating putting some items back into the building we had previously removed,” he said.
Because the City was assured its contingency dollars were still in place nearing project completion a few items were added back into the hall.
On Tuesday night council was told the project had gone from a surplus of $120,000 to a deficit of $500,000 over the “course of a few phone calls.”
The management company, council was told, attributed the difference to a “clerical error” based on a miscalculation on soil and gravel.
Despite concern and disappointment, councillors expressed a desire to learn from the experience and move forward.
“Up until December we were on budget and on time that was what we were hearing,” said Mayor Kerry Cook.
“At the end of the day we are responsible. The big thing is we’ve learned and this type of thing won’t happen again.”
Cook noted the 2011 budget will not be impacted in any way from the fire hall cost overruns.
“Taxes will not be increased to cover these regrettable overruns,” she said.
“It’s the taxpayers’ dollar,” said Coun. Surinderpal Rathor. “Something has to change. I am very disappointed.”
With the budget deficit of $528,035 the fire hall cost $7,028,034. The alternate approval process allowed the City to borrow $6.5 million for the project.
The City is not using borrowed funds to pay for the overruns.
The recommendations have yet to go to council for final approval.