Town infrastructure projects face steep cost increases, says TBM official

As the Town of the Blue Mountains (TBM) moves forward with a number of capital projects, town staff are reporting a dramatic increase in engineering design and construction costs. 

“Since the onset of COVID-19, staff have experienced significant cost increases based on several recent bid responses to town capital projects,” said Shawn Carey, director of operations for TBM at a council meeting held earlier this week. 

Carey said staff are seeing cost increases upwards of 30 to 40 per cent. 

“To buy a two-by-four today is about two to three times what it used to be almost a year ago,” he stated. 

He explained that a recent construction tender came back with compliant bids that were within 0.3 per cent of each other, an indication that the bidding was competitive and balanced.

"However, although the bids were within 0.3 per cent of each other on the same project, they were both roughly 34 per cent higher than both the town and engineering consultants’ pre-tender estimate,” he said. 

For the past several years, town staff have relied on benchmarking to estimate project costs. 

Benchmarking is a process by which the estimated cost of a project is compared to other similar projects. This process helps create baseline costs, which can then be used to build the various components of a capital budget.

Staff in conjunction with engineering consultants have completed an informal survey of the industry suppliers and contractors to better understand the higher pricing. 

According to Carey, there are several factors contributing to the increasing costs, including COVID-induced supply and demand issues that are showing a 30 per cent increase in plastic and metal pricing and 10 to 15 per cent increase in aggregate pricing.

Contractors are also reporting 25 to 30 per cent increase in labour costs, due in part to recently updated union boundaries. 

“The pandemic combined with the expansion of the construction labour area of influence of the GTA has resulted in a large increase in labour and material costs,” he said. 

COVID-19 has also created a backlog of work, which is putting contractors in the position of playing catch up and also allowing them the capacity to select and bid on projects with the least amount of risk.

“Large infrastructure projects in urban areas and changes in the demographics resulting from the pandemic (i.e. remote work) will keep these prices high for the foreseeable future and it is not anticipated that the labour costs will abate,” Carey continued. 

With a number of capital projects on the agenda for 2021, town staff will be preparing a report on each capital project planned for the year, which will include budget changes or impacts.

According to Carey, a number of capital projects currently underway have already been impacted, including Pressure Zone 4C, Price’s Subdivision wastewater servicing extension, and the Arthur Street parking lot. 

Project-specific staff reports for these capital projects are expected to be presented to council at the meeting scheduled for April 6.

In addition, town staff plan to create a new baseline for budget estimates that will encompass many of the current pressures, as well as re-evaluate all 2022 capital project budgets. Previously-approved projects will be re-budgeted as necessary.

“This is no fault of anyone. This is not an engineering fail. This is just a matter of the nature of today's business, unfortunately,” said TBM councillor Peter Bordignon. 

As the cost of projects go up, TBM is concurrently in the process of updating its development charge background study, which the finance department confirms will include the recently inflated costs.

“We will be continuing the development charges background study throughout this year and are looking at having a new background study into next year. We will include these new benchmark costs and update those project costs," said Sam Dinsmore, deputy treasurer and manager of budgets and accounting for TBM.