11.1.1 contract variations – margaret river heart …

11.1.1 CONTRACT VARIATIONS – MARGARET RIVER HEART PROJECT

LOCATION/ADDRESS Shire of Augusta Margaret River

APPLICANT/LANDOWNER N/A

FILE REFERENCE COR/259

REPORT AUTHOR Heather Auld, Manager Library Services and MR HEART Project

AUTHORISING OFFICER Stephanie Addison-Brown, Chief Executive Officer

IN BRIEF

• Legislation and a provision within the Shire’s delegations register require that Council approveall contract variations over and above 10% of the contract value or $50,000, whichever is thelesser amount, for contracts resulting from a tender process.

• A number of contracts have been entered into by the Shire following on from a tender process,as part of the redevelopment of the Margaret River Cultural Centre (HEART Project).

• Costs pertaining to these contracts have been monitored on an ongoing basis by the Shire’sProject Manager. In the case of the construction contract with BGC Construction Pty Ltd (BGC),this has been done in conjunction with Bollig Design Group Pty Ltd (Bollig), being the projectdesigner and appointed Superintendent’s Representative.

• It appears likely that variations on both the BGC and Bollig contracts will exceed $50,000 inaggregate, and therefore Council’s approval is required to proceed.

• It should also be noted that some works required as part of the construction contract andsubsequent variations, mainly pertaining to latent conditions with the old Cultural Centrebuilding, have been flagged as having the potential to significantly delay Practical Completionof Separable Portion 2 (SP2) containing, amongst other things, the main theatre, pre-functionarea, gallery/foyer and associated offices and amenities.

• The works which have the potential to cause the most significant delays to the opening of SP2for use have been identified as being in less-critical areas of the building, such as Court 3.

• To ensure that Practical Completion of SP2 and access to the main theatre and associatedareas is not unduly delayed, these less-critical areas have been moved into a newly created‘Separable Portion 3 (SP3), with its own Practical Completion date.

RECOMMENDATION That Council:

1. Approves the reallocation of 2019-20 budgeted amounts for HEART-related works to theHEART building construction project as outlined in Confidential Attachment 1;

2. Delegates the approval of variations to the BGC construction contract to the Chief ExecutiveOfficer, conditional upon the overall HEART Project budget being met;

3. Delegates the approval of variations to the Bollig consultancy contract to the Chief ExecutiveOfficer, conditional upon the overall HEART Project budget being met; and

4. Notes a variation to the BGC construction contract, separating certain aspects of SeparablePortion 2 into a newly created Separable Portion 3, for the reasons outlined in ConfidentialAttachment 1.

LOCATION PLAN N/A

TABLED ITEMS N/A

BACKGROUND

On 28 March 2018 Council approved funding of $9,463,233 for the HEART Project, consisting of grant funding ($6.75 million), developer contributions ($1.1 million loan), Community Facility Reserves ($1.112 million), additional loan funds $500,000) and Shire Municipal Funds ($1,233). In the same meeting Council awarded the tender for HEART construction services, being the largest component of the project budget, to BGC. Their contract contained a contingency sum, as is the norm for large construction contracts, to cover unexpected costs incurred during the contract term for works which could not reasonably have been foreseen. RECOMMENDATION / COUNCIL DECISION CR EARL, CR LANE OM2018/79 That Council being satisfied in accordance with – a) Regulation 20 of the Local Government (Functions and General) Regulations 1996 that the

estimated cost savings itemised in the confidential attachment constitute a minor variation in the goods and services to be provided; and

b) Regulation 21A of the Local Government (Functions and General) Regulations 1996 that the minor variation will not change the scope of the project and is necessary for the goods and services to be supplied;

Resolves to - 1. Award Tender (RFT) 05-18 Construction Services for the Margaret River Cultural Centre

Redevelopment (HEART Project) to BGC Construction Pty Ltd (BGC) for the contract sum after negotiating a minor variation as outlined in Confidential Attachment 1

2. Approve funding of $9,463,233 for the project to be made up from approved grant funds ($6.75 million), Developer Contributions ($1.1 million loan), Community Facility Reserves ($1,112,000) Shire Municipal Funds $1,233) and from accessing additional loan funds of $500,000

