City hall is shelving its proposed South Hill reservoir pump station upgrade project for at least five years because construction costs have doubled, contractors are busy and equipment is difficult to obtain.
During budget discussions last December, city council approved the engineering department’s project to upgrade the reservoir — at 12th Avenue Southwest and Coteau Street West — for $3,944,000. Some planned enhancements included:
- Replacing pumps, valves, instrumentation, piping, electrical service equipment, variable flow drive starters, and natural gas engine pumps with standby power generators
- Re-programming the control system so the pump station operated independently from the high-service reservoir
- Improving ventilation
- Rehabilitating the reservoir, pipe penetration and inner distribution piping
- Decommissioning and demolishing the building
However, between Jan. 25 and March 23, project manager AECOM became concerned about “challenging and unstable market conditions” after speaking with contractors and equipment suppliers, an April 24 city council report said. So, it informed city hall that there was a high likelihood of receiving inflated bid prices by the March deadline.
The two factors contributing to the market instability were:
- Significant overloading of provincial construction contractors caused by major project backlogs this year, leading to significant labour shortages across all trades and major increases in labour costs
- Important equipment items all face unprecedented acquisition lead times due to massive demand throughout North America and continued supply chain issues
AECOM’s fears proved true because the tender bids it received were $7,688,000 and $7,733,383. After including contingency fees and taxes, the total of the first bid — the lowest submission and technically the winner — jumped to $8,916,880, the council report said.
The project manager noted that reservoir rehabilitation costs jumped about 500 per cent of pre-tender estimates while mechanical and electrical costs rose roughly 200 per cent of pre-tender estimates.
AECOM, engineering services and public works discussed possible alternatives and determined the project should be shelved and the work completed within five years, the report continued. Further talks will occur this year about when to schedule future work.
Since replacing the Crescent View Lift Station is more important to ensure water and wastewater services, the money dedicated to the pump station will be directed to Crescent View, the report added.
Council should consider revisiting the project after city hall has completed the Crescent View initiative, engineering director Bevan Harlton said during the April 24 meeting. Also, he didn’t think the project would return to its original cost of around $4 million but would likely remain around $8 million.
Meanwhile, city hall has planned to conduct a full road rehabilitation from 12th Avenue Southwest to Eight Avenue Southwest along Coteau Street West, but it needs to install the feeder main along Coteau first, he added. None of that road work will be affected by the shelving of this project.
AECOM made five suggestions to move the project forward, including awarding only the reservoir work for $1.3 million, said Coun. Crystal Froese. She wondered why the engineering department didn’t pursue that route instead of completely pausing the project.
“We’re in the same situation as a lot of cities right now struggling to get things done and facing labour shortages and supply demands and increases in pricing,” she added. “It will be an interesting five years for sure.”
This decision was made based on discussions with other parties, the fact rehabilitation work is 500 per cent beyond pre-tender estimates, and suppliers cannot find labour, said Harlton. Furthermore, he thought the reservoir-only work was more expensive than it should be and that $1.3 million was a poor value.
When asked what happens if the South Hill pump station fails, Harlton replied that it has two separate pumps, which should provide enough backup.
The next regular council meeting is Monday, May 8.
