$89M for Halifax Water's new Burnside building is 'excessive,' says provincial regulator

The proposed $89-million price tag for a new Halifax Water operations centre in Burnside is not justified, according to an evaluation carried out for the Nova Scotia Utility and Review Board.

The regulator sought a second opinion after the project's budget jumped from $52 million in April 2023 to $89 million by November 2023 — a $37 million or 71 per cent increase.

The estimate has since been pared back slightly to $87 million. The building size was enlarged by 14 per cent from the original approval. 

"It is our recommendation that the current funding request does not get approved until further design, scope, and budget validation are completed," said real estate services firm CBRE, which conducted the review. 

Its 38-page report was posted this week by the board.

'Integrated' approach to construction

Halifax Water wants to move staff from four sites across the Halifax Regional Municipality into a single operations depot on Jennett Avenue in Burnside.

The estimated cost soared after the utility decided to use what's known as integrated project delivery (IPD), a method where construction costs and profits for project participants are agreed upon up front in a single contract. The owner, general contractor and others all collaborate to ensure those goals are met.

Experts told Halifax Water this approach would reduce risks experienced in the recent construction market due to labour shortages and supply chain issues.

CBRE said team members working on the project  —  Bird-Chandos Joint Venture, Group2 Architecture, FBM, CBCL and Atlantica Mechanical Contractors — are experienced and highly regarded and should stay to complete the next phases of the project.

"That said, with the unclear reasoning for the building increase in size and the unrealistic budget cost increase, it would be recommended more realistic targets be set," CBRE said.

"It is recommended that the IPD contract be reviewed by a contract specialist to ensure Halifax Water understands their obligations, risks, and full understanding of the costs."

Approach questioned

CBRE says the current budget contains "excessive" contingencies. For instance, eight per cent budgeted for construction risk should be cut to three per cent, it said.

The consultant also questioned whether the integrated contract lives up to its billing.

"The IPD contract notes the owner is obligated to pay for the cost of the work even if it exceeds the target costs. This statement seems to defeat the purpose of the IPD approach," CBRE said.

Halifax Water declined to address specific points raised by the CBRE.

Halifax Water statement

"Halifax Water recognizes that this is a significant investment, and we are committed to acting in the best interest of our customers," spokesperson Jeff Myrick said in a statement to CBC News.

"We are reviewing the consultant's report and working with them and the board to address questions or concerns."

Construction of the operations depot is expected to start this summer and take 24 months to complete.