CARRIED 7/0 Further to the original project budget adoption, as part of the 2018-19 mid-year budget review approved by Council on 27 February 2019 (OM2019/35), $95,000 for the installation of solar cells was added to the project budget. $35,000 had previously been included as a provisional sum in BGC’s construction contract for solar cells, however this sum was insufficient for the required works. Possession of site was granted to BGC on 30 April 2018 and construction works commenced. BGC’s contract with the Shire allowed for completion of construction works in two stages, being: • Separable Portion 1 (SP1) consisting of the multipurpose room, associated areas and amenities,

with a Practical Completion date of 7 January 2019; and • Separable Portion 2 (SP2) consisting of the main theatre, gallery/foyers, bar, commercial kitchen,

offices, Court 3 and associated areas and amenities, with a Practical Completion date of 27 May 2019

Works were split into two separable portions to allow for Practical Completion and use of SP1 whilst construction continued in SP2. Construction progress and costs have been tracked over the course of the contract term by the Project Manager, in conjunction with Bollig in their capacity as appointed contract administrators / Superintendent’s Representative. BGC were hindered by a number of delays in the first few months of construction, mainly relating to inclement weather, and as such Practical Completion of each portion of works was pushed out by 23 business days.

SP1 reached Practical Completion on 7 February 2019 and is being utilised by the current venue manager, Arts Margaret River, to run a program of cinema and other events. SP 2 works are ongoing, with the Project Manager continuing to track the construction program as well as the costs of individual contracts and the project as a whole, against budget. CONSULTATION AND ADVICE External Consultation Bollig are the Superintendent’s Representative, and engage a cost consultant, RBB, to assist with the tracking of works progress and costs. They have been, and continue to be, consulted regularly with regards to the BGC contract. Internal Consultation Manager Corporate Services, Project and Procurement Officer DISCUSSION / OFFICER COMMENTS Various delays have been encountered on the construction works for the HEART Project, some of which have cost implications and others which have implications in terms of construction programming. Details regarding some of the main variations are included in Confidential Attachment 1. A number of these delays pertain to works required in Court 3 and nearby areas. These areas are not critical for the functioning of the remaining venue, and therefore on 4 July 2019 the Project Manager instructed BGC, via Bollig in their capacity as Superintendent’s Representative, to create a new separable portion – Separable Portion 3 (SP3) – to which these non-critical works have been moved. BGC have advised of further delays to the completion of works, mainly resulting from inclement weather encountered in June 2019, meaning that SP2 is likely to reach Practical Completion at the end of July. At this point, the Shire can mobilise and prepare the building for occupancy and use, whilst works continue on SP3. SP3 likely to reach Practical Completion approximately 4-6 weeks later. The creation of SP3 and the delay in reaching Practical Completion has a corresponding cost impact with regards to both BGC and Bollig’s contracts. There are also further variations on BGC’s contract required, as outlined in Confidential Attachment 1, which would see actual spend being in excess of the approved contract value. With the cumulative variations on each of these contracts being more than the limit permissible in the Shire’s Delegations Register, Council is required to approve these variations before they can be accepted. In addition to the approved HEART Project budget of $9,558,233, as part of their adoption of the 2018-19 Annual Budget and draft 2019-20 Annual Budget Council have approved amounts in other budgets for certain aspects of the HEART capital works. These budgets are outlined in Confidential Attachment 1. Therefore, whilst actual spend on certain individual contracts within the HEART Project are likely to exceed their original contract values, the overall cost of the HEART project is still expected to come in at or below the amount approved by Council for the HEART Project when amalgamated with the other approved budgets for capital works. STATUTORY ENVIRONMENT / LEGAL IMPLICATIONS Regulation 21A of the Local Government (Functions and General) Regulations 1996 states: “If a local government has entered into a contract for the supply of goods or services with a successful tenderer, the contract must not be varied unless –

(a) the variation is necessary in order for the goods or services to be supplied and does not change the scope of the contract; or

(b) the variation is a renewal or extension of the term of the contract as described in regulation 11(2)(j)”

and regulation 11(2)(j) states: “The contract is a renewal or extension of the term of a contract (the original contract) where –

(i) the original contract was entered into after the local government, according to the requirements of this Division, publicly invited tenders for the supply of goods or services; and

(ii) the invitation for tenders contained provision for the renewal or extension of the contract entered into with the successful tenderer; and

(iii) the original contract contains an option to renew or extend its term; and (iv) the supplier’s tender included a requirement for such an option and specified the

consideration payable, or the method by which the consideration is to be calculated, if the option were exercised.”

