Winnipeg Free Press - PRINT EDITION

Police-HQ cost hike kept quiet

Higher price known months before it was made public

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 Mayor Sam Katz says he was unaware officials knew the police HQ project was tens of millions over budget months before council was informed.

WAYNE GLOWACKI / WINNIPEG FREE PRESS Enlarge Image

Mayor Sam Katz says he was unaware officials knew the police HQ project was tens of millions over budget months before council was informed. Photo Store

Senior city officials were aware Winnipeg's police-headquarters project was tens of millions of dollars over budget eight months before the ballooning cost was made public.

In the weeks following the 2010 civic election, officials overseeing the renovation of the former Canada Post building into the new home of the Winnipeg Police Service received financial projections indicating it was highly unlikely they could complete the project for the $135-million budget approved by council the previous year.

Steering-committee documents obtained by the Free Press show officials were told in November 2010 the combined purchase and construction costs pertaining to the project had increased to $157 million.

In December 2010, AECOM, the original planning and design firm on the project, told the city's deputy chief administrative officer this new budget did not include furniture, equipment, utilities during construction, the cost of transferring staff into the new building and other expenses.

As a result, the total estimated project cost was raised to $180 million in January 2011, when project sponsors met in the chief administrative office boardroom at city hall.

The first public indication the project was over budget came in July 2011, when a report to city council revealed the combined project cost had risen to $194 million, a figure that also included financing charges.

During this eight-month span, city council tabled and approved a capital-budget forecast without amending the projected cost of the police headquarters project.

Council also promoted Phil Sheegl to the position of chief administrative officer from deputy CAO.

Also during this time, the city parted ways with AECOM on the police HQ project, selected Caspian Projects as a construction manager and hired Ossama AbouZeid as a project director.

City officials overseeing the project needed several months to ensure they had a proper cost estimate, Winnipeg chief financial officer Mike Ruta said Monday.

"Numbers were moving around pretty significantly in dealing with AECOM during that time period," Ruta said.

He said city officials were losing confidence.

"We were making sure the numbers from January to July, were numbers we could stand beside in submitting a further report to council."

The calculations included figuring out which aspects of the project could be changed, how much those changes would cost and obtaining a guaranteed maximum price for building the final design, said Ruta, adding such deliberations take a lot of time.

In July 2011, council gave Sheegl the authority to conclude negotiations for a guaranteed maximum price with Caspian, based on a design later revealed to be only 30 per cent complete.

The incomplete design was a factor in an additional $17 million in cost overruns that boosted the price tag to $210 million in 2013.

The bulk of the cost increases on the project -- $59 million -- was calculated in the months between the October 2010 civic election and the report to council in July 2011.

Winnipeg Mayor Sam Katz said Monday he was not aware officials learned the project was tens of millions over budget eight months before council was informed.

Katz said officials were trying to get a handle on those costs during that time frame, partly through the process of value engineering, or removing unnecessary expenditures.

He also said AECOM assured the city it could keep construction costs within budgeted amounts. "There are people here who believe AECOM sold them a bill of goods," Katz said.

AECOM, however, argued it made its commitment based on a 2009 project estimate prepared by another project consultant, Shindico Realty.

In a December 2010 letter to Sheegl, AECOM associate vice-president Myron Paryniuk said his firm was led to believe during discussions with the city that the construction component of the budget -- $104 million, initially -- did not cover utilities, security or any other soft costs.

"During project-verification steps of the last several months, we realized the city's intent to include all project costs within the $104 million," Paryniuk wrote.

The city has hired a firm to audit the project.

A final report is expected as soon as this summer.

bartley.kives@freepress.mb.ca

Republished from the Winnipeg Free Press print edition June 24, 2014 A3

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