August 27, 2004

Cost of building materials, like steel and concrete, has risen dramatically

B.C. planning $8B in capital projects before Olympic year

BY CHERYL MAH

DCN CORRESPONDENT

The 2010 Winter Olympic Games will be the focus of a number of high profile public projects in the coming years.

As one of the biggest public-private partnerships in the history of B.C., the Games will require various levels of government and the construction industry to work together to ensure that projects are delivered on time and on budget.

Venue development will be more complex than conventional public projects given the large number of stakeholders and intense international scrutiny.

Construction is set to start next year on the first three venues.

“The first venues in 2005 will be the sliding centre, Nordic centre and speedskating oval. Right now the focus is on the two large outdoor venues and the large indoor venue. These are also the three most expensive venues,” says Vancouver Olympic Organizing Committee (VANOC) spokesperson Sam Corea.

The Nordic centre is currently at the RFP design stage with shortlisted companies. The sliding centre is close to a short list for the RFP design stage.

More than 10 venues will either be newly built or upgraded for the Olympics. VANOC will be responsible for the majority of those venues, including the Whistler Nordic facility, sliding centre, UBC hockey arena, the speed skating oval and the Hillcrest curling arena.

Existing facilities such as GM Place, BC Place and Hastings Park will undergo renovations along with the ski hills.”

All of those, whether it’s upgrading existing venues or construction of new venues, fall under the $620 million of funding,” says Corea, “of which $110 million is an endowment fund to help operate the venues that are new beyond the Games of 2010. So the actual construction and development costs are $510 million.”

Include the investments to be made by other public stakeholders and more than $700 million will be spent for sports venues, villages and other related Olympic facilities.

Adding Vancouver 2010’s operating budget of $1.35 billion, the total cost for hosting the Games will be more than $2 billion.

The committee will be relying on various public partners to deliver the other necessary venues for the Games, such as the two Olympic villages.

The bid book budgets the Vancouver village at $167 million and the Whistler village at $98 million.

Given the huge investment of public funds and huge expectations attached to the Games, delivering a successful Olympics is paramount.

“We will be judged on how we deliver on all the venues and how we deliver on the activities themselves but we’ll also be judged in Canada on how our athletes do,” says Corea.

“This is Canada’s chance to show the world how we produce in terms of this type of large scale event.”

The Olympic Games has also acted as a catalyst for major capital projects around the Lower Mainland, including the Sea to Sky Highway and Vancouver Convention Centre expansion.

While VANOC is not responsible for delivering these related projects, the committee has had input into them, says Corea, because they will enhance the Games’ experience.

Meeting international competition standards, deadlines and budgets and ensuring a legacy proposition for new venues all under a world spotlight are just some of the pressures the committee faces.

“It’s a high-profile project,” says Corea. “(We’re) going to be under the microscope so that’s why we have to work extra hard to make sure things are rolling along at a healthy pace but also take the time to ensure we’re doing things correctly at every step of the way.”

Part of the planning process this year includes looking at the Olympic overlay (the temporary structures), he adds, and “making sure that we don’t build what’s not necessary for 2010.”

Capital works committees and project teams will be formed for each venue.

The project teams will have a variety of responsibilities, including pre-qualifying contractors and the tendering and award of contracts.

Although detailed procurement procedures and policies are still under development, Corea notes the bid book outlines a construction and tendering process where work will go to open public tender for pre-qualified contractors with suitable experience.

“Obviously, the contractor and suppliers that are familiar with local regulations and local conditions will have an advantage,” he says.

Another key element in the Games’ preparation is the commitment to principles of environmental sustainability.

“The standards have been set. Lillehammer did a great job. Sydney did a great job. Every year, the next Olympic city needs to move that forward,” says Corea, noting the three pillars of the Olympic movement are sport, culture and the environment.

For example, the use of existing venues will be maximized and new venues will be built only where required. Accessibility will be a priority, such as ensuring washroom facilities are wheelchair accessible.

“And when we do build a new venue, we have a plan for what it looks like in 2011-plus in terms of using the latest technologies of sustainability, using local products as much as we can,” says Corea.

All venues and facilities will be designed to meet LEED requirements. Companies that already have proven track records in green design and construction principles may benefit.

“If one company has strategies that fall into the values of the Games organizing committee, that company may have an advantage over another company,” says Corea.

Although Corea did not acknowledge having any concerns about rising construction costs, Olympic projects will not be immune to market conditions.

When pressed about the impact of rising construction costs, Corea refused to speculate about the possibility of cost overruns on Olympic venues.

“The budget is what we have. That’s all we have to work with. We have to make it fit,” he said.

“Until we actually build next year, we don’t know what it’s going to be like.”

Since Vancouver won the bid, the cost of building materials (steel and concrete in particular) has risen dramatically.

And while the construction industry is currently coping with the shortage of skilled tradespeople, that shortage is expected to get worse as more scheduled projects come online.

The province is set to undertake more than $8 billion worth of major capital projects between now and the Olympics.

In addition, development cost levies in Vancouver increased significantly in July (from $4 to $6 per square foot for most land uses), which will add thousands of dollars to a typical major project.

Already, several public projects have been reported over budget and conditions are unlikely to change by next year when the first Olympic venues are to start construction.

How VANOC intends to keep costs down and stay within budget remains unclear.

According to Corea, risk management strategies have not been identified and are part of this year’s ongoing planning process.

He expects procurement details and all other relevant policies regarding the delivery of venue development to be finalized this fall.

A $200-million contingency fund is available with the B.C. government having agreed to pay any cost overruns.

Another issue the committee will have to decide on is whether or not to enter into a labour agreement with the building and construction trades.

“Right now we haven’t determined in what way we’re going to be putting together these Games but our goal is to have an inclusive Games where everyone can participate,” comments Corea.

“Every view is taken into account in a project of this magnitude.”

Victoria is reportedly against such an agreement, with minister John Les ruling out such negotiations earlier this year.

“We have to build the venues as we see fit to make sure they fit in with the money available and the scope of the venues available,” says Corea.

“But funders of the actual venue construction are Ottawa and Victoria so they will have a say in how things run.”

The committee will have to finalize many important decisions this year against a backdrop of escalating costs, tight budgets and fixed deadlines.

Is VANOC optimistic about being on schedule for getting projects off the ground?

“We are ahead of a learning curve at this point,” replies Corea.

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