Delegation 5 ‘Contract Variations’ from the Shire of Augusta Margaret River’s Register of Delegations 2018, adopted by Council on 27 June 2018 states: “Under s5.44 LGA Council hereby delegates the exercise of powers and the discharge of duties under Regulation 21A LG (Functions and General) Regulations 1996 to vary a contract for the supply of goods or services with a successful tenderer” Conditional upon: “Price variances may not exceed 10% of the contract value, or $50,000, whichever is the lesser amount, in each instance or cumulatively”. STRATEGIC PLAN / POLICY IMPLICATIONS Community Strategic Plan 2036 (CSP) Corporate Business Plan 2018-2022 Key result area 4: Managing Growth Sustainably Community Outcome: Liveable and well-designed places Strategic Response: Develop and implement master plans for Shire facilities and projects so they are well designed, have aesthetic appeal and are accessible by all Service level strategy/plan: Continue to closely track and monitor contract costs both individually against approved contract values and as part of the overall project budget PLANNING FRAMEWORK The proposal is consistent with the Civic, Cultural and Recreational Planning for the precinct and is zoned appropriately. FINANCIAL IMPLICATIONS Whilst a number of contracts under the project are likely to overrun on costs, the net financial implication for the Shire is expected to be nil. The Annual Budget includes a number of approved amounts that relate to capital works at the HEART building which were not part of the original HEART Project budget. Under this proposal to Council, pre-approved existing HEART capital works budgets would be amalgamated into the overall HEART Project budget, and utilised by existing contractors to complete those budgeted capital works.

Budget Item Council Decision No

Budget

Original project budget as approved by Council on 28 March 2018 OM2018/79 $9,463,233 Additional budget for solar panel installation as approved by Council on 27 February 2019

OM2019/35 $95,000

Additional approved budgets relating to the HEART building, proposed for amalgamation into the overall HEART project budget

N/A $350,000

Proposed revised HEART Project budget $9,908,233 SUSTAINABILITY IMPLICATIONS Environmental N/A Social A range of social and community development benefits are expected to be derived from the introduction of the new HEART venue, and these details have been published in previous Council reports. With regards to the separation of certain portions of works into a newly created SP3, this will ensure that no undue delay is encountered in opening the main areas of the HEART venue for use by the public, allowing the Shire and local community to access the social benefits of the venue sooner than it would otherwise. Economic A range of economic modelling has been undertaken by independent consultancy firms for the Shire with regards to the HEART Project, and these details have been published in previous Council reports. With regards to the separation of certain portions of works into a newly created ‘SP3, this will ensure that no undue delay is encountered in opening the main areas of the HEART venue for use by the public, allowing the Shire and local community to access the economic benefits of the venue sooner than it would otherwise. VOTING REQUIREMENTS Simple majority RECOMMENDATION That Council: • Approves the reallocation of 2019-20 budgeted amounts for HEART-related works to the HEART

building construction project as outlined in Confidential Attachment 1; • Delegates the approval of variations to the BGC construction contract to the Chief Executive Officer,

conditional upon the overall HEART Project budget being met; • Delegates the approval of variations to the Bollig consultancy contract to the Chief Executive

Officer, conditional upon the overall HEART Project budget being met; and • Notes a variation to the BGC construction contract, separating certain aspects of Separable Portion

2 into a newly created Separable Portion 3, for the reasons outlined in Confidential Attachment 1. ADVICE TO APPLICANT / PROPONENT Nil ATTACHMENTS 1. CONFIDENTIAL HEART Project Progress Report

Margaret River Cultural Centre Redevelopment (HEART Project) Project Update Report

Natural Connected Prosperous

Contents

1. Executive Summary 2

2. Background 3 2.1 Purpose of Report 3

2.2 Approved Project Budget 3

2.3 Construction Contract 4

2.4 AV and Technical Equipment Contracts 5

2.5 Professional Fees Contract 6

3. Construction Contract Progress 7 3.1 Completion of Separable Portion 1 (SP1) 7

3.2 Creation of Separable Portion 3 (SP3) 7

3.3 Progress of Separable Portion 2 (SP2) 10

3.4 Progress of Separable Portion 3 (SP3) 11

3.5 Contract Budget v Actual 11

4. AV and Technical Equipment Contract Progress 14 4.1 Progress on Supply and Installation of Equipment 14


5. Professional Fees Contract Progress 15 5.1 Progress on Services 15


Overall HEART Project Budget v Actual Costs 16

CONFIDENTIAL PROJECT UPDATE REPORT

1. Executive Summary BGC Construction Pty Ltd (BGC) were appointed as the construction contractor for the Margaret River Cultural Centre Redevelopment (HEART Project) following a public open tender process, at a contract value of $8,513,233. This contract sum included provisional sums of $115,000 and a contingency amount of $400,000 and formed part of an overall approved project budget of $9,463,233 (later increased to $9,558,233 to include $95,000 for solar panel installation over and above the provisional sum).

