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Open-ended budget introduced in updated design-build RFP for the KED arena

A $92-million cost limit has been removed from the design-build request for proposals for the Kingsway Entertainment District’s municipal arena, which calls to question what the final price tag to local taxpayers will finally be
KED sign
(Supplied)

With a $92-million cost limit for the Kingsway Entertainment District arena’s design-build request for proposals removed, it’s anyone’s guess what the final cost will be.

It’s not exactly a blank cheque, however, and city council is still mandated with approving any expenditures that exceed the $100-million all-inclusive budget they’ve set aside for the KED.

The cost limit’s removal acknowledges “current market risks, particularly with respect to inflation effects, supply chain reliability and labour availability,” according to a media release issued by the city.

“The legal and industry advisors confirmed that the construction industry is currently resisting fixed-price contracts, such as Design-Build processes, as a result of current market risk levels,” according to the release. 

“Proponents have been unwilling to assume the risks associated with a fixed-price contract early in the design process and, in some cases, have been declining to participate in the RFP altogether.”

The project’s three shortlisted bidders expressed a list of concerns earlier in the process, including alleged conflicts of interests and escalating costs.

These three shortlisted parties include:

  • Ball/TESC Construction Inc. (Joint Venture)/Architecture 49 Inc.
  • EllisDon Corporation/BBB Architects Toronto Inc., in conjunction with J. L. Richards and Associates Ltd.
  • PCL Constructors Canada Inc./Parkin Architects Ltd.

“In this market and considering the impacts that COVID has had on labour, materials and equipment, a proponent has no idea if this project can meet this affordability criteria,” an unnamed bidder asked in a question-and-answer the city released on the tenders page of their website.

At the time, the city indicated that “any financial proposal that exceeds the project budget will be disqualified. It is the proponents’ responsibility to prepare a design and cost proposal within the city’s budget.” 

The $92-million cap was in place to shelter the city from exceeding their all-inclusive $100-million municipal budget for the KED, which includes $90 million in debt and $10 million in fundraising. 

In emailed correspondence with Sudbury.com, the city clarified that the change in the RFP process toward a so-called “progressive design-build” process that lacks a cost limit will not affect the current timeline to have shovels in the ground later this year.

This timeline is still expected to have enough approvals in place to remove the KED as an election issue in time for the Oct. 24 municipal election. A grand opening is still planned for 2025.

“The first phase of the (progressive design-build) procurement process is expected to be complete early in the third quarter of 2022,” according to the city. “Staff will then provide information to Council on the selection of the Preferred Proponent, and seek Council approval on the final budget to complete the project. The final figures will be in that report to Council.”

The decision to go with a limitless progressive design-build approach was done in consultation with legal and industry advisors, according to the city, including the project’s fairness monitor. A compliance team consisting of city staff, specialist consultants and the fairness monitor will all remain in place to oversee the RFP process.

“The legal and industry advisors confirmed that the construction industry is currently resisting fixed-price contracts, such as Design-Build processes, as a result of current market risk levels,” according to the city. 

The progressive design-build approach includes a “multi-step collaborative process” to determine a final approved design and associated costs which will provide city council with “additional checkpoints” to evaluate their approaches and make adjustments as necessary “that maintain an appropriate balance between the building’s features and the project’s anticipated construction costs.”

Opponents of the KED have long-cited their concerns that project costs would escalate, and have already taken to social media and correspondence with Sudbury.com to highlight their now-amplified criticism. 

“There does come a point where determining factors emerge that can constitute a deal breaker situation,” according to an email representing local advocacy group Friendly to Seniors - Sudbury. “What these factors might be are as yet unknown. There might be one or several – perhaps cost or environmental, or both, or others?”

The city’s full collection of RFP documents can be found by clicking here. Sudbury.com used these documents and additional interviews with city engineering services director David Shelsted and Mayor Brian Bigger to offer readers a written walkthrough of the proposed site.

The updated RFP process and a need for additional council approvals adds to a series of hiccups related to the project in recent months. Other recent problems include an ongoing OPP investigation into a claim by Ward 3 Coun. Gerry Montpellier that he was offered a bribe to select a location on The Kingsway for the project, an ongoing legal challenge by the Minnow Lake Restoration Group and Gateway Casinos putting their investment in the project on pause until the other two challenges are overcome.

Tyler Clarke covers city hall and political affairs for Sudbury.com.