What Happened to My Budget? Staying on Track

1. What Happened to My Budget?Staying on Track Recreations Connections Manitoba 2011

2. What Happened to My Budget? • Politicians Always State Project was on Time & on Budget • Which One? • Introduction • 2. Project Initiation • 3.Design Phase Budget • 4. Pre-Tender Estimate • Construction Budget 1. Introduction

3. What Happened to My Budget? Exceeded Budget = Many Questions Was the original budget adequate? How was the budget established? What was it based on? When was it established. Were the consultants fees too high? Did they design something too expensive? Did they take too long? Was it tendered at the wrong time? Were there not enough bidders? 1. Introduction

4. What Happened to My Budget? Exceeded Budget = Many Questions Did the contractor ask for too many extras? Were there unforeseen site conditions? Labour disputes? Weather conditions? Not enough money for equipment? Furniture? Operating costs too high? Staffing cost too high?  Who’s responsible? How could it happen? 1. Introduction

5. Project Budget Components ? ± 20% ± 80% 1. Introduction

6. Budget Factors? COST QUALITY TIME 1. Introduction

7. Cost – Time – Quality Relationship $$$$ $$ COST QUALITY COST QUALITY TIME 1. Introduction

8. Ability to Influence Budget: Decision Making vs. Cost COST Unknown Undefined Known Defined DECISIONS DESIGN CONSTRUCTION TIME 1. Introduction

9. Cost – Quality – Time: Example Schedule Mar. 2005 – Vancouver City Council approved Apr. 2006 – Vancouver City Council selected Millennium Properties Ltd. developer 2007 – Construction began Oct. 2009 - Scheduled for completion Feb. 2010 – Vancouver Olympic Games Original Budget: $950,000,000 Final Cost: $1,080,000,000 Over Budget: $130,000,000 = 14% 2010 Vancouver Olympic Village 1. Introduction

10. Gaze upon the window of Yet to Be. How was the Budget Established? 2. Project Initiation Phase

11. How was the Budget Established? • Based on previous project? What does the cost include? • Was it comparable?: • Cost, Quality, Time • Year: 2006 • Cost: $25 Million • Seats: 4,300 • Year: 2001 • Cost: $26 Million • Seats: 7,000 Sovereign Centre, Reading Pennsylvania Sault Ste. Marie, ON Examples: • Year: 1998 • Cost: $16.5 Million • Seats: 4,500 • Year: 1995 • Cost: $18.5 Million • Seats: 5,300 Prince George Multiplex, BC Sarnia Sports & Entertainment Centre, ON 2. Project Initiation Phase

12. How was the Budget Established? Plan Perspective Project Schedule Cost Estimate •  In depth site analysis and concept design 2015 Canada Winter Games Prince George, BC 2. Project Initiation Phase

13. Request for Proposal Selecting Consultants • RFP’s = Quality of Information critical 2.0 BACKGROUND 2.1 HTC will be located on a TransLink-owned property in southeast Richmond, BC. The HTC facility will be a transit bus operating and maintenance facility for approximately 300 buses. 2.2 The HTC site is comprised of six principal lots, as well as a number of smaller lots, which have been consolidated into one, and appropriately re-zoned to I2, Light Industrial. The consolidated lands comprise approximately 7.5 hectares for development for the HTC facility. Access to the HTC site will be from Boundary Road by way of Westminster Highway. 2.3 Conditions of this re-zoning include a community amenity contribution by TransLink, the transfer of lands by TransLink to the City of Richmond for parkland and for road works, and the transfer of lands by the City of Richmond to TransLink for site development, and for on and off-site improvements on Boundary Road and Westminster Highway, as well as the construction of dike structures on TransLink property, and upon City of Richmond property. 2.4 The City of Richmond will provide a new sanitary sewer gravity main up to the HTC property, and a sanitary pump stationwhich will serve the HTC site and the surrounding area. • No budget given • No schedule given • No quality described • - How do consultants respond? - How are they selected? 2. Project Initiation Phase

14. Request for proposal examples: Budget + Schedule 10.0 PROJECT BUDGET 10.1 The City has established a project budget of $6,100,000 for this project. 10.2 The construction budget has been estimated at approximately $5,000,000.00. 10.3 The method of procurement for the project will be the CCDC 2 – 2008 Stipulated Price construction contract and the City of New Westminster Supplementary Conditions. 13.0 DELIVERABLES AND SCHEDULE 13.1 The City proposes the following schedule: Early October 2010 - retain services of the architect and the subs consultants October/November 2010 – Public Information Sessions Early December 2010 – functional and spatial program confirmed June 1, 2011 - Tender call July 1, 2011 - Construction start August 1, 2012 - Substantial Completion & Occupancy Official Opening – September 1, 2012 13.2 The City requires the project to be complete no later than December 31, 2013. 2. Project Initiation Phase

15. Scope of work: Consultants Design Development a) Develop the detailed design for the selected design concept; b) Coordinate the design of the sub consultants and specialty consultants; Working Drawings a) Develop drawings and specifications. The City will develop the Instructions to Bidders, Bid Form and Supplementary Conditions; b) Coordinate the design of the sub consultants and specialty consultants; c) Coordinate and liaise with the cost consultant in the preparation of a cost analysis at the end of the design development phase and at 75% working drawing stage; d) Provide and coordinate all Schedules, letters of assurance and application documentation for all sub consultants as required for the building permit application; 2. Project Initiation Phase

