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HomeMy WebLinkAboutOPS 12-22 Report to Council Report Number: OPS 12-22 Date: June 27, 2022 From: Brian Duffield Director, Operations Subject: Request for Additional Funds for the Construction of Fire Station #1 - File: A-1440 Recommendation: 1. That Report OPS 12-22 of the Director, Operations regarding additional costs for Tender No. T2020-3 for Construction of a New Fire Station and Headquarters on Zents Drive be received; 2. That additional costs in the amount of $203,520.00 (net of HST rebate) over the original tender amount for T2020-3 for Construction of a New Fire Station and Headquarters on Zents Drive resulting in a revised tender amount of $9,183,840.00 (net of HST rebate) be approved; 3. That additional costs in the amount of $56,160.00 (net of HST rebate) for additional FF&E above the $300,000.00 previously approved Capital Budget be approved; 4. That the Director, Finance & Treasurer be authorized to finance the additional net project costs of $259,680.00 as follows: a) the sum of $179,645.00 to be funded by a transfer from the Development Charges – Protective Services Reserve Fund; b) the sum of $62,725.00 to be funded by a transfer from the Development Charges – City’s Share Reserve; c) the sum of $17,310.00 to be funded by a transfer from the Seaton FIA Reserve Fund; and 5. That the appropriate City of Pickering officials be authorized to take the necessary action to give effect hereto. Executive Summary: Tender T2020-3 for Construction of a New Fire Station and Headquarters on Zents Drive was awarded to Percon Construction Inc. following approval of Report FIR 01-21 by Council on March 22, 2021, for a value of $8,980,320.00 (net HST rebate). This value included a contingency of $630,000.00 (approximately 7.6% of bid price) and cash allowances totaling $510,000.00. A separate $300,000.00 budget for furniture, fixtures and equipment (FF&E) was approved in the 2021 Capital Budget under project 5340.2107. OPS 12-22 June 27, 2022 Subject: Request for Additional Funds for the Construction of Page 2 Fire Station #1 All costs for defined work included in the contract documents is locked in as part of the original tender amount, but costs charged against contingency funds and cash allowances are incurred in real time as the project progresses and therefore subject to inflation. Construction costs have risen significantly due to the impact of Covid-19 on materials, manufacturing, supply chains and labour rates across the construction industry since T2020-3 was awarded. FF&E costs are also incurred as work progresses to coordinate delivery times with the completion of work on site, and have experienced even greater increases than those in construction. Due to the pending municipal election in October 2022, and the additional risk that Council may be in a lame duck position through the final stages of construction, approval for additional funds is requested to ensure that they are available, if required, to maintain the timely and successful completion of the project. Construction of the new Fire Station and Headquarters remains on track to be completed by the original contract completion date of November 22, 2022. Financial Implications: 1. Approved Cost as per FIR 01-21 Tender No. T2020-3 $8,195,000.00 Associated Costs Contingency 630,000.00 Sub-Total Costs $8,825,000.00 HST (13%) 1,147,250.00 Total Gross Proposal Cost 9,972,250.00 HST Rebate (11.24%) Total Gross Proposal Cost 991,930.00 $8,980,320.00 OPS 12-22 June 27, 2022 Subject: Request for Additional Funds for the Construction of Page 3 Fire Station #1 2. Actual and Additional Costs Tender No. T2020-3 (including change orders to date) $8,671,982.00 Miscellaneous Costs (incurred to date) 35,451.00 Remaining Contingency 117,567.00 FF&E Costs & Commitments (incurred to date) 130,427.00 Remaining FF&E Funds 169,573.00 Sub-Total $9,125,000.00 Additional Costs Additional Construction Contingency 200,000.00 Additional FF&E Contingency 50,000.00 Total Project Costs (excluding taxes) $9,375,000.00 HST (13%) 1,218,750.00 Total Gross Project Costs $10,593,750.00 HST Rebate (11.24%) (1,053,750.00) Total Net Project Costs $9,540,000.00 Approved Funds (FIR 01-21 plus FF&E budget) $9,280,320.00 Additional Funds Required $259,680.00 OPS 12-22 June 27, 2022 Subject: Request for Additional Funds for the Construction of Page 4 Fire Station #1 3. Approved Source of Funds Approved Code C10700.2007 C10700.2007 C10700.2007 C10700.2107 C10700.2107 C10700.2007 C10700.2007 C10700.2107 C10700.2107 Source of Funds 20-Year Debt RF DC Debt – Protection Services Property Taxes RF DC – Protection Services RF – Seaton Land Group FIA RF DC – Protection Services City Share DC Reserve RF DC – Protection Services