$5 million overspend to complete Wellington waterworks

By Sharon Harrison
While the difficulties and distress created by the Wellington waterworks project that shut down Main Street for about five months may now be a distant memory, the huge inconvenience of what many saw as a poorly managed project, won’t soon be forgotten.

What also won’t soon be forgotten is the $5 million overspend needed to complete the remaining work due to “unforeseen construction conditions” which now requires additional funding, as well as a reassignment of contractors, along with several more months to get everything finished.

This brings the total project spend for the Wellington waterworks project to $31.1 million.

Council got an update on the status at Tuesday evening’s council meeting about how the Wellington trunk main and sanitary pumping station project, which faced several serious challenges during the construction phase, is now going to cost the municipality considerably more than was initially budgeted.

It was a long discussion that ensued on the additional funds needed due to the numerous problems encountered during construction, where council members had a lot to say with staff fielding many questions and concerns about how the municipality finds itself in this situation.

Much was said and acknowledged about “lessons learned”, especially from David MacPherson, the County’s manager of engineering.

“We are definitely increasing the frequency and how many more bore holes we will do in the future, and there is lessons learned on the surface of the rock,” said MacPherson. “We do have different options we can look at now, and we can do ground-penetrating radar now to help get more information at the beginning.”

Council voted to accept the additional $5 million cost and to proceed as per staff’s recommendations on a way forward in order to get the project done, including refinancing. But as a few councillors pointed out, they really had little choice but to agree to it, otherwise the project will stall and ultimately cost more.

Staff did outline alternatives to the one being recommended, but several factors meant it would not be a sensible choice, plus cost implications would be significantly higher.

“We have to have that $5 million, that’s what we need,” said councillor Brad Nieman. “We can’t say no because if we say no, it don’t get completed.”

Councillor Roy Pennell asked what the original contingency fund was, to which MacPherson said it was about $1 million for each project (for a total of $2 million).

“We used all the contingency, which to me if it was planned right, is an over reach, plus we’re adding this, plus we’re adding… it just scares me to death how any project could be bungled up so bad,” expressed Pennell, “and I believe there should be a full investigation of.”

MacPherson said there are three primary factors that have contributed to the need for additional funding to complete these projects.

“During construction, both projects encountered several unforeseen and uncontrollable conditions that have resulted in significant cost increases and schedule impacts,“ he stated. “These challenges included the encounter of hardened rail steel components during trenchless boring operations beneath Lane Creek, as well as substantially higher groundwater infiltration rates than anticipated.”

He said the boring operation experienced significant schedule impacts, with production rates reduced to less than one metre per day during certain periods of construction, compared to the anticipated production rate of 15 to 20 metres per day.

The groundwater conditions encountered along the Millennium Trail and within the sanitary pumping station excavation required enhanced dewatering measures, additional permitting, revised construction sequencing and extended construction durations, he noted.

Referring to the damage done by the rock to the boring machine, Nieman expressed concern that it shouldn’t be the municipality’s problem if a contractor’s equipment is damaged during construction.

“If they are tunnelling under something and their machine is not doing it, why do we have to pay because that should be on them,” expressed Nieman. “They knew that it could be rock, which it was, and it could be the blue rock, it could be the hardest rock there is, so why are we being charged extra for that? It sounds like they are trying to blame the County because the rock has changed, and their machine wasn’t able to do it.”

MacPherson explained that the change in the rock was only part of the issues. “There was conditions with the hardened steel through boring operations that significantly impacted that, so both conditions together did worsen the delay.”

Councillor Corey Engelsdorfer asked if the County has any recourse to the consultants “that ultimately gave very poor advice.”

CAO Adam Goheen said that was a tough question to answer

‘It’s tough to be able to pinpoint a particular liability on a consultant, so I don’t think there’s much possibility of that occurring,” said Goheen.

Councillor Chris Braney called it a never-ending scenario.

“I feel that this trunk project has turned into a gong show,” declared Braney. “The overruns are one thing, but what people are concerned about is the errors and mistakes that have been made. Their fears are that their great grandchildren are going to be paying for the debt on this project.”

A $5 million overage to me is huge, he added.

“Why weren’t we were told when maybe it was half a million, why are we being told at $5 million. Could we not have known sooner about what’s being presented tonight, because I just can’t fathom it.“

Based on current capital financing projections, approximately $3,187,506 can be accommodated through lower-than anticipated borrowing requirements on the Picton Main Street (Phase 2) project.

MacPherson noted that the projects also form part of the Wellington area-specific development charges framework which identifies the water distribution, wastewater conveyance, and related trunk infrastructure required to support future development within the Wellington urban serviced area.

The County has also entered into development charge pre-payment agreements associated with development lands in Wellington, where he said the infrastructure included within this project forms part of the commitments supporting those agreements. The pre-payment collected through the agreements is intended to be used to service the long-term financing associated with the project.

Council also approved the transfer of the remaining watermain and sanitary sewer installation work from the Clearway Construction Inc. contract to the Strong Brothers General Contracting Ltd. contract.

“As a result of the delays caused by the significant groundwater conditions encountered during the construction of both the trunk main project and the sanitary pumping station, a construction conflict has arisen, as both contractors, Clearway Construction Inc. and Strong Brothers General Contracting Ltd., are now required to work within the same area to complete their respective scopes of work,” explained MacPherson.

He said this challenge is further compounded by restricted access along the Millennium Trail near West Street, where construction activities are constrained by an unlocatable fibre optic line and existing trailhead infrastructure located at the end of West Street.

“These site constraints have limited the ability to efficiently coordinate construction activities and have contributed to additional schedule impacts for both projects.”

The most practical and cost-effective approach is to remove the remaining watermain and sanitary sewer installation work along the Millennium Trail from the Clearway Construction Inc. contract and assign this scope to Strong Brothers General Contracting Ltd., stated MacPherson.

Implementation of this approach would require the removal of the remaining watermain and sanitary sewer installation work from the Clearway Construction Inc. contract, representing a value of approximately $1 million, and the transfer of this scope to the Strong Brothers contract at a value of approximately $1.8 million, resulting in an additional cost of approximately $769,000.

The report notes that based on current estimates, approximately $29 million of the new total project costs of $31.1 million, including the additional funding request, are considered development charge recoverable.

“As a result, a significant portion of the future debt payments are expected to be supported through development charges collected from development within the Wellington urban serviced area.”

Under a separate agenda item, council also discussed the long-term financing for the Wellington trunk infrastructure projects where they approved the long-term financing of up to $31.1 million for the project. Council also voted to change the 30-year amortization limit for the debt financing to a 40-year period.

“The projects have been financed through the County’s cash reserves during construction,” stated Arryn McNichol, director of finance and information technology. “Staff are now recommending that the County transition the projects to long-term financing through Infrastructure Ontario’s Housing-Enabling Water Infrastructure program.”

McNichol said, based on preliminary financing assumptions, the proposed financing structure will be for $31.1 million, amortized over 40 years with an initial fixed interest term of 20 years. Payments will be made semi-annually (estimated annual debt payments will be approximately $1.69 million), with a preliminary interest rate assumption of 4.5 percent.

As for timing, MacPherson said they are getting very near the completion with a few hundred metres of main trunk line to go.

“Our goal was originally to be done by the end of quarter two, that’s not going to happen. By end of quarter three (by end of September), this work will be completed.”

The staff reports, and related documentation on the financials, for the Wellington water main overspend discussed at the June 23 council meeting, can be found on the corresponding agenda items on the County’s website, along with the meeting recording.