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Council favours construction procurement model for proposed new fire hall that guarantees fixed price
Town of Osoyoos council has decided to proceed with a construction procurement policy for the town’s new fire hall that ensures more financial cost certainty and less risk over a construction management method without financial certainty, but one that could have written assurances that local contractors would be used during construction.
Council recently approved spending $80,000 to allow KMBR Architects Inc. from Vancouver to design a new fire hall building for the town.
Council voted two months ago that local citizens would have the final say on whether or not to build a new fire hall during a rare public referendum.
Council approved a motion Monday that the referendum will be held following the May long weekend and no later than June 30, but no final date has been set.
The initial estimates for a new fire hall, that would include four bays, a training tower and mezzanine, is roughly $5.6 million.
A staff report prepared for town council on Monday gave options to employ a “Stipulated Sum Contract (SSC)” or Construction Management (CM) method should this project proceed following the referendum.
“Having additional work of developing project costs on the SSC and CM in all likelihood would cause further delays,” said chief administrative officer Barry Romanko.
In late October, members of council received a presentation from architect Witmar Abele to review the pros and cons of construction procurement methods.
During that presentation, it was clearly stated that all options can be employed successfully in construction procurement and each had its advantages in a given situation, said Romanko.
Council focused on the opportunities to use local tradespeople in the fire hall construction as an important aspect of the procurement process, he said.
The CM method provides the owner with more control over the selection of trades, however, there is a higher level of financial risk as compared to the SSC model, said the staff report.
The SSC model has a “reasonable certainty” over the final price, subject to minor claims that are covered in construction contingency pricing.
Performance bonds in the SSC model assure completion of the project within contract terms in the event of default of trades. The CM model takes the role of general contractor and assumes the risks of performance of sub trades, says the report.
The CM model works well in times when the economy is doing exceptionally well and with high general contractor profits and in complicated and phased projects, says the report.
In a straightforward project, with well-defined terms, the SSC model will generally result in a very competitive price, said the report.
In a letter to the town on Monday, Witmar wrote, “While it may be true that CM provides the owner with a higher level of control over the selection of trades, it should be pointed out that there is a much higher level of financial risk attached to this method of construction delivery as compared to the lump sum.
“With CM … the final cost of the project is not known until he very end.”
Coun. Sue McKortoff said she was in favor of the SSC model because “it allows us to have fixed costs and that’s very important to me … it’s important to have fixed costs, especially when we’re spending taxpayer dollars and taxpayers will be voting on this.”
Coun. C. J. Rhodes was the only councillor in favor of the CM model, saying the “harsh reality” of the construction business is the approved contractor won’t hire local tradespeople to work on this project and will hire those he has become comfortable working with in the past.
The CM model will allow the general contractor to use contract language that will guarantee local contractors will get the majority of work on this major project, said Rhodes.
Thousands of quality projects have been completed across the country using the CM model and he doesn’t see any reason it couldn’t work on the new fire hall in Osoyoos, he said.
“The CM model does allow local participation in this project and the other does not,” he said.
Mayor Stu Wells said this is a huge project with a lot of money involved and it’s crucial to have a fixed price revealed to the public before construction begins and that’s why the SSC model is the only one he could approve.
Coun. Michael Ryan agreed and added he feels whichever contractor tenders the winning bid will use local contractors as often as possible during construction.