The Westlock Rotary Spirit Centre will cost the town $2.5 million more than originally expected.
A town news release issued last week indicates that Brenex Building Corporation estimates the remaining work will be completed at a cost of $9.7 million, bringing the total price tag to $15.5 million.
“There was a lot of discussion and attempts to get the price down as much as we could, but it turned out to be close to 20 per cent more than the original price,” mayor Bruce Lennon said. “Obviously we’re very unhappy about it.”
The town originally signed a stipulated-price contract with Balon Construction to build the facility for just under $13 million. Balon entered voluntary receivership Sept. 30, 2010, and the town subsequently terminated the contract. In February, Brenex was hired as construction manager to complete the project.
The news of the increase comes on the heels of last week’s revelation that the project won’t be completed until spring 2012 instead of the original completion date of fall 2011.
Lennon said the cost increase is the result of several factors — first and foremost being that with the switch to a different general contractor, there is a lot of the work that has had to be duplicated.
“You’ve got somebody coming in trying to redo what somebody else did so we’re paying twice for that,” Lennon said.
Furthermore, the initial stipulated-price contract with Balon included their fee, whereas Brenex is working on behalf of the town so will be paid a 3.5 per cent fee.
With some of the specific contracts, as well, there have been some price increases.
The electrical contract, for example, was partially completed when the original contract was terminated. Rather than putting out a tender for just the remaining component, Brenex put out a tender for the whole project with the assumption that there will be money coming back to the town for work already finished.
“We think there’s about $200,000 to $300,000 of electrical, so we’re going to get some credit back on that,” Lennon said.
All told, Lennon expects the $15.5 million price tag to be a “worst-case scenario” price tag. With some economies of scale once all the subcontractors are hired, there should be a reduction in that fee — but not by too much.
“Realistically, 10 per cent is likely very difficult considering what we have,” he said.
As far as how the town will pay the increased bill, Lennon said a plan is already in place and he expects it to be approved at a coming council meeting.
While the town has enough money in reserves to pay the full cost increase, Lennon said the town will look at using surplus to pay part of the cost while borrowing money for another part of it.
“That’s the way we’re going to go, it’s just a matter of getting the balance of how much we’re going to borrow and how much we’re going to use on the reserve side,” he said.
He emphasized that while the bulk of discretionary infrastructure funding for 2010 and 2011 was dedicated to Spirit Centre construction, the town will be back on track with major road projects in 2012 despite the unexpected expense.
“In 2012, the plan is we’re going to move forward and do some major roadwork, and get back on to our long-term plan,” Lennon said. “We feel we’ve got to move forward with the roads in Westlock in 2012.”
He added that while there are certain to be some nay-sayers and negative reactions to this news, the town could not have predicted Balon Construction would go into receivership and they are simply trying to proceed as best they can.
“We’re just doing our best. I know there’s going to be some pushback — a lot of negatives and ‘I told you so’ kind of thing,” he said.
“The problem we really have is we’re between a rock and a hard spot. We’ve got to move forward with the project; it’s got to be completed.”