Runaway prices could mean rocky road for city street projects Officials fear $156M budget insufficient to cover increased construction costs of planned work this year By: Joyanne Pursaga Posted: 7:00 PM CDT Wednesday, May. 3, 2023

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This article was published 03/05/2023 (902 days ago), so information in it may no longer be current.

Soaring construction costs threaten to empty the city’s $156-million roads budget for 2023 before all of the scheduled projects are completed.

Officials are warning that construction companies have submitted higher-than-expected prices for recent contracts, sparking concerns the city could run out of money.

“If this trend of increased construction costs were to continue as additional tenders close, there is a risk that funds remaining in the 2023 program may not be sufficient to award all projects contemplated in the 2023 roads capital program,” writes Brad Neirinck, manager of engineering, in a report headed to council’s public works committee.

The city estimates average construction costs have jumped 25 to 30 per cent since last year. The sharp rise in prices is occurring across Canada and is being closely monitored, city spokesperson Ken Allen said in an emailed statement.

“The rise is attributable to a variety of factors, including costs related to fuel, materials, labour, (and) equipment, as well as contractor workload and associated work schedules,” Allen wrote.

In an interview, Neirinck said the local dollar value of that impact is still being assessed, with some city road projects yet to be awarded.

“We are analyzing that but it’s kind of a real-time analysis,” he said.

Janice Lukes, council’s public works chairwoman said she fears the escalating prices will limit the ability to improve roads this year and add to the city’s overall infrastructure deficit.

“We’re looking at risk mitigation,” Lukes said.

Public works committee members, city staff and the Manitoba Heavy Construction Association recently met to seek ways to help control the costs, she said.

“We looked at some of these cost increases, trying to understand which areas of risk can be reduced…” –Janice Lukes

“We looked at some of these cost increases, trying to understand which areas of risk can be reduced… (the inflation is) cause for concern because it just doesn’t give us as much bang for the buck,” she said, adding the committee plans to ask city staff to provide monthly updates on the estimated rate of inflation.

While companies must incorporate the increased costs of products and labour into construction bids, there are key changes the city could make to attract lower-priced bids, said MHCA president Chris Lorenc.

“There are certainly increases in the costs that have been submitted. Some of them are tied to supply but many of them are tied to the risks we have to accommodate,” he said.

For example, Lorenc said because some city projects have quick completion dates and contractors can be charged thousands of dollars in penalty fees for each day they exceed a deadline, companies may set their bids higher to compensate.

“(The city) can have tight timelines, which are unrealistic, which unnecessarily push costs up,” said Lorenc, who was a city councillor from 1983 to 1992.

“We’ve asked the city to be flexible with the target completion dates to enable the industry to schedule more cost effectively.”

Neirinck said the city is now altering some deadlines to reflect that feedback.

“In the newer contracts, we are looking at flexible deadlines and flexible starting times as well… (and) we’re allowing work to carry into the following year,” he said.

Prior to the current inflation woes, the city had started to tender some projects earlier in the year to provide construction companies more time to plan for the potential work, said Neirinck.

joyanne.pursaga@freepress.mb.ca

Twitter: @joyanne_pursaga