Convention facility expansion price jumps 40% to $800 million
Jeff Lee
Sun
Work on the Vancouver Convention Centre expansion downtown is over budget and off schedule. Photograph by : Stuart Davis, Vancouver Sun
Runaway construction costs are being blamed for driving the price of the Vancouver Convention Centre expansion to $800 million, more than 40 per cent over its original budget.
The province acknowledged Thursday the project is behind schedule and it is impossible to keep it at its already-inflated budget of $615 million.
When the project was first announced in 2003, the price tag was cited as $565 million. In 2005, the province added $50 million because of construction cost increases. Now the Crown agency in charge of the project says it needs another $185 million.
The new overruns mean the project will cost B.C. taxpayers nearly twice as much as originally thought, pushing the provincial contribution to more than $417 million. The rest is being provided by the federal government, Tourism Vancouver and development revenues.
Ken Dobell, the chairman of the Vancouver Convention Centre Expansion Project, said the new estimates will be released in next Tuesday’s provincial budget.
He blamed the latest increase on a combination of rising construction costs and complicated technical factors.
They included difficult soil into which the 1,500 pilings that will support the centre have been pounded.
Those problems have also put the massive project behind schedule. Originally expected to be finished by November 2008, the centre, which at 9.2 hectares is physically one of the largest buildings of its kind in Canada, won’t be ready until March 2009.
Dobell said that still leaves plenty of time for the centre to be converted into the broadcast centre for the Vancouver 2010 Winter Olympics.
In an exclusive interview with The Vancouver Sun, Dobell said the Crown agency had no choice but to ask for more money, especially after the federal government turned down two requests last year to contribute more than the $222.5 million it has offered.
He said his board had already cut more than $42 million in “value engineering,” and projects it will get $40 million more in development and parking revenues when the centre is operating. But he said it is still being pushed around by a strong construction market that has plagued the entire province.
“We’re a victim of this damn government’s success,” he said. “They turned the economy around, the flaming construction is booming and you can’t hire a worker from here to Newfoundland.”
He acknowledged the new estimate may damage the government’s credibility, especially after then-tourism minister Olga Ilich said in late 2005 she was confident “we won’t be seeing any further increases.” She made the statement after the province boosted its share by another $50 million to $272.5 million.
“On the face of it, it is a problem. You can’t say it isn’t,” Dobell said of the potential for public backlash. “But you have to keep something in perspective. We started on this at a time when inflation in the construction industry was two per cent a year. And in fact inflation has been 10-12 per cent a year.”
Stan Hagen, who took over from Ilich as minister, said he was disappointed over the ballooning costs but wouldn’t fire anyone for miscalculating. “It would really be nice to have someone to blame for this, but I can’t,” he said. “This is one of those cases where there is some very unusual escalation of costs that were beyond our control.”
Hagen said he didn’t know until last week how badly the budget was out of line.
“In August, after I became minister I took over this file. I wanted to tie the number down, but we couldn’t. After a series of meetings over these numbers, we were still bouncing around all over the place.”
Dobell said his board has asked the auditor-general to review its operations again in light of the new budget to see if it used proper governance, project management methodology and procurement processes to keep the escalation of prices and costs under control.
It is also moving to lock in the costs as much as possible now by converting its project management contract with PCL Constructors Westcoast Inc. to a fixed-price contract next week.
Hagen said he expects the $800 million figure to be “at the outside” of what the convention centre will actually cost. The figure includes a contingency fund but he wouldn’t say how much because it’s part of the negotiations with PCL next week.
“I will be confident when I see the number they are going to sign on,” he said. “I expect it should come in at something less than the $800 million in the budget.”
Dobell said PCL acted as the Crown agency’s construction manager for all of the sub-trades working on the site, but will take over under a fixed budget.
© The Vancouver Sun 2007
