STAFF REPORT

January 20, 2000

To: Works Committee

From: Barry H. Gutteridge, Commissioner, Works and Emergency Services

Subject: Contract WPC-11-97

Cogeneration Facility at the Humber Treatment Plant

Additional Expenditures for Extra Work

Purpose:

Funds are available in the approved 1999-2003 Water and Wastewater Services Division capital Account C-WP115, Humber Treatment Plant.

Recommendations:

It is recommended that:

(1) additional expenditures in the amount of $384,750.00 including Goods and Services Tax, be authorized for the performance of necessary additional work on Contract WPC-11-97 for the Construction of the Cogeneration Facility at the Humber Treatment Plant, and in accordance with the estimates listed in Appendix A attached;

(2) the appropriate City Officials be authorized and directed to take the necessary action to give effect thereto.

Background:

By adoption of Clause No. 3 of Report No. 4 of the Works and Utilities Committee, City Council, at its meeting of May 13, 1998, awarded Contract WPC-11-97 for the Construction of the Cogeneration Facility at the Humber Treatment Plant. The contract was awarded to Comstock Canada Ltd. for the total lump sum tender price of $16,798,000.00 including GST and a Schedule of Prices allowance of $22,860.00 for additional work if required. The order to commence work was dated July 14, 1998, at which time the contract work began.

At the time of award, in accordance with former Metro By-law No. 146-90, as amended, a Department Head had authority to approve additional expenditures on a commitment in accordance with the By-law up to an amount equal to ten percent of the commitment. As such, under the former Metro By-law a further $1,679,800.00 or ten percent of the awarded contract amount would have been available for required extra work.

At its meeting of January 6, 1998, City of Toronto Council enacted By-law No. 7-1998, Interim Financial Control By-law, which repealed former Metro By-law No. 146-90. As the new By-law contains no provision to exceed the awarded contract value, as confirmed by the City's Legal Division, the Department has effectively lost its ability to authorize the unforeseen and necessary additional work that may arise during construction of capital projects. This is particularly problematic for projects tendered on a firm, lump sum basis. For contracts recently tendered, since confirmation of the repeal of former Metro By-law No. 146-90, we have been providing, on an interim basis, a general contingency allowance for possible extra work into the Schedule of Prices for Alterations, Extras, and Deductions for incorporation into the total lump sum tender price. In the case of Contract WPC-11-97, however, no such general contingency was added, as we believed it was still available through former Metro By-law No. 146-90.

Comments:

At its meeting of April 13, 14 and 15, 1999, and July 27, 28, 29 and 30, 1999, City of Toronto Council adopted Clause No.10 of Report No. 4 and Clause No. 23 of Report No. 2 of the Works and Utilities Committee authorizing an additional expenditure in the amounts of $140,000.00, and $196,000.00, respectively, including Goods and Services Tax for the performance of necessary additional work on Contract WPC-11-97.

Since the last request to City Council for authorization of additional expenditures for Contract WPC-11-97, more recent issues have been identified as requiring the performance of extra work. In some cases, additional information and unexpected circumstances have arisen during construction, which have necessitated changes to the original tendered scope of work. In other cases, staff of the Department and/or our consultants have identified changes to the design of the original contract which are now advisable to be performed to conform to changed regulatory code requirements or operating procedures, and which should be implemented to ensure construction of the best possible finished product. To ensure continuity with respect to liability and warranty issues under the contract, these changes must be implemented by the issuance of extra work orders. For instance, the requirement by the Canadian Standards Association and Canadian Gas Association for the installation of emergency shut off and pressure reducing valves in order for the Cogeneration Facility gas system to comply with the current gas code. The cost of performing the upgrades to the Cogeneration Facility gas system has been quoted by the contractor at $110,750.00.

The Contractor has advised us of his intent to claim for costs attributed to extended duration of construction as a result of unforeseen extra work required prior to placing the Cogeneration Facility into operation. Based on discussions with the contractor, the amount of his claim could be approximately $170,000.00; however, once a detailed claim is received, a rigorous analysis will be performed to identify any valid portions of the claim and to negotiate with the contractor, in an effort to resolve the claim without litigation. If additional project funding will be required at that time, this issue will be the subject of a further report to Council.

We have discussed with SNC·Lavalin, the City's consulting engineers responsible for the design, contract administration and on-site inspection for the Cogeneration Facility, that the City will review and assess the costs which could be attributed to SNC·Lavalin for resolving the technical problems, including extension of contract duration. These amounts will be deducted from the consulting engineering services invoices and reduce the balance of outstanding payments to SNC·Lavalin.

The total value of the estimated extra work required to-date, as a percentage of the overall value of the contract is equivalent to 4.3 per cent.

Conclusions:

The additional expenditures required for extra work pertaining to Contract WPC-11-97 in the amount of $384,750.00, including GST, are summarized in Appendix A attached. This additional work is necessary to either meet regulatory code requirements and/or ensure construction of the best possible product.

Contact:

M. Barbon, P.Eng.

Senior Project Engineer

Engineering Facilities - Works Facilities & Structures

Technical Services Division

Tel: (416) 392-8854

Fax: (416) 392-4594

E-mail: MBarbon@toronto.ca

Tom G. Denes , P.Eng. Barry Gutteridge

Executive Director Commissioner

Technical Services Works and Emergency Services

MB/ph

Attachment:

Appendix A

APPENDIX

HUMBER TREATMENT PLANT

WPC-11-97 - COGENERATION FACILITY

Authorized

Item No. Description Terms Amount

1. Installation of emergency shut-off lump sum $110,750.00

valves and pressure reducing valves

for Cogeneration gas system in order

to comply with current gas code.

2. Additional costs for extending duration estimated $170,000.00

of construction due to unforeseen extra

work required prior to placing

Cogeneration Facility into operation

3. Supply and install booster pumps estimated $100,000.00

to permit circulation of return water

to the Cogeneration Engines. Hot

water pumps will deliver water at lower

pressure (speed) to existing heat

exchangers for Digesters. The hot water

pumps installed for use with

Cogeneration can not operate at the

higher pressure (speed) until the heat

exchangers for the existing Digesters

are upgraded.

4. Interlocking of fans supplying fresh air estimated $ 4,000.00

to engine room with hot water boilers

to prevent operation of boilers without

fresh air supply per current CSA

requirements.

$384,750.00