Westlock is fortunate that the Westlock Rotary Spirit Centre construction only went $3 million over budget, mayor Bruce Lennon says.
“Although it’s tragic that we’re $3 million over, this scenario could have been a heck of a lot worse, in my view,” he said. “The good thing is we ended up with a quality building.”
Administration presented council with a cost summary of the $19.7 million project at its Dec. 10 council meeting, which was also attended by about a dozen members of the public. The figures includes roughly $16.1 million in construction costs, $2 million for site servicing, $1.2 million for engineering and consulting and $383,000 for other non-contracted costs.
“We feel as the town that we’re living in our means, and everybody who has been down to the Spirit Centre realizes what a great asset it is, not only for us but for the surrounding areas,” he said. “We’re committed to it, and I’m very pleased by the sense of what’s going on down there and the use it’s getting.”
A $13 million stipulated price contract was awarded to Balon Construction, but that company went into voluntary receivership in September 2010. The town regained control of the project in early 2011, and the town awarded a construction management contact to Brenex Building Corporation on Feb. 22, 2011.
All told, Balon received payments totaling $6.2 million, while Brenex finished the job for an additional $9.9 million — meaning the construction component of the project went $3.1 million over budget.
Lennon pointed to two specific factors in the overruns — the first and most obvious one being Balon going bankrupt, but he also suggested the original $13 million budget may have been too low.
“We feel that Balon underbid the project,” he said. “When we met with Brenex and did a detailed analysis of what was left to be done, … it turned out some of these numbers from Balon were underbid and that would have created a problem whether Balon had finished the project or not.”
The second factor is simply the time it took to regain control of the project and get new construction contracts in place for those sub-trades that chose not to continue after Balon was out. Many contracts had to be re-tendered at a time when costs were on the rise, and in addition to that it costs money to simply have an operational construction site.
CAO Darrell Garceau said that the delay also contributed to an increase in the site-servicing contract. “The construction delay further delayed the site servicing costs, so there were additional costs relative to that contract as well,” he said.
Lennon also said that in hiring Brenex as the construction manager, there were some things brought to the town’s attention to do differently — places where Balon may sought to keep prices low at the cost of quality.
“We added in another $1 million of upgrades to the original contract, and that was at the recommendation of Brenex,” he said. “We felt that we wanted a quality building that was going to last.”
The payments that were made to Balon were made at the recommendation of the town’s consulting engineer for the project, Terry Bearden.
“All payments made to either Brenex or Balon were made only under the authority and under the supervision of our engineers,” Lennon said. “We didn’t make any payments unless they signed off on it. It was all based on approval with our engineers.”
At the meeting, county resident Terry O’Donnell questioned the town’s efforts to make the total project cost projections available to the public, noting the public perception was that the original $13 million contract included site work and tearing down the old Jubilee Arena, as well.
“With the benefit of hindsight we might have done some thing differently, but we can all say that about pretty well anything we can do.” Lennon said. “I know we had lots of public meetings, but it’s really hard to get people involved and we may have been not good enough in communicating where we were at.”
O’Donnell also questioned the decision to not enter into a performance bond relative to the original contract with Balon,
Lennon explained that the decision was made on the advice of Bearden. A bond would have cost $200,000, and if the town had tried to collect from the bond company it would likely have meant further delays and therefore further costs.
“In the end his recommendation as our engineer is that bonding is not a good investment of your money,” he said.
In terms of the overall quality of the building, Garceau said that while there were some deficiencies — mechanical and electrical issues — they are covered by a one-year warranty and were fixed at no cost.
Other problems, such as water leaking into the concession area, will be treated as maintenance issues. Garceau said the water leak, which staff noticed Dec. 7, was caused by condensation in the roof cavity and is related to the recent heavy snowfall.
Lennon said after the meeting that, as with everything in life, hindsight is 20/20. With that in mind, there were three specific things he felt the town could have done differently with the project.
First, he said the town could have put more time and effort into vetting the potential contractors before awarding the project to Balon.
“One of the things is we could likely have done a little more checking in term of Balon’s financial state and so on. We might have uncovered something that gave us a hint that there were some issues.”
Second, he said the project could have benefited from having an on-site supervisor answering directly to the town, instead of to the engineers or the construction companies, a position he called a “clerk of the works.” Lennon said when he worked with the school board, these clerks were often hired.
“It was beneficial to us because they would pick up on things that maybe weren’t being done properly or according to the plans, whereas engineers are doing inspections and things but they’re not generally on site all the time.”
Finally, he said there could have been some benefit to taking legal action to dismiss Balon more quickly once that company went into voluntary receivership in September 2010. The receiver, BDO Dunwoody, said the project could be finished so the town didn’t seek to part ways with Balon until several months later.
“With the benefit of hindsight what we should have done is shut down Balon as the main contractor at that point, instead of waiting until December,” he said. “That would have given us the ability to shut them out and go through the process we did, but it would have been three or four months earlier.”
