Report to: General Committee                                                      Report Date: June 2, 2009

 

SUBJECT:                    East Markham Community Centre & Library – Award

PREPARED BY:         Gary Adamkowski, P. Eng., MHPM Project Managers Inc

                                       Henry Tse, P. Eng., Acting Senior Manager, Facility Assets         

 

RECOMMENDATION:

 

1)      THAT the report titled “East Markham Community Centre & Library – Award” be received;

 

2)      AND THAT staff be authorized to award contract 012-T-10 to the lowest priced qualified bidder, PCL Constructors Canada Inc., for the construction of East Markham Community Centre & Library, in the amount of $56,949,984 inclusive of HST;  

 

3)      AND THAT this award be made in the full amount and that Staff negotiate any potential cost savings based on the Contractor’s further review of the design drawings and specifications to propose more cost effective or simplified methods of constructability and/or selection of materials without loss of design integrity or functionality;

 

4)      AND THAT Staff be authorized to subsequently reduce the award by the amount of any such negotiated cost savings which prove good value for the Town;

 

5)      AND THAT Staff be directed to incorporate appropriate conditions in the contract to facilitate negotiation of additional cost savings for efficiency gains of constructing on adjoining properties should PCL Constructors Canada Inc. be successful in their bid for the Markham Stouffville Hospital expansion project;

 

6)      AND THAT a contingency amount of $2,562,749, inclusive of HST, representing 4.5% of the contractor’s bid price, be established to cover any unforeseen additional construction or design costs that may be incurred during construction, and that the CAO, be authorized to approve the expenditure of this contingency amount up to the specified limits in accordance with the Town’s Expenditure Control Policy and a monthly status update be provided to the Treasurer;

 

7)      AND THAT the awards be funded from the East Markham Community Centre & Library project budget account 070-5350-8200-005 in the amount of $59,512,733;

 

8)      AND THAT the East Markham Community Centre & Library project budget be increased by $5,335,733 from $70,400,000 to $75,735,733 and be funded as presented in the Proposed Funding Sources section;

 

9)      AND THAT all other awards for this project be made in accordance to the Town’s Purchasing Bylaws;

 

10)    AND THAT the balance of Administration Lot Levies Reserve Funds in the amount of $2,721,999 be transferred to the 10% Non-DC Growth Reserve Fund;

 

11)    AND THAT Council express its intention to recover any future excess capacity that may be created from the addition of this facility from future Development Charges; and,

 

12)    AND THAT Staff report back in the fall with the potential need for external Development Charges borrowing;

 

13)    FURTHER THAT Staff be authorized and directed to do all things necessary to give effect to this resolution.

 

 

PURPOSE:

 

The purpose of this report is to seek Council approval to conditionally award the construction contract for the East Markham Community Centre and Library (EMCC&L) and its associated parking structure.  The intent is to facilitate negotiations with the contractor for potential cost effective design or material selection changes from a constructability view point without altering the general design integrity or functionality of the project.  Target of construction completion of the project remains to be Q1 2013.

 

 

BACKGROUND:

 

Staff, together with the project architect Shore Tilbe Irwin and Partners (STIP), presented the final design and colours and finishes along with various recommendations to Council at their General Committee meeting on December 14, 2009.  The resolutions resulting from that report included, “That Council authorizes Staff to award a construction contract to the lowest compliant bidder if the price is within the approved budget…”

 

 

OPTIONS/ DISCUSSION:

 

Progressive cost estimates were performed by the cost sub-consultant to the project architect throughout the project.  A fully detailed construction cost estimate was performed during September, 2009 at approximately the 40% Detail Design stage.  The estimate included the costs associated with the Town’s requirements, derived from the numerous micro-planning sessions.  Escalation was estimated at 0% based on market observations at that time.

 

A subsequent detailed construction cost estimate was performed during November 2009, at approximately the 80% Detail Design stage.  This estimate included the finalized interior selection of finishes and materials, and reflected all changes adopted through micro-planning meeting process discussed earlier in this report.  The cost consultant stated that “…the estimate has a 95% likelihood of falling within the range of bids…” implying that there is a 95% likelihood that the low bid may be below the estimate.  At that time, escalation was identified as 0.5%.  The cost consultant recommended monitoring for potential future increase in escalation.

 

As approved through General Committee on December 7, 2009.  Staff released a pre-qualification to the market place to ensure the contractors bidding on this tender are qualified to undertake a project of this magnitude and complexity with the appropriate resources to complete the works in accordance with Town of Markham requirements within the specified timelines. Pre qualification # 326-P-09 was issued to the market place in accordance with the Purchasing By-law 2004-341

PRE QUALIFICATION INFORMATION (326-P-09):

 

Advertised

ETN

Pre qualification closed on

January 15, 2010

Number picking up document

56

Number  responding to pre qualification

11

Number of contractors pre qualified

5

BID INFORMATION (012-T-10):

 

Advertised

ETN

Bids closed on

May 20, 2010

Number picking up bid documents

4

Number responding to bid

4

 

DETAILED PRICE INFORMATION:

 

Bidder

Price

(Inclusive of HST)

1

PCL Constructors

$56,949,984.00

2

Aecon

$57,850,560.00

3

Eastern

$60,645,907.20

4

VanBots

$60,789,388.80

 

The bids range within a $3,773,000 band with PCL Constructors as the low bid and Vanbots construction the high bid.  The highest bid is 6.7% greater than the lowest bid.  This reflects a very clean technical tender package, resulting in a very competitive tender response, with the resulting pricing being a reliable indicator of the value of the project at this time in the current construction market.

