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