October 31, 2007

Richard Gilbert

Construction costs on the Vancouver Convention Centre Expansion Project (VCCEP) have almost doubled from an initial estimate of $495 million in 2000 to the latest figure of $883.2 million. Six increases to the budget have been submitted and approved by the provincial government in the last four years.

Vancouver Convention Centre

Auditor’s report focusses on reasons for escalating Vancouver Convention Centre costs

RICHARD GILBERT

STAFF WRITER

The Auditor General of B.C. said last week that he could not guarantee there would not be more cost escalation on Vancouver’s convention centre expansion project.

The construction costs on the Vancouver Convention Centre Expansion Project (VCCEP) have almost doubled from an initial estimate of $495 million in 2000 to the latest figure of $883.2 million according to a report released on Oct. 25 by Errol Price, acting auditor-general of B.C. The construction costs have escalated by $388.2 million, while six increases to the budget have been submitted and approved by the provincial government in the last four years.

The auditor’s report focused on several factors, including the rush to finish the project for the Olympics, an unconventional procurement process, scope creep, lack of formal reporting and poor cost estimation.

He said that at this stage in the construction of the project there should be greater cost certainty.

“Design and approvals are nearing completion and most contracts have been tendered.” Price said. “(However, we) cannot provide assurance about whether the current cost estimates approved by the Cabinet will be sufficient to complete the project.”

The management of the VCCEP signed a contract with PCL for a stipulated lump sum to complete the project.

But Price said that the contract does not guarantee the project will be completed within the latest budget.

Maureen Bader, B.C. director of the Canadian Taxpayers Federation expressed concerns about the massive cost overrun.

“In 2003, taxpayers were left with the impression the budget for this project, $495 million, was based on a realistic estimate of costs. Yet the auditor general’s report suggests the figure was wishful thinking at best,” she said.

“The government has been blaming construction cost inflation for the cost overruns knowing all along politically motivated building changes and the rush to finish were important contributors to out-of-control costs.”

According to the Auditor General’s report, one of the main drivers of cost escalation on this project is an unconventional approach to construction management by the VCCEP.

Price said that there was rush to meet a deadline driven by the 2010 Olympic Games.

“It meant that VCCEP’s choices regarding a procurement approach were somewhat limited. Instead of proceeding with a traditional staged procurement approach such as design and build, VCCEP felt obliged to proceed concurrently with the construction of the marine and platform works, while design of the building was being completed,” he reported.

Some of the construction drawings are still incomplete and only 85 per cent of the construction prices have been locked down.

The procurement approach also assumed that the VCCEP would negotiate a lump-sum contract with the construction management company.

However, that too didn’t work out as originally planned.

“(The) contract was not completed until the first part of 2007, by which time most of the large contracts had already been let by the VCCEP. This has left VCCEP to bear the originally unanticipated cost escalations,” Price said.

Another cost driver on this project is scope change, which includes: expanded public amenities, redesign of the roof, incorporation of retail space, technical difficulties in setting the pilings, and a decision to turn the expanded facility into a showcase for the 2010 Winter Olympics and to use it as the Games’ international media centre.

Inflation in the construction industry surpassed initial projections, with the costing consultant predicting approximately four per cent a year.

Construction cost inflation reached a peak of 11 per cent in 2006.

Added to this problem was the fact the monthly progress reports by the VCCEP’s management lacked important components and failed to show the total estimated costs to complete the project.

Print | Email | Comment