The cost of construction and materials is very high right now.
That’s largely the reason for a $20-million increase in the projected cost of Oak Harbor’s sewage treatment plant, city engineer Joe Stowell told the mayor and city council members during a Monday workshop.
“The cost of materials went through the roof when we needed them,” he said.
The workshop was arranged to give city staff the opportunity to explain the cost escalation to the elected officials, who were taken aback by the revelation last month that the plant being constructed in Windjammer Park will cost about $142 million.
Just 15 months earlier, the price tag was about $122 million.
Afterward, Mayor Bob Severns said he still has questions left unanswered and plans to move forward with an investigation by a consultant into the project and its costs.
During the 80-slide Powerpoint presentation, Stowell explained that city officials elected to build the project through a process called a general contractor-construction manager method, which is an alternative to the typical design-build approach. Under the GC/CM method, the city selected a general contractor who also acts as the construction manager.
The project is broken into different phases which are competitively bid for a “guaranteed maximum price,” or GMP.
Stowell said one of the greatest benefits of the process is that it allowed the project to be built much more quickly as the design and construction phases overlap. If the city had done the project through the design-build process, the project would just now be going out to bid. As it is now, the plant is largely complete and should be online by the end of this year.
He said the process allowed the city to procure equipment early on and to take advantage of favorable interest rates.
“Did it work?” he asked rhetorically. “I like to think that it has.”
Still, the cost of GMP 10, 11 and 12 were a total of $10.5 million over the estimate. They covered concrete and superstructure work, as well as odor control facilities. In addition, the estimate for the cost of restoring Windjammer Park is now projected at $5.3 million, which is $2.3 million more than the original estimate.
Severns said earlier that he questions whether the GC/CM process was the right choice. Under the method, the project costs are only estimates and the final cost isn’t known until the end. The price has escalated over the years from an original $79-million estimate.
Stowell said changes in the project were behind many of the earlier costs increases, as were different assumptions and more accurate cost estimates. Additions that increased the cost earlier included a belt dryer, a training facility, the purchase of the Whidbey Island Bank building, the cost of demolishing the building and the move toward deep excavation.
Even with the increase of $20 million, Stowell emphasized, the monthly sewage rate for residential users is going to be lower than the 2016 estimate because of the grants and low-interest loans procured by city staff.
The city originally assumed that the loans would be 6 percent; the final funding package, however, includes approximately $8.5 million in grants and $97 million in reduced rate loans, some as low as 1.2 percent.
“It’s really been the saving grace for the project, to be honest,” he said.
The rate is currently $102.76 a month.
Just two years ago, city officials estimated that the residential sewage rate would increase to $119.86 in 2021. The current estimate is for an increase to $110.08 in 2021.