A number of variations have been required to the contract works over the course of construction, as expected for a project of this size due to factors such as latent conditions relating to the original building and regulatory compliance requirements. Many of these variations have had costs attached, and some have involved extensions of time.

Construction was to be undertaken in two separate portions – Separable Portion 1 (SP1) and Separable Portion 2 (SP2) – to allow for Practical Completion and occupancy of the building in two stages. SP1, consisting of the multipurpose room and associated amenities and services, was completed in early-February and is being utilised by the current venue manager, Arts Margaret River, to run their program of events.

Some of the variations have the ability to significantly delay the Practical Completion of SP2. As such, it was decided by the Project Manager to separate certain areas of the building out into a newly created Separable Portion 3 (SP3), which would allow for earlier Practical Completion of SP2, containing the main trafficable areas of the HEART venue, without being unnecessarily delayed by works in SP3, containing the less critical areas of Court 3 and the switch room architectural changes.

The original date for Practical Completion for SP2 has been extended from 27 May 2019 to the current estimate of 26 July 2019. Practical Completion for SP3 is likely to be reached between 4 to 6 weeks after.

Cost variations have been tracked against the provisional and contingency sum allowances by the Project Manager in conjunction with the Superintendent’s Representative, Bollig Design Group Pty Ltd (Bollig) and their appointed construction cost consultant RBB.

It now appears that variations to the BGC contract will exceed the original contract sum of $8,513,233. The exact amount by which the contract will be exceeded is unknown, as BGC are still in the process of processing Superintendents Instructions and providing quotes.

Due to the creation of SP3 and extension of the contract duration, Bollig will also be submitting a variation to their contract in relation to contract administration services.

Over and above the $9,558,233 approved HEART Project budget, there are a number of other approved capital works budgets relating to the HEART which are being spent with BGC. Therefore whilst individual contract values shall exceed those originally awarded, it is not expected that the overall HEART Project expenditure will exceed amounts budgeted to be spent.

Recommendation to Council

That Council:

1. Approves the reallocation of 2019-20 budgeted amounts for HEART-related works to the HEART building construction project as outlined in this report;

2. Delegates the approval of variations to the BGC Construction Pty Ltd construction contract to the Chief Executive Officer, conditional upon the overall HEART Project budget being met;

3. Delegates the approval of variations to the Bollig Design Group Pty Ltd professional services contract to the Chief Executive Officer, conditional upon the overall HEART project budget being met; and

4. Notes a variation to the BGC Construction Pty Ltd construction contract, separating certain aspects of Separable Portion 2 into a newly created Separable Portion 3.


2. Background

2.1 Purpose of Report This report outlines the updated project program and budgetary estimates for the HEART Project, some of which required Council approval.

2.2 Approved Project Budget On 28 March 2018 Council approved funding of $9,463,233 for the HEART Project, consisting of a mix of grant funding, developer contributions, Community Facility Reserves, additional loan funds and Shire Municipal Funds.

Further, on 27 February 2019 Council adopted a budget amendment increasing the HEART Project capital budget by $95,000 for the installation of solar panels over and above the $35,000 included for such cost in the previously approved HEART Project budget.

The approved HEART Project funding is as outlined below:

Funding Source Original Approved

Budget 28 March 2018

Revised Approved Budget 27

February 2019

Council Resolution - OM2018/79 OM2019/35

Grant – National Stronger Regions Fund $1,800,000 $1,800,000

Grant – Regional Venues Improvement Fund $500,000 $500,000

Grant – LotteryWest $1,400,000 $1,400,000

Grant – Royalties for Regions $3,050,000 $3,050,000

Interest on Royalties for Regions funding - $40,000

Expected Rebates from Solar Panel Installation - $30,000

Shire – loan (repaid from developer contributions) $1,100,000 $1,100,000

Shire – loan $500,000 $500,000

Shire – allocation from reserves $1,112,000 $1,112,000

Shire – municipal funds $1,233 $26,233

Total HEART Project funding as approved by Council $9,463,233 $9,558,233


The budgeted costs associated with the HEART Project were as follows:

Project Costs Based on Original Budget

Based on Revised Budget

Construction costs $8,513,233 $8,608,233

AV and Technical Equipment $295,000 $295,000

Professional Fees $655,000 $655,000

Total HEART Project budget as approved by Council $9,463,233 $9,558,233

2.3 Construction Contract The highest value contract under the HEART Project is for construction services.

On 28 March 2018, Council resolved to award the tender for the construction portion of the HEART Project to BGC, for a contract value of $8,513,233. This contract value was inclusive of a $400,000 contingency.

