A Lesson from BC Place Contractor PavCo
Posted by Lisa Toner on Fri, Sep 30, 2011 @ 02:18 PM
Source: Jeff Lee, The Vancouver Sun
BC Place is ready for its grand reveal today and with all the hype it’s hard to ignore all the rumors about the project running over budget by $287 million. After a bit of research, I discovered that the PavCo general contractors hired for the project are under a fixed-fee agreement. It will not go over budget.
According to Jeff Lee of the Vancouver Sun, ‘If BC Place’s budget is out in outer space, it’s news to PavCo chairman David Podmore. He told me today, without creating any wriggle room for himself that BC Place has a fixed budget of $563 million and he isn’t going over it. He’s mystified as to why this rumor of $850 million keeps popping up.
“Not true. No truth in it whatsoever,” he said with just a tiny hint of exasperation in his voice. “I don’t know where it comes from but whoever is spreading it doesn’t know what he’s talking about. If we were having budget problems I would tell you. That’s just my nature. So I really am dumbfounded about this.”’
It seems that PavCo won the project because they bid a fixed-fee price of $563 million. Podmore said the $563 million includes “construction reserves” and contingencies; the project could possibly come in under that amount if those reserves aren’t used but he isn’t banking on that. He thinks the rumours may be cropping up because people want to believe that if the convention centre can be so badly over budget, the stadium must be too.
The significant thing worth pointing out is that this is a fixed-price project. When PCI bid on this as the general contractor, they bid a set price, Podmore said. Some of the sub-contractors – such as the structural steel supplier, Structural-Heavy Steel Construction (Structal), a business unit of Canam Group, went over budget on their own – and had to absorb the costs themselves. Structal’s costs were $25 million higher.
The Podmore story is a good-news story – at least for taxpayers – because it shows the merit of fixed-price contracts in insulating the public from costly budget mistakes. I asked Podmore if PavCo or the B.C. government was hiding potential cost overruns elsewhere so that it would look like they are on budget. Maybe it’s because he’s a fly-fisherman that he has so much patience for questions like that.’ “I wouldn’t be involved in a conspiracy or any effort to suppress the truth.”
Plus’ belief is that fixed-fee is a more ethical method of billing than the billable hour. We price all of our Sage ERP projects on the value received, not the time taken. We sell results, not time. If you don’t agree we would love to hear your thoughts.