‘Spend at the beginning, save at the end’
Ian Elliot
Local News - Saturday, February 17, 2007 Updated @ 11:13:56 PM
By Ian Elliot
Whig-Standard Staff Writer
Cost overruns at the city’s new downtown arena are the result of poor planning
and communication, say municipal and construction experts.
But they go on to say there should no such thing as an unforeseen expense in
such a project.
Council was told this week that the budget for the new arena has to increase by
$4.3 million, raising the cost of the new facility to about $46.1 million. A
motion on Tuesday’s agenda suggests cancelling the project, though work has been
underway since the fall.
Politicians were told last week that the cost of outfitting the concession and
sports cafe and buying furniture will cost more than $2.5 million and that a
further $800,000 will have to be spent on the construction of the building,
including upgrading the refrigeration system and installing cabling.
The cleanup of the site was also over budget and that, plus adding additional
handicapped parking, will run $1.3 million more than budgeted.
Experts in the field who were interviewed by the Whig – and who had no direct
ties to or interests in the project – say the costs may have been unanticipated,
but ought to have been.
“Before you do anything, you have to ensure that everything is covered,” said
engineer Jonathan Huggett, who has been a consultant on dozens of municipal
arena projects, including those in Victoria, B.C. and Oshawa.
“Arenas are not difficult to build, and what we call F, F and E – which is fit,
finish and equipment and includes things like appliances for the kitchen and
furniture – is not difficult to estimate,” Huggett said.
George Cuff, a municipal governance expert who now works as a consultant for
municipalities, said planning prevents surprises.
“There’s no fallback for administration to say we didn’t know, or we couldn’t
have anticipated this, not with the amount of information that’s out there and
the experience that other municipalities have had with these projects,” he said.
“Anytime these issues have come up for me, the question is, what did we do at
the start that led to them? What caused this to go off the rails that we could
have foreseen?”
Nick Smither, the president of
Municipal World, the trade magazine for Ontario’s municipalities, said cities
need to have someone accountable for the project – for good and bad.
And because the average city manager isn’t an expert in outfitting a commercial
kitchen, for example, they need to work with their own experts to make sure the
details are right when companies bid on the work.
“If you spend the money at the beginning, you’ll save money at the end,” he
said.
And Bob Hunter, the executive vice-president of Maple Leafs Sport and
Entertainment, which has built arenas and other facilities across the country,
speculated there might have been an assumption in an early draft that a
private-sector operator would pay to equip the kitchen of a restaurant in
exchange for a lower rent, and it was never corrected as the plan evolved.
“It would be difficult to attract a company to do that in a market such as
Kingston because you just don’t have the volume of food there,” he said.
But he also said planning and reliance on the experience of those in the field
at the start of a project was one of the most crucial elements and the key to
realistic budgeting.
“When you’re building a budget, the one thing I would recommend is that you
build yourself in lots and lots of contingency,” he said.
One of the most significant new reports to surface this week was a report by
KPMG on the city’s process.
It highlighted a number of points of concern, and although it was given to the
city nearly five months ago, had never been shared with either the public or
council.
It found communication was poor and top city managers responsible for the
project missed key meetings. It also suggested input from Arcturus, the company
that will operate the facility and whose expertise, experts say, should have
guided the city, wasn’t being acted upon rapidly.
The report, which has been in city hands since Sept. 22, 2006, predicted the
costs of the project would rise based on the shortcomings.
“[The] current budget is incomplete – for example, environmental remediation,”
it stated. “Without sufficient analysis, the opening budget and possible
deviations may not be known early enough to mitigate any negative impacts on the
overall cost.”
In December, the city discovered more water than it expected on the site and
clearing it away cost $500,000 more than expected.
KPMG noted that the risk management plan was incomplete and that “major risks
may be unknown and may not be implemented as a result of a lack of process to
communicate and monitor risk and related actions.”
The consultants also observed there has not been one person accountable for the
project from the start.
They note Don Gedge was original project manager but left the project following
what the city describes as health problems. The new project manager, Lanie
Hurdle, is new to the city and at the time the report was written was not
assigned solely to the project (she has since been.)
City staff insist they have made major changes to how the project is run since
receiving the report. They did a review of the budget with the companies
involved in December and January, and hired a company to act as an owner’s
representative in October.
But, Huggett said, faced with evidence that there were flaws in the starting
process that will only magnify with time, the city needs to do an emergency
audit .
“What you have got to do now is call a fast audit,” he said. “You need to get
everyone in a room over a couple of days and get a checklist and go over every
single item that is required to ensure it’s there and that it’s costed.”
KPMG also recommended a third-party assessment of the project design and budget.
The report also found that there was “very little public communication” about
the progress of the project.
Alex Zetlin is a public relations and crisis management expert in New York City,
whose Zetlin Strategic Communications firm works with governments on such huge
and often controversial projects such as the rehabilitation of the Williamsburg
and Manhattan bridges.
She said that aside from overseeing the engineering and construction work,
cities have to keep citizens informed on a project’s progress – particularly
when it involves large outlays of public money.
She also advised that if problems develop, the city needs to make them public
and say what’s being done about them.
“If you have a problem, people are going to find out about it,” said Zetlin,
whose firm advises governments to anticipate problems and get their information
out first.
“And what we find is that if you’ve been communicating from the beginning, the
backlash is less [when something goes wrong.]”
There are already mutterings in the city that the project cost was lowballed in
the beginning and the overruns are actually costs that should have been
included.
“I know that’s a pretty common citizen’s complaint, but I’ve seldom found that
to be true,” he said. “I have some degree of sympathy for city staff in a
situation like this, but we do expect first-rate advice from them.”
The consultants also noted there was a large degree of employee burnout among
staff and “signs of excessive stress” among those they interviewed.
That came as no surprise to Smither, who noted staff had a city to run and
putting a huge project on top of that – and in Kingston’s case, a number of them
– could be too much.
“This type of thing is a fairly common problem because municipalities are
overworked,” he said. “That’s largely the result of downloading – staff are
responsible for a whole lot of things they weren’t doing before.”
But Huggett said no one has stopped an arena project that was underway,
particularly in view of the tens of millions of dollars in penalties and other
costs a municipality would incur.
“When you’re building an arena, once you’re in, you’re in.”
ielliot@thewhig.com