Carter concerned about arena overage
Work on the the S.G. Nesbitt Memorial Arena renewal project up until the end of May went 9.4 per cent over the amount that was budgeted for it, but Minden Hills Mayor Brent Devolin and community services director Mark Coleman maintain that because of the integrated project delivery model being used, the project will not go over its total budget.
Coleman gave a progress update on the nearly $13-million project during a June 27 council meeting, explaining that the footings for the new arena were almost complete, and the foundation walls scheduled to go up shortly. The project also includes a gymnasium with elevated walking track, modern accessibility features, parking lot, landscaping and a refurbishment of the Minden Hills Community Centre, to which the arena is attached. In February, council awarded the project to McDonald Brothers Construction and Parkin Architects Ltd., on a joint bid that was the sole bid the township received for the job. Those companies are using a variety of subcontractors, and negotiations and tenders for different parts of the project are ongoing.
Coleman told councillors proposals for the fitness room design have been received, and tendering for items such dry walling and asphalt are underway.
“We should have further numbers within the next week on those,” Coleman said.
Councillor Bob Carter said he wanted more clarity when it came to figures and reports titled more clearly, noting that according to one of the reports in the community services portion of the agenda, work on the first phase of the project had gone more than nine per cent over the budgeted amount.
“I would prefer to get a little more information and clarity on things,” Carter said, referring to one of the reports. “Nineteen, twenty-three dash C ... it doesn’t really have a title, so I can’t really tell you what the report is, but I see you’re running at 9.4 per cent over budget on that.”
That report shows that for the validation (essentially engineering assessments), pre-construction and design portion of the project, the amount in the budget was $820,630, and that with actual and forecasted costs, the cost for that work is anticipated to cost $897,513.25, for a shortfall of nearly $77,000.
“You’re talking here, and you’re saying everything’s on time and on budget, and I look at this and it’s 9.4 per cent over budget,” Carter said. “So, either your original document isn’t true, or I don’t understand it, and either way, that’s a problem.”
Coleman responded by saying that actuals in the coming months are expected to come in below budgeted amounts.
“This is the portion of the budget that relates to the design consultation and consultant services,” Coleman said. “This is a progress tracking of those summary numbers as we progress from month to month, and so it may appear at this time that it’s in contract to be over budget, as you’ve suggested. Just in the last two or three months, there’s been more effort put in up front from the original forecast, so some of these next months, we haven’t realized those actuals yet, we’re likely to be under on some of those actuals.”
“I guess what I’m looking for in the report, is that I can’t glean that from anything I see,” Carter said, adding he’d like to see overruns highlighted. “There has to be a way of communicating that, so we’re clear and we’re aware. Generally, when the snowball starts rolling down the hill, it tends to get a bit bigger, and so you’re 9.4 per cent behind on your first stage, it doesn’t give me a lot of assurance more isn’t going to happen. So, if you have explanations and there is something to tell me, don’t worry about it, this is where we are now, and we’re clear about it, it needs to be in the report. And I need to see, I’m sure others too, we need to have some titles on these reports.”
“I’ll endeavour to do that for the next report,” Coleman said.
Carter said he also wanted greater clarity on the so-called “profit pool,” essentially a contingency fund that is a joint pool of money accrued from any savings to be split 50/50 between the companies and the township, the township using any monies left in this fund for “value-added items” – smaller items such as a retractable stage or motorized basketball backdrops that are not included directly in the project’s budget.
“I think it needs to be clearly stated what part of that is the township’s,” Carter said. “As I understand it, again, the way the payments are scheduled, is that the builder, or our partners, will be taking their part of the profit pool out over a period of time. So I think it needs to be clear how much of that money is ours, or potentially ours. Because, you know, it makes it seem like it’s this great profit pool, but that money’s going to someone else, it’s not something we can use.”
As of last week, the contingency fund was sitting at more than $286,000, with $272,895.85 of that accrued from savings to date from tender results, according to Coleman’s report.