Contingency sums are standard inclusions in large-scale construction contracts, and are intended to cover any unexpected costs that can arise throughout a construction project. They are typically set at between 5% and 10% of the contract value, and in this case was set at the lower end of the scale.

With the Council approving a further $95,000 for the installation of solar panels, the revised contract value with BGC is $8,608,233.

Contractor Original contract

Revised contract

Main Schedule of Works $7,998,233.00 $7,998,233.00

Provisional Sums $115,000.00 $210,000.00

Contingency Sum $400,000.00 $400,000.00

Total value of contract awarded $8,513,233 $8,608,233

The BGC contract allowed for completion of construction works in two stages as follows, and as shown in Image 1:

• Separable Portion 1 (SP1), consisting of the new multipurpose room and associated store, backstage area amenities and corridor (highlighted red in Image 1) with a Practical Completion date of 7 January 2019; and

• Separable Portion 2 (SP2), consisting of all other areas including the main auditorium, pre-function area, bar, amenities, soundshell, hard landscaping and Court 3 (highlighted blue in Image 1), with a Practical Completion date of 27 May 2019.


Image 1: HEART Project separable portions 1 and 2

2.4 AV and Technical Equipment Contracts The project budget of $295,000 for audio visual and technical equipment consisted of the estimated cost for the supply, delivery and installation of such equipment.

Contracts were awarded as follows:

Contractor Contract Contract Value

Totally Sound Supply of audio visual equipment (excluding cinema processors, cinema projector and associated server and lens, silencing enclosure and Dexion pallet rack)

$138,868.73

Stagecraft Supply of audio visual equipment (cinema processors, cinema projector and associated server and lens, silencing enclosure and Dexion pallet rack only)

$69,922.67

Totally Sound Supply of remaining AV and technical equipment, installation of all supplied equipment

$100,823.40

Total value of contracts awarded $309,614.80


Subsequent to awarding a contract to Stagecraft, they advised that they were no longer able to supply the specified projector for the price outlined in their tender and in the resultant contract. As such, their contract was terminated, and the balance owed to them for the supply of the projector and associated equipment - $58,590.51 – was cancelled.

The contract for the supply of this equipment was then awarded to Australian Theatre Supplies, at a contract value of $63,409.35.



Stagecraft Cancellation of unsupplied contract requirements

($58,590.51)

Australian Theatre Supplies Supply of cinema projector and associated items

$63,409.35

Revised total value of contracts awarded $314,433.64

2.5 Professional Fees Contract The project budget of $655,000 for professional fees relates to the Shire’s contract with Bollig. Their contract included, amongst other things:

• Concept and detailed design works; • Construction documentation preparation; • Contract Administration (Bollig are acting as Superintendent’s Representative)

The approved contract value with Bollig was $598,198.68.


3. Construction Contract Progress

3.1 Completion of Separable Portion 1 (SP1) During the construction of SP1, BGC issued a number of Notices of Delay, and were provided with a total of 23 days’ extension of time as a result. These extensions of time consisted of the following:

• Delay in issuance of building permit – 1 day • Building still occupied and being used by the public – 1 day • Latent conditions – 3 days • Inclement weather over Winter 2018 in excess of provisional delay – 18 days

Practical Completion for SP1 was reached on 7 February 2019 – 22 days after the original contracted Practical Completion date, but 1 day ahead of the extended Practical Completion date.

The multipurpose room and associated areas have been handed over to the current venue manager, Arts Margaret River, who are currently running their program of events and cinema from this portion of the venue.

3.2 Creation of Separable Portion 3 (SP3) The contracted works have been progressing well, and overall the Project Manager and Superintendent’s Representative have been extremely satisfied with BGC’s quality of work and professionalism.

However, a number of variations have been required during the course of the construction contract, some of which have been significant to BGC from a resourcing and/or programming perspective, and a few of which had the ability to push the date for Practical Completion of SP2 out significantly.

This would have ongoing implications in terms of the Shire gaining occupancy of the building and being able to hand over the venue for use by the current venue manager, Arts Margaret River, in particular for events which they have already committed to.

