A $92 million cost limit was removed from the design-build request for proposals for the Kingsway Entertainment District municipal arena, raising questions about what the final price will ultimately be for local ratepayers
With the removal of a $92 million cost limit for the design-build request for proposals for the Kingsway Entertainment District Arena, anyone can guess what the final cost will be.
It’s not exactly a blank check, however, and the city council is still mandated to approve any expenditures that exceed the all-inclusive $100 million budget they have set aside for KED.
Removing the cost cap recognizes “current market risks, particularly with respect to the effects of inflation, supply chain reliability and labor availability,” according to a press release issued by the city.
“Legal and industry advisors have confirmed that the construction industry is currently resisting fixed-price contracts, such as design-build processes, due to current levels of market risk,” the statement said.
“Developers were unwilling to take on the risks associated with a fixed-price contract early in the design process and in some cases refused to participate in the tender.”
The project’s three shortlisted bidders expressed a list of concerns earlier in the process, including alleged conflicts of interest and rising costs.
These three shortlisted parties include:
- Ball/TESC Construction Inc. (Joint Venture)/Architecture 49 Inc.
- EllisDon Corporation/BBB Architects Toronto Inc., in collaboration with JL Richards and Associates Ltd.
- PCL Constructors Canada Inc./Parkin Architects Ltd.
“In this market and given the impacts COVID has had on labor, materials and equipment, a developer has no idea if this project can meet these affordability criteria,” asked an anonymous bidder in a question-and-answer the city posted on their website’s bidding page.
At the time, the city indicated that “any financial proposal exceeding the budget of the project will be disqualified. Developers are responsible for preparing a design and cost proposal within the limits of the City’s budget.
The $92 million cap was in place to prevent the city from going over its $100 million all-inclusive municipal budget for KED, which includes $90 million in debt and $10 million in fundraising.
In email correspondence with Sudbury.com, the city clarified that changing the RFP process to a so-called “incremental design-build” process that has no cost limit will not affect the current schedule to have shovels in the ground later this year. .
This timeline is still expected to have enough approvals in place to remove KED as an electoral issue in time for the October 24 municipal elections. A grand opening is still planned for 2025.
“The first phase of the procurement process (incremental design-build) is expected to be completed early in the third quarter of 2022,” according to the city. “Staff will then provide information to the Board on the selection of the preferred proponent and seek Board approval on the final budget to complete the project. The final figures will be in this report to the Board.
The decision to go for a phased, limitless design-build approach was made in consultation with legal and industry advisers, according to the city, including the project’s fairness monitor. A compliance team made up of municipal staff, specialist consultants and the fairness monitor will remain in place to oversee the tendering process.
“Legal and industry advisors have confirmed that the construction industry is currently resisting fixed-price contracts, such as design-build processes, due to current market risk levels,” according to the city.
The phased design-build approach includes a “collaborative, multi-step process” to determine an approved final design and associated costs that will provide City Council with “additional checkpoints” to assess their approaches and make any necessary adjustments” that maintain an appropriate balance between the building characteristics and the expected construction costs of the project.
Opponents of KED have long cited concerns about the project’s escalating costs, and have previously taken to social media and correspondence with Sudbury.com to highlight their now-amplified criticism.
“There comes a time when defining factors emerge that may constitute a breaking point,” according to an email representing local advocacy group Friendly to Seniors – Sudbury. “What those factors might be is still unknown. There could be one or more – maybe cost or environment, or both, or others?
The full collection of City tender documents can be viewed by clicking here. Sudbury.com used these documents and additional interviews with the city’s Director of Engineering Services David Shelsted and Mayor Brian Bigger to provide readers with a written overview of the proposed site.
The updated RFP process and the need for additional board approvals add to a series of project-related setbacks over the past few months. Other recent issues include an ongoing investigation by the Ontario Provincial Police into a claim by Ward 3 Council Gerry Montpellier that he was offered a bribe to select a location on The Kingsway for the project, an ongoing legal challenge by the Minnow Lake Restoration Group and Gateway Casinos putting their investment in the project on hold until the other two challenges are overcome.
Tyler Clarke covers city hall and political affairs for Sudbury.com.