High-cost tenders prompted switch to fixed bid

University can’t reveal cost of contract signed with PCL Construction due to privacy concerns, Ann Browne says

The University signed a fixed-bid contract for Phase One of the Queen’s Centre project just before Christmas, but won’t reveal the amount it’s paying.
The University signed a fixed-bid contract for Phase One of the Queen’s Centre project just before Christmas, but won’t reveal the amount it’s paying.
Associate Vice-Principal (Facilities) Ann Browne says the University negotiated 80 per cent of the tenders for Phase One by the time it changed the contract.
Associate Vice-Principal (Facilities) Ann Browne says the University negotiated 80 per cent of the tenders for Phase One by the time it changed the contract.
Journal File Photo

When Associate Vice-Principal (Facilities) Ann Browne opened a tender for masonry work on the Queen’s Centre in December and saw a number $1.5 million over the proposed tender, she knew it was time to make some changes.

Browne said PCL Construction, the general contractor working on the project, thought the masonry tender would be $1 million overbid.

“It came in at a million and a half and I said, ‘Enough. Now we have to really look at it.’”

She said she couldn’t reveal the bid’s total cost because contract information is private.

Browne, who said she has been working 18-hour days to keep the construction project on track, said the University decided to switch the Queen’s Centre contract to a fixed-bid agreement just before Christmas. The Board of Trustees approved the decision on Dec. 18 and the University signed the contract the following day.

Browne said she can’t disclose the price because PCL’s still working with contractors on pricing and discussing numbers publicly could lessen the company’s negotiating strength.

“If I was to start talking about numbers, that would inhibit our pricing, and I don’t want to do that,” she said.

At the initial planning stage, the construction was going to be done under a fixed-bid contract. Browne said because of the inflation level in the construction industry in the fall of 2006 when contracts were being negotiated, the University decided to use a construction management program instead.

Cost consultants advised the University that they could expect to receive contract bids well in excess of the budget if they used a fixed-price contract. Browne and her team have since been reviewing components of the project to identify savings through “value engineering.”

With the state of the construction industry in recent months, however, the University began to consider switching to a fixed-price contract. Browne said all of the tender proposals were coming in at higher costs than expected and PCL advised her that the market is volatile.

“The original contract that we had for construction management had an option in there to become fixed bid if we chose to do so,” Browne said.

“It’s like any contract—you always put in clauses to help yourself if you can.”

Queen’s wasn’t obligated to switch to a fixed-price contract, but Browne said once they had finished negotiating about 80 per cent of the tenders for Phase One, all of them were coming in overbid.

“We took all of the good parts of construction management and exhausted them and then we went and locked ourselves into a stipulated bid which again protected us.”

The tenders for large parts of a construction project—such as the foundation—come first, Browne said. When decisions had to be made on smaller components, the University realized it had done all of the value engineering it could.

“When you do construction management … you’re at the table for everything. We had thoroughly exhausted the good that we could get,” Browne said, adding that no decisions have been made about the type of contract the University will sign for Phases Two and Three. She said rather than blueprints, the University only has artistic renderings of the next two phases.

“It’s all schematics; there’s no actual drawings,” she said.

It would be counterproductive to do drawings for a project that’s three years down the road, she said. In addition, working drawings take a long time to complete.

“If this had been done as one phase, you would have had to have had all your drawings done,” Browne said, adding that working drawings are required to move on to the tender stage.

“It’s already decided what’s going in [Phases Two and Three], but you don’t work every single room out yet because we’re building [Phase One].”

The original Queen’s Centre budget projected Phase Two to cost $83 million. Phase Three was originally budgeted to cost $23 million.

Browne said her team used high-level estimates based on unit pricing, called “Class D estimates,” to come up with a budget for each Queen’s Centre phase.

“We know basically what it’s going to have inside, but we haven’t gone to what you call ‘working drawings’ yet,” Browne said.

Phase Two’s working drawings will begin once Browne and her team have finished their review of the project’s next two phases. The review committee’s made up of members of the Queen’s Centre Management and Executive Committees, the Campus Planning and Development Committee and the Finance Committee, as well as the AMS, the SGPS, Athletics and Recreation, the International Centre, Student Affairs, the JDUC, faculty, staff and students.

Browne said the review will include a public consultation process. She said they’re in the preliminary stages of the review, which will take all summer and will hopefully be complete for the September Board of Trustees meeting.

“I would like to be in a position … that we can sit down with the Board and say, ‘These are the things we’ve come up with, these are the options we’ve got—what should we do?’ That’s my goal right now, it really is.”

How does construction management work?

• Major contracts (those that are costly and time-sensitive) are tendered first. Queen’s used construction management to tender contracts for excavation, form work, steel reinforcement, mechanical, electrical, demolition and masonry, among others.

• Architects write specifications describing the scope of the work and methods that must be adhered to in order to do the project.

• The construction manager takes the drawings and written specifications and invites three to five subcontracting companies to bid on that portion of the work.

• Subcontractors are given three to four weeks to create proposals, depending on the size of the project.

• The University and the construction manager evaluate the lowest bid to ensure that there are no hidden fees.

• The lowest bidder gets the job.

Source: Queen’s Centre Project Manager Bob Polegato

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