The main issues encountered are as follows:

i. Switch Room (variation to original scope)

A Western Power inspection undertaken during construction uncovered the fact that the main switch was unsafe and needed immediate replacement, and also that the architecture of the housing for the switch (the switch room) was not compliant with regulatory requirements.

The main switch upgrade has been completed, however the works required to make the switch room architecture compliant – involving various design, approval, ordering and installation activities – is more involved and as a result has caused delay.

These architecture rectification works are required before Practical Completion can be granted.

ii. Landscaping Works

The scope of the landscaping works in the BGC contract was reduced during contract negotiations, to bring the contract value into line with agreed funding. During the course of construction, it was found that during these negotiations, a portion of necessary landscaping works had been deleted from the contract, and that this would need to be added back in in order for SP2 to reach Practical Completion.

iii. Court 3 additional works

A number of issues have been encountered in relation to Court 3. The majority of these are latent conditions, some of which require rectification for compliance reasons, such as changes to the doors and emergency exits. A number of these items have been discovered later in the construction process and the lead time between ordering of supplies required for the rectification works to be undertaken and completion of such works is significant enough to be able to push out Practical Completion of SP2.


iv. Rain garden changes

The original rain garden was created to slow down and absorb water runoff on the precinct so that the stormwater system would not be overloaded. The rain garden has been substantially reduced in size as a result of the HEART Project. Together with the Director Infrastructure Services, the Project Manager inspected the completed works in that section of the precinct, and noted that the design showed the runoff angle pushed the water catchment area under the new sound shell. After onsite discussions with BGC, the Shire concluded that additional work was needed to rectify the design to the existing inlet into the piped drainage system. This would ensure free flowing conditions can be maintained. BGC will make every endeavour to complete these works during the SP2 phase, however possible delays may mean that these works are excluded from SP2 and added instead to SP3.

v. Latent conditions

As expected with a construction project of this size, latent conditions with the original Cultural Centre building have been discovered during the course of works which were not – and could not have been - discovered until construction had commenced e.g. interaction between existing infrastructure and new installations.

vi. Inclement weather

A number of claims for extensions of time have been made in relation to inclement weather encountered over the winters of 2018 and 2019. In Winter 2018, 18 days extension of time was granted for inclement weather in excess of the provisional delays allowed for. In addition to this, a further 13 days have been claimed in relation to June 2019. With BGC currently undertaking landscaping works, it is feasible that further delays will be claimed in relation to July 2019.

On 4 July 2019, Bollig – under instruction from the Shire’s Project Manager – advised BGC that certain parts of the SP2 works package were to be separated out into a newly created separable portion, Separable Portion 3 (SP3).

The decision to create SP3 was made in order to allow for Practical Completion and use of the main areas of SP2 – being the main amphitheatre, display and exhibition areas, pre-function area, amenities, offices and soundshell – without being unnecessarily delayed by works required in SP3.

The parts of the SP2 works package separated out into SP3 are depicted in Image 2 and consist of works required to:

• Court 3; • Switch room; and • Associated store areas.


Image 2: Creation of Separable Portion 3

BGC have advised that works required in Court 3, the switch room and associated stores would have delayed Practical Completion of SP2 by an estimated 4-6 weeks on top of the delays already expected due to extensions of time notified by BGC (see Section 3.3), had they not been separated out into SP3.

There are various implications to creating SP3, including:

• the requirement for bank guarantees attached to completion dates and defects liability periods being moved from SP2 to SP3;

• liquidated damages per day figure for SP3; and • the introduction of a new Practical Completion date and defects liability period for SP3.

These implications are due to be discussed and agreed upon at the site meeting on 29 July 2019, based on the current criteria for SP1 and SP2.

BGC have been very supportive in agreeing to this extended program, even though they were under no obligation to accept the extra variations to contract. They have demonstrated commitment to the HEART Project and wish to see it through to a positive conclusion.


3.3 Progress of Separable Portion 2 (SP2) As noted in Section 3.2, SP2 now excludes Court 3, switch room and store works.

The 23 days’ approved extension of time outlined in Section 3.1 also pushed out the SP2 Practical Completion date from 27 May 2019 to 26 June 2019.

