County council to scrutinize multi-million dollar capital projects Monday

Council considering construction contracts for new roads garage, Erin library, Guelph transitional housing

ABOYNE – Tens of millions of dollars will be on the line come Monday morning when Wellington County council considers whether to award construction contracts for three major capital projects, including a new garage, library and transitional housing.

The Aboyne Hall at the Wellington County Museum and Archives was a flurry of activity on Wednesday morning as three county committees and numerous council members filtered through back-to-back meetings discussing contracts for the projects worth $31 million.

The cost of the garage project in Wellington North — the subject of a contentious land rezoning decision by that township’s council last year — has since risen to $16.8 million from the $9.2 million budgeted.

The cost of a new library to be located in a restored Erin grist mill has risen to $12.89 million from $8 million.

And the cost of turning a two-storey building located at 65 Delhi Street in Guelph into transitional housing (the county is the city’s social housing administrator) has increased to $10.6 million from $7.6 million.

Representatives from construction companies and architects who spoke at the committee meetings cast blame for the massive increases, ranging between 40 and 82.6 per cent, on an erratic market where material suppliers are, in the case of steel, only guaranteeing prices for mere days.

Committee members voiced concern about how to bring the long-awaited projects to fruition while not squandering the taxpayer dollars they’re entrusted to spend.

“I think this price is way too high,” councillor and roads committee member Campbell Cork said of the Arthur garage.

Warden Andy Lennox said he was struggling with not making adjustments to the library project to reduce costs.

Councillor and finance committee member Steve O’Neill said “our numbers have just gotten much too large.”

He questioned if the county was focusing on wants rather than needs.

County CAO Scott Wilson, however, told the room that sticker-shocked committee members are simply not accustomed to seeing such inflated numbers.

“The county and all municipalities have to get used to the new reality,” Wilson said.

“We’ve hit a new plateau,” he added.

To pay for increases on the garage and library, collectively totalling nearly $15 million, the county will tap into reserves and take on debt to be repaid when future development charges are collected.

The increase related to the transitional housing building will be covered by a $3.65 million federal grant, with some left over for a housing regeneration reserve.

“There is no anticipation to increase taxes for any of these three projects,” county treasurer Ken DeHart told the room.

“The question is,” DeHart added, “How do we replenish those reserves and what are the implications for a future budget?”

VG Architects managing partner Paul Sapounzi, whose firm has designed the library and transitional housing, said costing exercises in the past three years have been “very difficult.”

“What is happening in the industry is really totally out of anyone else’s control,” Sapounzi claimed.

Electrical, mechanical and steel supplies, particularly those coming from overseas, he said, are throwing costs overboard.

“It’s a tough thing right now, and I don’t see it plateauing, I see it going up and up,” he said.

Architect Lloyd Grinham, who has been working on designs for the garage in Wellington North since 2020, told local politicians that until detailed designs are market-tested, accurate costing remains an unknown.

“We don’t know what a building is really going to cost … there’s too much volatility,” Grinham said.

In an attempt to address some of that volatility, the county is embracing a model known as construction project management.

Typically public projects are tendered out with companies bidding competitively and councils awarding work to the lowest bidder.

Though each job will be awarded by council to a single construction management company, each sub-contracted part of the project — such as electrical or landscaping work, for example — is tendered out by the manager. The results are reported in an open-book format that council, and residents for that matter, can scrutinize.

“Our staff and [the] consultant determined that having [construction manager] input would provide better cost certainty and have valuable input and recommendations on the overall building design [and] systems,” county purchaser and risk manager Jackie Osti wrote in an email to the Advertiser.

Osti said the model has been used by the county for three projects; two of which came under budget and one that went over “due to unforeseen foundation conditions.”

Grinham advocated for the model during a committee meeting, saying it allows more transparency and “simply provides greater assurance” by reducing wildly speculative pricing and the risk of cost surprises later on in a project.

In a very real sense, council will be voting on, and potentially agreeing to, a cost ceiling.

If a project breaks through the ceiling, it’s on the construction manger to dip into their own pockets, not the taxpayer’s.

If any portion of the project comes under budget, the manger and the county split the “savings” 50-50, rather than the contractor pocketing it all.

All said, Grinham argues the model provides incentive to control costs and for the county and the manager to work together to find savings.

But nothing about the chosen tendering model alleviates the gravity of the weighty numbers presented.

“I think it’s time that on Monday, we need to look at what we’re doing,” councillor O’Neill said. “We’re so far over budget.”

Warden Lennox said council should consider all the projects holistically.

“I think a discussion does need to occur around the holistic (financial) effect of these,” Lennox remarked.

In reports authored by Osti, the recommendations are that:
• a construction contract of $13.31 million (tax-in with management fees included) be awarded to Dakon Construction Ltd. for the roads garage;
• a construction contract of $9.26 million (tax-in with management fees included) be awarded to Demikon Contrstruction Ltd. for the new Erin library; and
• a construction contract of $8.48 million (tax-in with management fees included) be awarded to Collaborative Structures Ltd. for the transitional housing building.

One by one, as the morning hours passed on July 26, the roads, social services and finance committees, and the library board, supported recommendations to award the construction work despite the reservations voiced.

The recommendations will go before council for debate at a July 31 meeting.

“We’re going to walk through the numbers again, on Monday … and we’re going to talk about other implications, whether it’s the 10-year plan, impact on reserves, or any of those things,” finance committee chair Chris White said.

“Whether you support these projects or not … what matters most is that you’re making an informed decision,” White added.

“I want to make sure that everybody knows exactly what these numbers are, and where they take us.”

*Update – Aug. 1: This article has been updated from an earlier version to reflect a total of $8 million originally budgeted for a new library in Erin, once a 2024 capital forecast amount is included. The new amount, updated from $5.5 million previously reported, means the project is 61 per cent over budget, not 132 per cent.