Two major City of Winnipeg waste projects have blown past their budgets as the pandemic affects bidding and a contractor struggles to meet deadlines, according to a briefing presented to the city’s finance committee on Tuesday.
The city is conducting a massive upgrade of its sewage treatment system to meet the requirements of its licence under the province’s Environment Act and reduce the outflow of nutrients into Lake Winnipeg.
Upgrades to Winnipeg’s South End sewage treatment plant have fallen behind schedule, prompting the water and waste department to estimate additional costs of $16.5 million.
The total cost for the expansion and upgrades to the plant is now pegged at $335.6 million.
The city’s senior water and waste managers say the performance of the contractor is in part to blame for some of the cost increase.
The contractor’s missed deadlines have triggered a dispute resolution process between the city and the company. Part of the extra expenses include the city’s expenses for external legal counsel to address the contractual issues.
The increase also covers additional contract administration, construction management and administration, and increases in shipping costs for material coming from Korea.
The global COVID-19 pandemic has played a part in the delays and the performance of the contractor, and had an effect on market conditions and shipping parts and equipment, according to the briefing.
Senior administrators at water and waste promise more details about the cost overruns and delays in a report due in May.
Global conditions drive costs up for North End plant
While the rising costs on the South End treatment plant are linked to ongoing work, the budget for the city’s North End plant is ballooning, even before that work has started.
The cost of building a new headworks facility at the plant — part of the treatment process that involves raw sewage pumping, screening, grit screening, and removal — has jumped by $65 million to $473 million, without a yard of concrete poured. The total cost of all upgrades to Winnipeg’s sewage treatment system is currently estimated at $1.8 billion.
Water and waste staff say they received two bids to complete the work but both were substantially higher than the Class 3 estimate for the project — an estimate is considered accurate to within minus 20 per cent or plus 30 per cent of the total cost of a project.
Department director Moira Geer told the city’s finance committee the estimate for the work was “solid” and was reviewed by an external engineering consultant, as well as the city’s auditor and a construction expert.
Geer says the pandemic has had a dramatic effect on the construction industry.
“The market is not willing to take on as much risk,” Geer told councillors on the committee. “Supply and demand are quite skewed. There is a glut of work but not enough people.”
Geer says re-tendering the project is not a feasible option.
“If we stop and restart it would put us two years behind and there is no guarantee the price would drop,” she said.
The water and waste department is concerned about timing on project as the city waits for the provincial and federal governments to approve funding for this part of massive upgrades to the plant.
The bid the city favours for the headworks project expires in mid-June. After that the contractor could walk on the deal, leaving the city with a $1 million penalty and forced to start the bidding process once again.
Geer did not know if the cost overruns will have an effect on the city’s water and sewer charges to residents. That calculation should be known by the fall of 2021.
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