Thanks to cost overrun, the University has revised its contract with the company working on Phase One of Queen’s Centre construction. The first phase of the project is $41 million over budget.
Yesterday in an e-mailed statement to the Journal, Associate Vice-Principal (Facilities) Ann Browne said the University changed its contract with PCL construction because of cost increases. Discussions on changing the contract began in December.
Until now, Queen’s has used a construction management program with PCL, the general contractor working on the project. With construction management, all components of a project are reviewed by the project team, architects, cost consultants and the construction manager to identify possible savings.
For the remainder of Phase One, which is set to be complete by the fall of 2009, the University will use a fixed bid agreement. A fixed bid—which includes both material and labour—guarantees the cost of the project doesn’t change, regardless of alterations made to construction by architects or fluctuations in the construction industry.
Vice-Principal (Operations) Andrew Simpson wouldn’t say what price the University negotiated for the remainder of Phase One.
“We’re not going to make any comment about it,” he said. “We are concerned that … there’s still some contractual negotiations going on.”
He said PCL is negotiating with their subcontractors and until those issues are resolved, it would be inappropriate to release the number.
“It’s a very substantial overall project that’s broken down into phases,” he said, adding that there’s “tremendous complexity” behind the numbers involved.
He said the University uses fixed price contracts for most construction projects, but decided to use construction management for the Queen’s Centre to save money.
“We decided to pull back because we desperately needed to get our numbers down,” Simpson said, adding that the University established an agreement allowing it to convert from construction management to a fixed price when necessary.
“We are working pretty diligently to get the budget back down.”
A fixed bid process may also be used for Phases Two and Three of the project, but the decision depends on the state of the market in a couple of years.
Phase Two, scheduled to be completed by 2012 and budgeted to cost $83 million, includes an arena, a field house and a pedestrian mall. Phase Three includes the student life centre and is budgeted to cost $23 million. It’s scheduled to be completed by 2014.
Since the project began in 2006, the University has used “value engineering” to alter small aspects of construction to reduce costs.
Browne said the University has saved more than $20 million as a result of value engineering.
“Value engineering has proven to be invaluable to this project,” she said in her statement.
The University will continue to use value engineering throughout the design development stages of the project’s next two phases.
Browne said it’s difficult to predict the state of the construction industry in the coming years.
“The supply and demand of skilled labour, availability and cost of construction materials, the planning and announcement of new projects (both private and public, residential and large-scale) are all factors that will continue to impact the cost of construction in Kingston and across the country,” she said. Both federal and provincial initiatives and policy changes can impact the industry.
The University hopes to maintain its original $230-million target for the Queen’s Centre. In an e-mailed statement to the Journal, Simpson said Queen’s will re-examine the timing and program components of the project’s next two phases.
“Through additional consultation with the various stakeholders, we hope we can stay the course, but we will need to be mindful of costs, particularly as it relates to our experience with Phase One,” Simpson wrote, adding that the University will proceed “cautiously and prudently.”
Simpson said a review of the project, directed by Browne and her project team, is to begin immediately and will involve the AMS, the Student Affairs Office and representatives from the PEC and the JDUC.
The only programming change for the first phase is altering the School of Kinesiology to make it cheaper and more efficient to build.
The University will work with the contractor and the architect throughout construction of the School of Kinesiology. Offices, labs and teaching space within the building won’t change, but a simpler layout and different materials and finishes will be used for the building’s exterior and interior.
The Finance Committee met last night to discuss the University’s capital program and the Queen’s Centre project. The Board of Trustees is meeting tomorrow morning to discuss the project.
George Anderson, chair of the Board of Trustees Finance Committee, said the budget problems are part of a bigger issue within the construction industry.
“Nobody likes cost overruns,” he said of the Board’s reaction to the news that the project is costing more than expected.
Anderson said there’s room for optimism.
“The earlier you work on these kinds of issues, the more freedom you have,” he said.
“The University’s in good financial shape and has the capacity to take on the Queen’s Centre and other projects if it likes.”
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