 

The cost estimator for the project, CM2R has identified the following factors which may have contributed to the bids exceeding the estimate: 

  • Market conditions have fluctuated rapidly in reaction to the spending deadline on many infrastructure projects.
  • Bidding was restricted to the most qualified contractors which may carry a premium.
  • Certain trades are currently experiencing shortages of labour and/or materials and priced accordingly.
  • Bidders may have carried generous allowances to cover perceived risk in certain aspects of the project such as accommodating the heliport and temporary services.

 

The Award Budget was calculated as the Construction Budget less the allocation for Construction Contingency and adding items budgeted in the Furniture, Fixture and Equipment and Internal budgets that were included in the Bid Price.  These items include

  • AV System
  • IT System
  • PA System
  • Security System
  • Indoor Playground equipment/fitment
  • Aquatic Centre Window Blinds

 

Per the Town’s legal advice, negotiations with the low bidder may only commence after the award of the contract. 

 

The project team has identified the following options for proceeding at this point:

 

Option 1

Hold the existing budget.  Since the Alternative Prices are not sufficient to reduce the price to within the original council approved budget, it would be necessary to redesign the facility to reduce the scope and/or scale of the project to within the required limits.  So doing would require 4 to 6 months, involve reduction of the project requirements/program, perhaps sacrificing desired features or functionality and incur significant consulting fee for the rework.  The time required would be well beyond the valid period of the bid offer and therefore the Bid would need to be cancelled and retendered.  Re-qualifying bidders and relaxing the criteria to expand the bidder pool would likely cause the existing “A-list” bidders to drop out.  This approach would also entail additional risk in that continued escalation could increase the risk of yet higher prices.

 

Option 2

Partially increase the budget.  Setting a target budget below the Bid Price but higher than the current Award Budget would still likely require redesign and involve the risks described above.

 

Option 3

Fully increase the budget and award the project to the lowest compliant bidder.  This approach ensures that a top quality contractor will execute the project as specified which fully satisfies the program requirements and for a price which is fair and competitive albeit higher than the original Council-approved budget.  A variation on this approach entails making a conditional award to the low bidder and then working with the contractor to identify potential opportunities for cost savings through:

·       construction efficiencies,

·       risk transfer,

·       simplified details,

·       substitute materials, and,

·       re-designed architectural features.

 

While this approach will doubtless provide additional savings, the aggregate is unlikely to approach the full amount desired.   Moreover, the savings provided by these changes may not provide good value for the Town.  The Town must proceed cautiously, with the support of the project architect and the cost estimating sub-consultant if this approach is adopted.

 

Recommendation

Staff recommends increasing the budget by $5,335,733 and awarding the contract to PCL Constructors Inc. and in conjunction with this make best efforts to effect cost savings that are deemed of good value to the Town and that do not fundamentally change the functionality and nature of the building as the design currently stands. 

 

 

FINANCIAL CONSIDERATIONS AND TEMPLATE:

 

Below please find the cost estimate of the award:

 

AWARD COST ESTIMATE

 

 

 

 

 

 

Award

Cost Estimate

Increase / (Decrease)

Construction

 

$54,703,700

$50,762,254

$3,941,446

FF&E

 

$701,500

$481,500

$220,000

IT

 

$208,800

$105,500

$103,300

Signage & Security System

 

$351,000

$590,000

-$239,000

HST Impact

 

$984,984

$0

$984,984

Award before Contingency

 

$56,949,984

$51,939,254

$5,010,730

Contingency

 

$2,562,749

$2,237,746

$325,003

Total Award

 

$59,512,733

$54,177,000

$5,335,733

 

 

 

COST ESTIMATE:

 

Below please find the financial position of the project after the proposed award:

 

 

General Committee Presentation

 

 

 

 

PROJECT COST ESTIMATE

 

 

 

 

 

16-Jun-08

 

 

25-May-09

 

 

03-Dec-09

 

 

07-Jun-10

 

 

 

 

 

 

 

 

 

 

 

Land

$6,300,000

 

 

$4,300,000

 

 

$4,300,000

 

 

$4,323,111

 

 

 

 

 

 

 

 

 

 

 

Construction

$51,400,000

 

 

$53,100,000

 

 

$53,100,000

 

 

$58,483,425

 

 

 

 

 

 

 

 

 

 

 

Internal cost at 10% of Construction

 

 

 

 

 

 

 

 

 

 

     STIP (Arch./Eng. Consult'g Serv.)