“Up to 50 per cent of project savings (currently $136,447.92) can be retained or reinvested in value-added items upon full release,” the report reads. “McDonald Brothers Construction is currently comfortable releasing $40,000 of the project savings to date to cover the early integration costs noted in the updated value-added spreadsheet attached.”
Coleman explained to council he was seeking approval of the expenditure of that $40,000 to incorporate those value-added items – including motorized basketball backboards, a gym divider, a retractable stage, projector screen and projector – into the building’s design, as electrical drawings for the facility are currently being completed.
The items have a collective value of $150,000, however, as Coleman explained, “We are not necessarily expending that total value at this time, but to facilitate those things into the facility going forward, we are seeking approval for a certain value amount to incorporate those into the structure and design. So, if and when the contingency funds are fully released and there’s adequate funds, then we can, at the time, do final approval on fully implementing it.”
Coleman noted that the township might not be able to afford some of those additions for years into the future, but that it was about making them easy to add at that time.
“We won’t have to cut holes in the building, and take the building apart,” he said.
Noting that the contingency belonged half to the township and half to the construction and architectural firms, Carter wondered what would happen should that contingency fund eventually be drained.
“If this $40,000 is released, just to make it clear, if at some point we get to a zero value on this contingency, does the $40,000 then become something that is fully absorbed by the municipality?” Carter asked. “In other words, I see that McDonald Brothers is currently comfortable releasing $40,000, but, that’s, if you will, $20,000 of their money. Is that money we would have to pay them back if the contingency went to zero?”
“So, I should explain that a little better,” Coleman said. “So, McDonald Brothers right now is comfortable releasing $80,000, $40,000 of which is ours.”
“And $40,000 theirs,” said Mayor Brent Devolin. “We have a hard upset [limit]. There isn’t anything happening that is taking us above that threshold.”
“This is $80,000, it’s not $40,000, and this is where it gets really confusing,” Carter said. “It’s actually $80,000 that’s being requested – $40,000 of ours, $40,000 of McDonalds’.”
Devolin said that because most of the in-ground work had been completed, which meant the majority of risk associated with the project was over, the company was comfortable beginning to draw out contingency money.
“We both have $40,000 of skin in this, and we’re comfortable that contingency’s not going to hit zero,” Devolin said.
“I’m certainly new to this type of project, and I think they’re kind of new to it also, so it’s making sure some of these kinds of points as we go along, so that we don’t all go down a road we don’t plan to go down,” Carter said.
Devolin said that this type of integrated project delivery system, with a shared profit pool is new, “for sure in Canada, not so much the rest of the world.”
“It’s the incentive of the profit pool portion of the management model is to really promote and strengthen the idea of keeping the project on budget and on time,” Coleman said, “as well as demonstrating lots of value to the project to the owner, or the buyer, and it’s their incentive to work harder, as they go through various tendering packages, to find the savings and make sure we’re getting good value for the dollars that we’re approving. Just very briefly, we’ve had areas of the project tendered where there’s multiple bids, some of the bids are way off, way too high ... so they had to go back and work hard, sometimes approach others to get further bids, to make sure we’re getting the bid that’s realistic, because if we just accept one the higher bids, we’re paying more for something than we should. We’re working hard to make sure that doesn’t happen.”
Devolin said the project would also be a showpiece for the project management model, and said the Minden arena was the first integrated project delivery job under $30 million in Canada.
“Parkin Architects is no small firm,” he said, emphasizing the arena project would be one the company would be referring to as an example.
Carter, along with councillors Pam Sayne and Jennifer Hughey voted against proceeding with the sole-source contract in February, while councillors Ron Nesbitt, Jean Neville, Deputy Mayor Lisa Schell and Devolin voted in favour. No feasibility study on the project was performed.
The township is forming a fundraising taskforce for the project, with a meeting of stakeholders scheduled for July 8. An additional call for members will then go out. Devolin has said he believes as much as $1 million can be raised.