By Mark Squibb/March 17, 2023
Municipal projects rarely go according to plan, and it seems the bigger the project, the more likely things will have to be adjusted along the way, at costs to the municipality.
But while change orders are not unexpected, a recent round of them approved during last week’s meeting has Mount Pearl councillor Bill Antle asking where all the money is going to come from.
The first change order was a contractor change order, payable to Eric Taylor Limited, for the purchase of additional materials for the pedestrian underpass remediation project.
Councilor Mark Rice explained the adjustments were required and would cost an additional $12,250, most of which was for concrete.
The change order was approved unanimously and is the fourth change order approved for the project thus far.
The next change order pertained to Phase 1 of the Farrell Drive Street Upgrading, a $7.1 million project funded in part by the federal government, which will see water, sanitary/storm sewer, asphalt, curb, and sidewalk replaced along Farrell Drive between Evan’s Place and Holden Street.
This change order was due directly to the increased price of materials.
“There seem to be price increases everywhere and this item is no exception,” said councillor Isabelle Fry. “During the period of time between the design build request for proposal closing date and the award of the contract on February 17, the supply of piping materials and accessories has had an escalation in manufacturer pricing. Increases were attributed to rising material costs, logistical and labour costs, including increased demand, supply chain disruptions as well as a fluctuating Canadian Dollar. The Engineering Services Division has reviewed the materials cost increase and considers the value reasonable and substantiated through manufacturer research.”
The increase amounts to $143,360, HST included, payable to Dexter Construction Company.
Councilor Antle, who noted that council had just debated an increase of about $35,000 annually for toilet paper, was aghast at the amount.
“Where are we getting the money from?” asked Antle. “That’s $143,000 that’s not in the budget. It’s not budgeted for. I mean, we’re only in March, it’s March 7, we’re only three months into the year… what do we do?”
Mayor Dave Aker, who noted the City does have contingencies in place, directed the question to Engineering Director Gerry Antle.
“This is a Design Build RFP,” said Antle. “Between when it closed and when we awarded, we did not actually have a contracted price in place until we actually considered these kinds of increases. This reflects a change in material pricing from wholesalers, the actual raw producers of materials.”
Antle said the price of materials had increased some seven to 11 percent. He clarified the price increase doesn’t include an increase in labour costs. He added that council approved, in Budget 2023, an asset management contingency fund from which the City will drawn money for this particular change order.
“And in part, that’s why that contingency was put in place, because council had the foresight when we approved the budget to see the environment that we were headed into,” added Mayor Aker. “But it represents, I think, around a two percent increase (of the entire project) which, even though the amount is quite large by my personal standards, it’s a fairly small one based on percentage.”
Councilor Antle acknowledged that $143,000 seems small stacked against a City budget of roughly $56 million, but persisted in expressing concern.
“It’s only March,” Antle reiterated. “My concern is that this keeps on going… I know we have a contingency fund, but do you think we’ll run out?”
Director Antle explained the City has advised the contractor that this is a fixed material increase, and that no further material price increases will be approved.
Aker said not many other change orders are expected on this project as it’s a ‘design build contract,’ in which the one company, in this case Dexter Construction, both designs and builds the infrastructure.
“Unforeseen things can still happen, but the whole purpose of a design build is for the builder to get all those ducks lined up effective the starting date,” said Aker.
Director Antle allowed that while there can be change orders to a design build contract, they tend to be limited.
Aker concluded that, to Antle’s question, the nature of the contract mitigates any future inflation.
“I won’t say this is the last change order, but between the contingency and the process that we bought into, we don’t have cost certainty, but we have pretty close to it,” he said.
Director Antle added that he would be “hesitant” to say the City has any guarantees of no further increases.
“We have a very solid structure, but things can change when you do $7 million worth of mostly underground replacement of infrastructure,” said Antle. “In this case, we are fairly confident in the way the contract is structured and with the material price escalation now fixed, we think we’re in a good position.”
Deputy Mayor Nicole Kiley said the conversation around price increases is one council has had time and time again across all departments.
Though she allowed that the volatility of the market is a concern, she felt the City has done a good job mitigating increases, by means such as adding to the contingency fund.
Kieley added she hoped the provincial and federal governments will work with municipalities on the cost increases.
As a final word on the matter, Director Antle noted that applications to fund projects are made years in advance, and that estimates are made based on construction pricing forecasts, not actual pricing.
“In the past year or so, nobody could have predicted the kind of escalation we’re seeing across the world,” said Antle, conceding there are contracts to come that are of a similar nature due to continued rising costs.
The actual amount of the contingency fund was not mentioned during the meeting.
Council voted unanimously to approve the increase.