Conclusion: Centre Block project due diligence report: Cost report

Turner & Townsend has undertaken a comprehensive review and analysis of the costs to ensure accuracy for the costing methodology and value for money. The cost is driven by the essential work required to meet building codes, ensure the health and safety of Parliament, and restore the built heritage of the space, as well as to modernize the building to meet Parliament’s functional requirements. Turner & Townsend is confident that the hard construction cost estimate presented within this report is within a 10% to 15% level of accuracy, meaning the program has a high level of confidence to be delivered within the current budget, including the established contingencies and risk allowance, provided no major functional program changes occur or extreme rates of escalation are not experienced.

Benchmarking comparison of contingencies and risk reserve identified for the Centre Block with the West Block and Senate of Canada Building illustrates alignment.

Contingency and Risk allowance are adequate based upon the current understanding of the program but would be insufficient to absorb significant changes in scope, such as a major security event.

Following a comprehensive reconciliation process with the Construction Manager’s (CM) parallel estimate, Turner & Townsend’s estimate for net trade cost (before general requirements, CM fees, contingencies etc) was within 3% of the CM’s estimate. For a project of this size and complexity, this percentage variance is well within the anticipated range, and is exceptional given the current level of design completion. Since both estimates were completed utilizing different estimating methodologies this is a solid indicator that the costs are reflective of the current design.

It is our opinion that the program is carrying appropriate design (Centre Block 25%, PWC 15%) and construction (Centre Block 20%, PWC 10%) contingencies, which align with industry standards and are in accordance with benchmarked projects within the Parliamentary Precinct (25% to 35% combined design & construction). The contingencies presented are also appropriate and in line with the Association for the Advancement of cost Engineering International (AACEi) standards. In addition, Turner & Townsend supports the escalation values presented within this report based on the current industry indices available and the risk envelope set aside to accommodate future fluctuations of the market. Moreover, Turner & Townsend endorses the risk allowance that Public Services and Procurement Canada (PSPC) is carrying (ranging from 15% to 35%) based on our experience on projects of similar scale and complexity. This upper range makes accessible the appropriate risk funds to address unknowns that may materialize on a highly-complex and lengthy project, as well as providing the lower range as an aspirational target to ensure that controllable risks such as scope changes are appropriately constrained.

The cost estimate and budget range utilized ($4.5 billion to $5 billion) by PSPC reflects contingencies and risks to sufficiently implement the current project scope. To ensure proper stewardship of the estimate, Turner & Townsend strongly recommends continued efforts with PSPC, the Design Team and the CM to build a robust change control process to enable the contingencies to be efficiently and effectively managed and that all contingencies are monitored and regularly reported on during the design development (ensure no design “creeps” occur such as major program changes) and construction phases (ensure site investigations are in place and well documented tender documents) and adjusted accordingly if required. In alignment with the proper management of contingencies, Turner & Townsend also strongly encourages PSPC to follow a robust risk management framework to ensure the risk allowances are efficiently and effectively managed and that all risk dollars are allocated and tracked appropriately throughout the duration of the program as per industry best practice standards.

Turner & Townsend is confident that the total construction cost is accurate, including that contingencies and escalation will be sufficient to deliver the program based on the current known scope. Furthermore, Turner & Townsend confirms the risk range PSPC is carrying is appropriate providing no major scope changes or significant unforeseen events occur, such as extreme rates of escalation.