RF – Seaton Land Group FIA Total Funds Funds Available $2,765,000.00 6,213,000.00 2,320.00 207,500.00 92,500.00 0.00 0.00 0.00 0.00 $9,280,320.00 Funds Required $2,765,000.00 6,213,000.00 2,320.00 207,500.00 92,500.00 140,795.00 62,725.00 38,850.00 17,310.00 $9,540,000.00 Project Cost under (over) approved funds by ($259,680.00) Discussion: Tender T2020-3 for Construction of a New Fire Station and Headquarters on Zents Drive was awarded to Percon Construction Inc. following approval of Report FIR 01-21 by Council on March 22, 2021. Construction costs have increased significantly since the project was awarded. By way of comparison, cost increases that were in the range of +3 percent per annum at the time of award of the project have since been trending in the range of +3 percent per quarter throughout 2022. Staff continue to diligently manage the work, but project a risk that the existing budget could be exceeded prior to completion of the work based on current projections. Contingency costs, cash allowances, and FF&E for this project account for $1,440,000.00 (pre- tax) of the approved budget value, but are subject to market pricing and directly impacted by inflationary pressures. OPS 12-22 June 27, 2022 Subject: Request for Additional Funds for the Construction of Page 5 Fire Station #1 Three significant cost pressures have impacted the original project contingency. The first was the unexpected discovery of poor soils on site, which had to be removed and replaced. Steps were taken to mitigate this cost, reducing the resulting change order by nearly $100,000. The second was an after-tender request to provide enclosed offices on the upper floor, requiring extensive changes to the architectural and electrical scopes of work, an totaling approximately $100,000. The changes were required by Fire Services in order to meet their operational needs for the headquarters are and not captured in the original design. The third is a more general pressure that can currently be found throughout the construction industry. Bids submitted for the original tender are based on late 2020 prices. Those materials and pieces of equipment are often not actually ordered by the contractors until later in the construction process, by which time they can be subject to market price increases. This is part of the risk undertaken by all trades in construction. It also drives attempts at cost recovery by contractors on change orders issued after the initial award of the work. The aggressiveness of requests for extras on projects is often proportional with cash flow pressures experienced by the general contractor and sub-contractors during actual construction. Staff, supported by the project consultant team, make every effort to ensure that approved changes are priced fair and reasonably, and in the best interests of the City, but change order costs will be based on current market prices at the time when a change is requested and approved. The last twelve months have seen extraordinary upward pressures in material, construction, and labour costs, most notably represented by a series of union labour strikes over the last few months, of which some are still ongoing. The new Fire Station and Headquarters remains on target to be completed by November 22, 2022 and costs incurred to date remain within the approved budget. This request for additional funds is intended to be precautionary, based on the known value of outstanding change orders and remaining purchases to be made against remaining cash allowances and FF&E budgets. Negotiations are ongoing with the general contractor to modify changes to the tendered scope of work to ensure successful project delivery at a reasonable costs, but all post-tender changes applied to the work are subject to current market rates. Where possible, existing FF&E from the existing headquarters will be relocated and re-used to help mitigate costs. New equipment will still be required, and staff are exploring the most cost- effective solutions for service delivery while minimizing any potential impact to future operations. Where possible, non-essential costs will also be deferred to future budgets and the related work or items purchased separately at a later date. OPS 12-22 June 27, 2022 Subject: Request for Additional Funds for the Construction of Page 6 Fire Station #1 Prepared By: Approved/Endorsed By: Original Signed By Original Signed By Vince Plouffe, OAA, RAIC Stan Karwowski, MBA, CPA, CMA Manager, Facilities Capital Projects Director, Finance & Treasurer Original Signed By Original Signed By Brian Duffield Stephen Boyd, CMM III Director, Operations Fire Chief BD:vp Recommended for the consideration of Pickering City Council Original Signed By Marisa Carpino, M.A. Chief Administrative Officer