BGC has advised the Shire of a number of further notifications of delay, and requested approval of further extensions of time, as follows:

Days of delay

Reason for Delay Revised SP2 Practical

Completion Date

13 EOT # 8 Inclement weather (June 2019) 17 July 2019

7 EOT # 9 Additional landscaping works 26 July 20191

1 Practical Completion inspections were undertaken during the week commencing Monday 15 July. Whilst 26 July 2019 is the latest estimated date for Practical Completion provided by BGC, it is possible that Practical Completion of SP2 may further be delayed by items such as:

• Inclement weather encountered in July 2019 for which no formal Notification of Delay has yet been received;

• Any further latent conditions uncovered during course of works; • Rectification of any defects uncovered during the course of Practical Completion inspections;

and • The outcomes of discussions and decisions around the fire exits2

2 Shire staff have raised the issue of the fire exits to the stage area of the main theatre in SP2 being non-compliant with Bollig. This is an issue which has repeatedly been flagged by Shire staff since 2015.

The reply from Bollig is as follows:

‘The original RFT document excluded the stage and back of stage area from the scope of works. During design development we raised the issue of some non-compliances to this area and were requested to investigate what would need to be done to achieve compliance under current codes. In summary; fire exits and signage would require amending/upgrading, a fire curtain introduced to separate the theatre seating from the stage, drenchers introduced to both sides of the curtain, a roof top smoke exhaust fan introduced, smoke detection introduced (programmed to distinguish between stage smoke and fire smoke). This was the lowest cost performance based alternate solution in lieu of full sprinklers. The cost to implement this was not budgeted and with the project under financial pressure having added an additional 90 seats the Shire decided to leave this component excised from the works.’

This is a matter under discussion between the Shire, Bollig and BGC. The Shire seek certainty that Practical Completion on SP2 will still be achievable despite this non-compliance. Shire staff believe a performance solution is needed and this will need to be revisited by the Shire and costed in the near future.

Once Practical Completion of SP2 is granted, certain other inspections will be required before occupancy is granted to the Shire. The likely completion time for these activities is early to mid August.

Once occupancy is obtained Shire staff will be commissioning the venue and its equipment and undergoing training and inductions.

Operations at the venue cannot commence with the public until all training, inductions and operations manuals are in place.


3.4 Progress of Separable Portion 3 (SP3) SP3 will commence once SP2 has been handed over to the Shire. With SP2 on track to reach Practical Completion towards the end of July, commencement of SP3 works is expected to be in early August.

The current estimated date for Practical Completion of SP3 is 4-6 weeks from cost approval, and the Project Manager is currently working on that approval in conjunction with Bollig. BGC are committed to completing these works as quickly as possible.

It is worth noting that the timeframe for completion of SP3 may be impacted by latent conditions found during works, weather delays affecting the switch room works and any defects that may be found during Practical Completion of SP3.

3.5 Contract Budget v Actual

Component of Contract Contract Value

Main Schedule of Works $7,998,233.00

Provisional Sums (incl. original $35,000 PS for solar panels) $115,000.00

Contingency Sum $400,000.00

Solar Panel installation (OM2019/35) $95,000.00

Total Approved Contract Value $8,608,233.00

Variations:

Removal of Contingency Sum – to be replaced with actual variations incurred ($400,000.00)

Removal of Provisional Sums – to be replaced with actual costs incurred ($115,000.00)

Removal of allowance for solar panel installation – to be replaced with actual costs incurred

($95,000.00)

Variations/Provisional Sums approved and paid $390,831.89

Variations/Provision Sums approved and not yet paid $180,504.49

Variations submitted and not yet approved $193,941.55

Allowance for further variations not yet submitted or approved1 $50,000.00

Total anticipated contract spend $8,813,510.93


The contract spend is split into financial years as follows:

Actual Spend 2017-18


Forecast Spend 2019-20

Total Expected Spend

Construction services $473,025.17 $7,007,051.93 $518,155.90 $7,998,233.00

Provisional Sums $0.00 $53,421.67 $63,208.44 $116,630.11

Contingency Sum $0.00 $292,697.62 $107,302.382 $400,000.00

Solar Panel installation $0.00 $44,712.60 $52,695.40 $97,408.00

Estimated variations over and above contingency

$0.00 $0.00 $201,239.822 $201,239.82

Total Spend $473,025.17 $7,397,883.82 $942,601.94 $8,813,510.93

Original Contract Sum $8,608,233.00

Total Variation from original Contract Value2 $205,277.93

1 Whilst we have received a number of submitted variations which have not yet been approved, there are also a number of Superintendent Instructions for which BGC have not yet submitted costs. There is, therefore, the potential for an increase in the variations over and above the contingency sum which will require approval for completion of the project. A provisional figure of $50,000.00 has been added to account for this.