16. Story of Multi Purpose Centre • Budget • Schedule • Quality 2. Project Initiation Phase

17. RFP’S • What do they indicate about owner? • Quality: • Schedule: • Budget: Proposals • What do they indicate about proponent? • Quality: • Schedule: • Budget: 2. Project Initiation Phase

18. Soft Costs What Consultants do I need? • Consultants 8-12% • Building Related •  Architect •  Struct. Engineer •  Mech. Engineer •  Elec. Engineer •  Interior Designers • Specialists •  Food Services •  Acoustics & Noise • Artists •  Signage •  Code Consultants •  Accessibility •  Building Envelope •  Elevator •  Material Handling/ Equipment • Site Related •  Civil Engineer •  Landscape Architect •  Planners 3. Design Phase Budget

19. Soft Costs What Owner costs do I carry? • Other Soft Costs •  Insurance •  Legal Advice •  Financing Costs •  Permits •  Furniture & Equipment •  Taxes • Optional •  Project Managers (3-5%) •  Construction Manager (3-5%) •  Clerk of works • Owner Consultants •  Quantity Surveyor •  Geotechnical •  Surveyor •  Environmental •  Hazardous Material • Construction Related •  Independent Testing: concrete, steel, soil compaction, roofing, painting, etc. • Soft Costs 8-12% 3. Design Phase Budget

20. Controlling Consultants Fees •  Defined scope of work = fixed fee •  Owner defined •  Consultant defined •  Contracts •  Standard Contracts = Standard fee •  Modified Contracts = Higher risk (insurance, liability) • % Fees = fixed fee when Budget Fixed 3. Design Phase Budget

21. Controlling Consultants Fees • Requests for Extra fees •  Extended schedule (Design or Construction) •  Extra Expenses: Travel costs, reimbursable costs •  Change in scope of work (Design or Construction) •  Redesign •  Watch for change in personnel control user expectations •  Budget variance 3. Design Phase Budget

22. Types of Estimates • Which cost do you carry in budget? 3. Design Phase Budget

23. DesignControls – Reducing Costs •  Cost Cutting COST •  Reduce quality •  Reduce building area •  Reduce unnecessaries COST DECISIONS • Value Analysis •  Quality vs. long term maintenance costs •  Effect on operation costs •  Effect on functionality •  Durabability •  Life cycle costs •  Cradle to grave QUALITY DESIGN CONSTRUCTION TIME 3. Design Phase Budget

24. Tender Phase Controls – Effect on Cost •  Timing of Tender  Other major projects at same time = less bidders  Closing date conflicts •  Desirability •  Prestigious projects = more bidders = lower price •  Technically complex = less qualified bidders = higher price •  Messy renovations = more unknowns = higher price = phasing COST QUALITY •  Quality of tender documents •  Higher quality = less time for pricing = better price •  Less design time = lower quality documents 4. Pre-Tender Estimate

25. Construction / Hard Costs 5. Construction

26. Estimate Example 5. Construction

27. Estimate Exclusions • Exclusions • The estimate specifically exludes the following: •  Land costs •  Planning, administrative and financing costs •  Legal fees and expenses •  Temporary facilities •  Unforseen ground conditions & associated extras •  Environmental costs •  Off-site works •  Phasing of the works & accelerated schedule •  Decanting & moving •  Insurance & bonding for equipment installation contractor •  Erratic market conditions, such as lack of bidders, proprietary specifications •  Owners planning, management & overhead costs 5. Construction

28. Estimate Exclusions • Pricing • Stipulated lump sum form of tender in an open market, with a minimum of 5 bids, supported by the requisite number of sub-contractors. • It does not take into account extraordinary market conditions, where bidders may be few & may include in their tenders disproportionate contingencies & profit margins. 5. Construction

29. Escalation Escalation rate = 2% per month on $7.5 Million = $150 K per month divided by 200 per SF = 750 SF = 1 dressing room 5. Construction

30. Change Orders – 5% Normal Allowance (Is it in the Budget?) • Site Conditions • Unknown soils conditions. Rock, Unsuitable material, • Buried services not on as-built drawings • Environmental issues • ConsultantRequests • Coordination issues between disciplines • Complex building systems 5. Construction

31. Change Orders – 5% Normal Allowance (Is it in the Budget?) • Owner Requests • Changes to layouts • Changes to equipment / furnishings • Changes in personnel = change project requirements • Delays • Changes to schedule • Weather delays • Strikes, walkouts, lockouts • Damage / loss 16 Mile Sports Complex, Oakville, ON 5. Construction

32. Construction Risks: Example #1 • Hazardous material • $100k extra • 2 months extra time Study Plan Recreation Centre Renovations • 1.1 million budget • 1.2 million construction cost 5. Construction

33. Construction Risks: Example #2 Administration Building 5. Construction

34. Construction Risks: Example #3 • $100k budget • $220k tender price Steam & Sauna Room Renovations 5. Construction

35. Staying on Track How do I stay on track? •  Establish regular & rigorous budget monitoring & controls  Project initiation through to post construction •  Regular budget updates •  Manage expectations •  Budget changes over time Conclusion

36. Staying on Track How do I stay on track? •  Detailed budget analysis early •  Define what is included / excluded •  Define quality •  Allow for unknowns & risks  Contingency, contingency, contingency Conclusion

37. What Happened to My Budget? Ian McKay, MAIBC, MRAIC, LEED AP PBK Architects Inc. Email: ian.mckay@genivar.com www.pbkarchitectsinc.com