$2,127,600

 

 

$2,719,080

 

 

$2,719,080

 

 

$2,747,000

     Other internal costs (incl. int.& 

$3,172,400

 

 

2,880,920

 

 

2,880,920

 

 

$2,339,889

                ext. Proj. Mgmt cost) (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FF&E / IT cost

$7,400,000

 

 

$7,400,000

 

 

$7,400,000

 

 

$6,813,000

 

 

 

 

 

 

 

 

 

 

 

Project Cost Estimate

$70,400,000

 

 

$70,400,000

 

 

$70,400,000

 

 

$74,706,425

HST

 

 

 

 

 

 

 

 

 

$1,029,308

Project Cost Estimate with HST

 

 

 

 

 

 

 

 

 

$75,735,733

 

 

BUDGET STATUS:

 

Total approved budget for the East Markham Community Centre project is to be increased to $75.7 millions. 

 

PROJECT BUDGET

 

 

 

 

 

Original Budget Approved

 

$70,400,000

Increased Construction Cost

 

$4,025,746

Increased Contingency Cost

 

$280,679

HST

 

$1,029,308

New Budget Requirement

 

$75,735,733

 

 

PROPOSED FUNDING SOURCES:

 

Please find below the funding sources that will be used for the project:

 

FUNDING SOURCES

 

 

 

 

 

 

Revised Funding Requirement

Approved Budget Funding

Additional Funding

Development Charges Reserve Fund

 

$67,272,753

$62,190,000

$5,082,753

Pre-DCA Engineering Growth Reserve Fund

 

$590,000

$590,000

$0

10% Non-DC Growth Reserve Fund

 

$5,112,369

$6,320,000

-$1,207,631

Administration Lot Levies Reserve Funds

 

$2,060,611

$0

$2,060,611

Markham Stouffville Hospital

 

$700,000

$1,300,000

-$600,000

Total

 

$75,735,733

$70,400,000

$5,335,733

 

 

Development Charges Reserve Fund – Development Charges (DC) Reserve fund provides funding for eligible growth-related projects in the Town’s Capital Budget.  The funding requirement increased due to higher than expected construction costs, contingency costs and the HST impact as well as a decrease in Markham Stouffville Hospital (MSH) funding.  The funding required from the DC Reserve Fund for the project is $67,272,753 of which $5,045,193 has already been funded, leaving a remaining amount of $62,227,560.  The balance in the Recreation and Library DC Reserves as at April 2010 is $30,033,434 which is insufficient to cover the required DC funding.  However, there are positive reserve balances in other DC accounts to fund the shortfall.  The Town is currently in the process of reviewing the DC Reserve Fund to determine if borrowing is required for this project.  A report will be forthcoming to General Committee in the fall to address the need for potential borrowing.

 

10% Non-Development Charges (Non-DC) Growth Reserve Fund – 10% Non-DC Growth Reserve Fund finances the 10% non-DC component of growth-related recreation facilities and libraries.  The funding required from the 10% Non-DC Growth for the project is $7,172,980, of which $1,300,000 has already been funded, leaving a remaining unfunded amount of $5,872,980.  The remaining balance in the reserve as of end of April 2010 is $3,812,369.  Staff recommend that the balance in the Administrative Lot Levies Reserve Funds be transferred to the 10% non-DC Reserve Fund to fund the differential. 

 

Administration Lot Levies Reserve Funds – Administration Lot Levies Reserve Funds provided financing to support soft services such as library, fire halls and recreation facilities, and these are no longer collected and have been replaced by the Development Charges Act since 1992.  The remaining balance as of end of May 2010 is $2,721,999.  Staff recommend that the balance be transferred to the 10% Non-DC Growth Reserve Fund to cover for the shortfall in this project and to fund future 10% non-DC requirements.

 

MSH – The original budgeted funding from MSH was based on a preliminary estimate of $1,300,000.  The funding has since been amended to $700,000 based on a medical library of 2,000 sq. ft. compared to the original size of 3,000 sq. ft as previously communicated to Council.

 

 

ENVIRONMENTAL CONSIDERATIONS:

 

The East Markham Community Centre and Library will incorporate an environmentally friendly building design, energy consumption and recovery, as well as and product procurement in the development of the facility.  It is targeted to achieve at least the Council-mandated LEED Silver certification level, with an aim to achieve the next higher level of certification, LEED Gold, if possible.

 

 

ACCESSIBILITY CONSIDERATIONS:

 

The facility will be designed in accordance with all requirements of the Ontario Building Code as well as the current (2007) Accessibilities Guidelines of the Town.

 

 

ENGAGE 21ST CONSIDERATIONS:

 

The project aligns with the following Town of Markham corporate goals:  Infrastructure Management, Economic Development, Quality Community and Environmental Focus.

 

 

BUSINESS UNITS CONSULTED AND AFFECTED:

 

Recreation Services

Markham Public Libraries

Planning & Urban Design

Financial Services

Strategic Initiatives

 

RECOMMENDED BY:

 

 

 

 

 

__________________            _____________________            _____________________

Steve Andrews, P.Eng.           Brenda Librecz                             Andy Taylor

Director,                                  Commissioner,                              Commissioner,

Asset Management                 Community and Fire Services       Corporate Services

 

 

 

 

 

________________________                                   

John Livey                                                                 

Chief Administrative Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                                                                   

 

 

 

 

 

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