Now that the Referendum is over, I’ve been asked how we keep the costs of The Crystal Pool Replacement Project under control.
Given that it’s the most expensive project Victoria has ever undertaken, and that 75% of construction projects across Canada go over budget,* we will need to control costs going forward.
The budget is $153.4 million to cover all of the pre-construction and soft costs, construction, and post-construction and commissioning costs.
Hopefully that’s all we spend.
If not, there are additional provisions for contingencies ($24 million) and escalation ($31.8 million) for a total of $55.8 million. Hopefully we won’t have to dip into those contingency or escalation pots. If we did, the total could be up to $209.2 million.**
So I asked staff what mechanisms we would be using to prevent or minimize dipping into those pots, noting that they had already taken steps:
“Just wondering if you can outline the mechanisms staff and contractors will be using to ensure that we are not dipping into the contingencies (the $55M in contingencies and escalation) built into the budget, or at least are going to minimize any dipping.
I know that we have stated that there was a lot of expertise and experience going into building the budget in the first place, so that is one mechanism that is preventive of dipping.
I would assume that we are not going to increase the scope of the project, and that staff would be receiving spending reports and approving spending continuously, and that council would be getting at least monthly reports. Are there any other mechanisms we will be using?”
As usual, the staff response was excellent, and very informative. So I’m sharing that here:
“Thank you for your question. I’m including the other Councillors in my response for awareness.
Our approach to managing contingencies includes a strategy with three main components.
Firstly, we will adhere to the City’s Capital Cost Estimate Policy and Project Management policies. These policies, based on industry best practices, require staff to comply with processes and management practices to monitor and manage project risks.
Secondly, the project will be delivered using the Construction Manager at Risk method. The Construction Manager serves as both general contractor during construction and advisor early in the design phase. This model supports identification and mitigation of risks early and supports value engineering to refine the design and reduce costs. This method was previously endorsed by Council.
Thirdly, our risk management strategy involves maintaining a detailed risk register and providing regular reporting to the steering committee. Through qualitative and quantitative assessments, we continuously identify and plan for potential risks, ensuring that contingency funds are allocated efficiently when needed. Our budget tracking system documents when and why contingencies are assigned, ensuring transparency and accountability. Additionally, scope and schedule management are areas that the project team remains focused on, recognising that effective decision-making and the efficient use of time is critical in minimizing financial risk and cost escalation.
For your awareness, we are following the same management approach used for the Firehall #1 replacement project. The project team, comprised of the project leads, design consultants, and subject matter experts, handles day-to-day management, planning, and risk management strategies. This team reports to the steering committee, comprised of the City Manager, Deputy City Managers, Director of Communications, myself, and additional members of the senior leadership team as needed. This project governance model ensures clarity in responsibilities, accountability and decision-making. The project team will continue to provide regular reports to Council.
Staff remain committed to proactive risk management and responsible use of contingency funds, while ensuring the project stays on track. For additional details, please refer to the financial summary (click here) presented to Council as part of the Feasibility Study staff report.”
That sounds pretty reassuring, and based on that, I committed that I will vote against any increases to the project budget.
* ReNew Canada, “Most construction projects over budget and late: survey” (Aug 20, 2021) https://www.renewcanada.net/5000088747-2/
** These numbers are for the North site location, which is what the public voted to support, and it’s what City Staff had recommended. The South site would cost an extra $6.7 million, for a total of $215.9 million. City of Victoria, “Appendix 2 – Financial Summary, Total Project Budget” https://pub-victoria.escribemeetings.com/filestream.ashx?DocumentId=97683