Medicine Hat's Water Treatment plant is pictured in a file photo. A consultant who reviewed city management of the water treatment plant upgrade said budget overruns are never good, but the pandemic was behind much of the issue.--NEWS FILE PHOTO
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More than $8 million in budget overruns does not sound like a success story, according to a consultant hired to review the city’s management of the new water treatment plant, but Medicine Hat has fared better than similar projects hit with high inflation after the pandemic.
On Monday, council approved another $4.1 million to complete the new residuals plant near Powerhouse Road and the Trans-Canada Highway. It will filter out additional silt from water taken from the river to meet new, higher discharge standards from the province set years ago.
Medicine Hat planned the project in 2015, but delayed ground-breaking and major construction until 2023 after setting the foundations.
The time frame coincided with high inflation for materials and a rush of other projects as governments across Canada pushed infrastructure spending as an economic stimulus plan, according to Brian Maksymetz, a consultant with Better Projects Inc.
“These sort of cost overruns are typical in the waste water project (over that time),” he told council Monday.
“It’s quite normal, in post-COVID, for projects to be 25 to 50 per cent over budget. The cost performance on this project is actually very good … in the waste water construction sector in Western Canada.”
Last January, council approved an additional $3.8 million to the budget after hearing regulatory approvals added time, inflation and carrying costs to the original $30 million capital budget item.
At that time, council was told the price of concrete had doubled and steel was 70 per cent more expensive than planned. Long provincial environmental approval and uncovering an Indigenous campsite during excavation, also added costly delays.
The project is mostly funded by infrastructure grants, and new money approved Monday will come from reserve funds.
“COVID derailed the best-laid plans of everyone,” said Coun. Darren Hirsch on Monday. “I accept the arguments … It’s an important issue because there is a significant overage.”
This summer, Maksymetz was engaged to review the project, its execution and make recommendations, including the fact that the city will act as the construction manager, rather than hiring a general contractor to arrange the work.
That avenue provided value, he said, but the planning, engineering and bidding processes could be improved.
“It’s hard to see in a 27 per cent cost overrun, but if … the city saved $3.7 to $6 million that would have been paid to a general contractor in the bidding,” he said.
That would have come from a middle-man adding premium for services. Instead, city staff managed that project and completing the city’s Unit 17 power plant addition.
That setup included some gaps in specialized knowledge for water plant work, which should be considered in future, said Maksymetz. A project steering committee of top-staffers should also be considered – the project switched divisions twice during corporate reorganizations at city hall in 2021 and 2023.
Five of the six major sub-trade providers were based in Medicine Hat area, allowing them to switch to other jobs during delays, rather than demobilizing and charging the city costs.
“Local contractors are interested in doing a good job for the city because they want to work for the city,” said Maksymetz.
