Construction costs under review
The U of S has begun to carry out frequent, ongoing reviews of information from a number of sources about factors influencing the costs of capital construction projects planned for campus.
Richard Florizone, Vice-President of Finance & Resources, told the Board of Governors at its December meeting the move is necessary, in the face of rapidly escalating construction costs, if the University is to estimate its total capital project costs accurately.
Florizone said the “current uncertain and volatile construction market” includes inflationary factors like a recent 60-per-cent increase in construction activity in Western Canada, rebuilding efforts in the southern United States following hurricanes Katrina and Rita, and ongoing building material shortages.
“We’ve seen escalation of one per cent per month,” Florizone told On Campus News after the Board meeting. “Nobody has a crystal ball. One source says this will moderate in 12 to 24 months. The problem is unique to the construction industry and it is driven by both long- and short-term factors,” he says.
As part of the new cost-monitoring process, the University’s Facilities Management Division is in regular contact with contractors and consultants on tender closings in Western Canada, including Saskatchewan and Saskatoon. It is also gathering information from other universities, private consultants and will use that in its project planning. And it held a workshop in November with Saskatoon contractors and consultants to identify strategies for cost-efficiency in projects.
“To be prudent, we’ve looked at all sources of information,” Florizone said.
He said the inflationary cost factor the University will apply to projects will be individually determined for each project, using all relevant factors.
One example of rising construction costs is the expansion and renovation project at the Western College of Veterinary Medicine. The Board of Governors voted at its December meeting to revise the project’s capital budget to $57.1 million, up from the original $48 million. Thee are indications the provincial government may make a one-time grant to help pay for this increase.
Another example is the planned Academic Health Sciences Centre. Its forcasted costs have increased from $165 million to $251 million because of this escalation in construction costs.