The "guaranteed maximum price" for Winnipeg's over-budget new police headquarters was based on a design that was only one-third complete.
On Friday, city council will be told precisely how much more money it will cost to complete the conversion of the former Canada Post building on Graham Avenue into new headquarters for the Winnipeg Police Service. Some councillors were told last month to expect up to $17 million of additional costs.
The purchase of the building and the renovations originally were supposed to cost the city $130 million. The price tag rose to $168 million in 2010 before increasing again in 2011, when officials disclosed they failed to discover problems with the building's foundation and weather protection.
In an effort to prevent further cost overruns, the project was capped in 2011 at $194 million, based on a $137.1-million "guaranteed maximum price" for the core construction component of the work.
That price, however, was based on a design that was only 30 per cent complete, according to the fine print of a financial status report completed by the city in April.
The same report noted the design may not have met the needs of the Winnipeg Police Service.
"There is risk that the pricing of the (completed) design may differ from the price based on the 30 per cent design, which may not have been reflective of total police services capital needs," wrote Jason Ruby, the city's capital projects manager.
Changes to the design are not covered by the guaranteed price, heralded by Mayor Sam Katz as a legal agreement that would shield the city from future cost overruns. "This is definitely value for the dollar," Katz said at a press conference in 2011, when $28 million in cost overruns were explained.
In the wake of last week's scathing fire-paramedic station construction review, few on council are similarly enthusiastic about Winnipeg's management of major construction projects.
"This is a mess. It just keeps getting beyond belief," Charleswood-Tuxedo Coun. Paula Havixbeck on Wednesday.
The new police-headquarters project emerged from the ashes of a cancelled plan to replace the crumbling Tyndall-stone facade of the Public Safety Building, built in 1964. That project had an original budget of $19 million but was placed on hold in 2007 when officials concluded it would cost as much as three times more to replace the stone while police rented out offices elsewhere.
In 2008, police began kicking the tires at the Canada Post building, made up of a 10-storey office tower on Graham Avenue and a six-storey warehouse, both built in 1955. A plan was hatched to consolidate 14 police divisions within a single, 606,000-square-foot headquarters and build a shooting range on the roof.
The city used eight consultants over 18 months to ensure it made more financial sense to renovate the Canada Post building than to fix the Public Safety Building. In 2009, then-deputy CAO Phil Sheegl convinced Ottawa to sole-source the sale of the structure to the city for $31.5 million. Renovations were supposed to cost another $99 million.
In 2010, the total cost of the project was pegged at $168 million. This included $5.3 million of initial design work conducted by the consulting firm AECOM.
Problems with the building emerged by June 2011, when the city hired construction consultant Ossama AbouZeid, then the CEO of the Winnipeg Football Club, to manage the project. AbouZeid was selected because of his experience obtaining a guaranteed maximum price for Investors Group Field, Katz said at the time. AbouZeid's Dunmore Corporation was assigned an untendered, $263,000 contract.
One month after hiring AbouZeid, the city revealed the project was $28 million over-budget. Katz blamed the problem on inaccurate initial estimates but called the cost increase "extremely reasonable" because the detailed design of major construction projects can't be conducted at the start.
The city then proposed a new construction plan that involved scrapping the rooftop shooting range, building a new one in Charleswood and capping the core construction component of the police-headquarters project at the "guaranteed maximum price" of $137.1 million.
Council then approved this plan in a unanimous July 2011 vote that also granted Sheegl the power to award the final construction contract without council approval. In November 2011, Sheegl awarded the $137.1-million contract to Caspian Projects.
Because elected officials did not approve the contract, there's no information about any other bids for the work in any report to council. Information about other bidders also does not appear on the city's materials-management website.
City spokesman Steve West said there were four bidders for the police-headquarters contract, but could not disclose the names of the other bidders.
The original request for proposals to renovate the former Canada Post building was amended five times. The final change allowed Caspian to reduce the construction bond -- the amount of money it puts up to guarantee it will finish the work -- to $25 million from $68.5 million.
West said in a statement lowering the construction bond would provide the city with "a broader base of potential bidders and potentially provide savings on the project cost."