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Higher HQ price tag kept quiet

Councillors OK'd project based on lower cost estimate

Hey there, time traveller!
This article was published 11/3/2015 (1589 days ago), so information in it may no longer be current.

City council's decision to approve Winnipeg's police headquarters was based on a price tag that was $45 million lower than an estimate provided to city officials by the consultant hired to compute the cost.

The Free Press has learned the cost of buying and renovating the former Canada Post building on Graham Avenue was pegged at $179.5 million nine months before council voted unanimously to approve the project at $135 million.

The HQ purchase and renovation, which wound up costing $210 million, has already been the subject of two scathing external audits as well as an ongoing RCMP investigation.

Documents obtained through a freedom-of-information request -- and a subsequent complaint to the Manitoba ombudsman -- show city officials did not share an estimate prepared by the consulting firm Hanscomb before council approved the project in November 2009.

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Hey there, time traveller!
This article was published 11/3/2015 (1589 days ago), so information in it may no longer be current.

City council's decision to approve Winnipeg's police headquarters was based on a price tag that was $45 million lower than an estimate provided to city officials by the consultant hired to compute the cost.

The Free Press has learned the cost of buying and renovating the former Canada Post building on Graham Avenue was pegged at $179.5 million nine months before council voted unanimously to approve the project at $135 million.

The new police station on Graham Avenue was approved by councillors who believed the cost would be $135 million -- $45 million lower than another estimate they never saw.

WAYNE GLOWACKI / WINNIPEG FREE PRESS FILES

The new police station on Graham Avenue was approved by councillors who believed the cost would be $135 million -- $45 million lower than another estimate they never saw.

The HQ purchase and renovation, which wound up costing $210 million, has already been the subject of two scathing external audits as well as an ongoing RCMP investigation.

Documents obtained through a freedom-of-information request — and a subsequent complaint to the Manitoba ombudsman — show city officials did not share an estimate prepared by the consulting firm Hanscomb before council approved the project in November 2009.

In a February 2009 report commissioned by the city, Hanscomb pegged the purchase of Canada Post's complex at $30 million and estimated the renovation at $149.5 million. The following month, the city announced it had convinced the Crown corporation to sole-source the sale of its 10-storey office tower and six-storey warehouse, pending a due-diligence period to ensure the 56-year-old structure could meet the Winnipeg Police Service's needs.

'What surprises me is I do recall the WPS and the original engineering firm we hired, telling all members of council it could be done at this price'— Former mayor Sam Katz

In November 2009, an internal city financial analysis of the project pegged the project cost at $135 million — $30 million for the purchase and $105 million for the renovation.

Those figures appeared in the report to council, but were later found not to include any of the soft costs tallied up by Hanscomb. Not included in the figure presented to council were costs such as engineering and architectural fees, furniture and equipment purchases, financing charges and the cost of moving the police from the Public Safety Building.

Former mayor Sam Katz

Former mayor Sam Katz

"When you're told a project cost, you assume it includes everything," said North Kildonan Coun. Jeff Browaty, one of four current members of council who voted to approve the Canada Post building purchase in November 2009. Couns. Jenny Gerbasi (Fort Rouge), John Orlikow (River Heights-Fort Garry) and Mike Pagtakhan (Point Douglas) also voted for the HQ project.

Transcona Coun. Russ Wyatt, the only other remaining council member from November 2009, did not take part in the HQ vote, but said his colleagues "made the best decision they could" with the information they were provided.

"Now you're saying information was withheld and that's not any different than what we've heard in the past," said Wyatt, referring to revelations contained in audits of the police HQ, major city real estate transactions and the fire-paramedic station replacement program.

Current city officials, speaking on condition of anonymity, could not say why it appeared soft costs were eliminated from the November 2009 report to council. Late Tuesday, one official said a 2011 update of the Hanscomb report appeared to support the lower estimate provided to council.

Former mayor Sam Katz placed the blame for the $135-million project cost at the feet of the police service as well as consulting firm AECOM, which prepared the initial designs for the HQ project.

Katz said AECOM promised the core construction work could be done for $105 million.

"What surprises me is I do recall the WPS and the original engineering firm we hired telling all members of council it could be done at this price," Katz said Monday in an interview.

Last year, while he was still mayor, Katz said: "There are people here who believe AECOM sold them a bill of goods."

Micheal Fountain, AECOM's Toronto-based communications manager, declined to comment. In a letter obtained by the Free Press, a senior AECOM official in Manitoba told the city his firm had operated under the assumption a $104-million project budget did not include any soft costs.

"We understood the referenced $104-million project costs to be capital costs only," former AECOM associate vice-president Myron Paryniuk wrote in a December 2010 letter to Phil Sheegl, the city's deputy chief administrative officer at the time. "During project-verification steps of the last several months, we realized the city's intent to include all project costs within the $104 million."

Manitoba court records show the city has not pursued any legal action against AECOM related to the HQ project. AECOM was replaced on the project by Adjeleian Allen Rubelli, which completed the project designs.

The decision to pursue a new headquarters for the police service was sparked by rising cost estimates to replace the crumbling Tyndall-stone exterior on the 48-year-old Public Safety Building on Princess Street and housing police in temporary offices while the exterior repairs were underway, a process known as decanting.

Council's approval of the new headquarters eliminated the need for at least $22 million worth of recladding and decanting costs and also provided the police with enough extra office space to avoid making $49 million worth of improvements to other police buildings.

Design problems, change orders and other problems, however, led the combined cost of the police HQ purchase and renovation to rise to $210 million in 2013.

The project was the subject of a 2014 external audit by consulting firm KPMG, which criticized the way the primary contract was awarded to Caspian Construction, among other issues. The police HQ also figured prominently in a separate 2014 real estate audit by consulting firm EY, which noted the city purchased the Canada Post building without appraising its value.

The construction is also under investigation by the RCMP, which raided Caspian's office in December.

 

bartley.kives@freepress.mb.ca

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History

Updated on Wednesday, March 11, 2015 at 6:43 AM CDT: Replaces photo, adds cutline

1:03 PM: Factbox updated.

1:15 PM: Adds Ombudsman report.

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