2 The total variations to the contract include the following individual amounts worth more than $10,000:

• $88,000.00 fly tower cladding works to stop fretting, as previously agreed to by Council • $97,408.00 in relation to the installation of the solar panels, over and above the provision sum

amount included in the original contract. $95,000 was approved by Council on 27 February 2019 as part of the mid-year budget review

• $38,228.48 switch room works, required to meet compliance standards as outlined in Section 3.2.

• $14,850.00 1,000 amp main switch required to meet compliance standards as outlined in Section 3.2.

• $18,490.00 step edge light nosing to retractable seating. The ‘deemed to satisfy’ solution that had been applied to the retractable seating steps (due to cost cutting measures pre-contract award) was not satisfactory to the Shire Environmental Health Officers (EHOs) and HEART Project Manager when inspected at Practical Handover of SP1. They were concerned that the seating did not meet the Department of Health: Public Building Regulations. A solution was found and implemented, that satisfied the requirements.

• $23,611.11 for differences between existing walls at theatre and architectural drawing. Latent conditions in the old building were uncovered during construction and the height of the walls was found to be inconsistent, requiring rectification.

• $16,091.00 Hearing augmentation. No provision had been made in the budget for a hearing augmentation system for patrons of the venue. This is considered a vital component for a venue of the calibre and size of the HEART and fulfilled some of our commitments to the Access and Inclusion Plan 2018-22.

• $34,122.00 Forecourt soil preparation works. The landscaping portion of the project was split into a ‘hard’ landscaping portion, to be completed by BGC, and a ‘soft’ landscaping portion, to be undertaken by the Shire’s Parks and Gardens team. At a late stage of construction the Shire’s Parks and Gardens team inspected the works and realised some vital elements had been mixed up. Works required included earthworks, excavation, grading, laying of grit, supply and install of soil and mowing strips. It was determined that, given their presence on site already, BGC could do this work more cheaply and efficiently that the Shire’s own team.


• $83,000 (estimated) Court 3 works required for reasons as outlined in Section 3.2. This variation is very complex and costs are high at present because it also contains the estimated BGC supervision and management charges for SP3 (which will be discussed at the site meeting 29 July 2019). It is anticipated that this charge will be decreased during discussions pertaining to the contract criteria referred to earlier. This variation began because it was identified that the closure of the roller door to the north wall of Court 3 (that became the new foyer of SP2) presented problems for Recreation Centre maintenance in Court 3. The Recreation Centre could not get the equipment in to work on the ceiling, which is very high, and therefore a solution was vital. The Shire’s EHO’s were also concerned that the roller door had in fact, been used as an ‘emergency exit’ when events such as the Agricultural Show were held in Court 3. To mitigate the risks, new emergency exit doors were incorporated into the design in Court 1 and 3. The use of Court 3 for events in the HEART also needed to be planned into the design, and solutions had to be found that enabled this function in the space. Consideration of fire alarms, security, and keyed access into and out of the HEART and Recreation Centre were all factors that resulted in increased costs. There were also latent conditions in Court 3 to be taken into account as well as some items that were removed from the contract without adding in a solution. This variation is still being worked on by the Project Manager in conjunction with Bollig and BGC.

• $16,391 projector room mechanical changes works. Safety issues with the design were identified and mechanical, electrical and air conditioning requirements were needed. Rubber sound cushioning and galvanised handrails were needed for safer access.

• $28,080 existing theatre ceiling replacement. Latent condition with the old ceiling in cultural centre, with the ceiling needing to be raised to get sight lines workable for cinema and shows.

• $50,000 allowance for any variations which have yet to be submitted by BGC.


4. AV and Technical Equipment Contract Progress

4.1 Progress on Supply and Installation of Equipment All audio visual and technical equipment ordered has now been delivered to the Shire, and installation of equipment has been undertaken by Totally Sound in relation to SP1.

Installation of SP2 equipment is anticipated to commence on 22 July 2019.

4.2 Contract Budget v Actual The AV and Technical Equipment spend consists of four separate contracts, as outlined below:


Totally Sound Supply of audio visual equipment $138,868.73

Stagecraft Supply of audio visual equipment $11,332.16

Australian Theatre Supplies Supply of audio visual equipment $63,409.35

Totally Sound Supply and installation of audio visual equipment $100,823.40


Totally Sound Contract variation – exchange rate variance passed on to Shire

$2,392.89

Total expected AV & Technical Equipment spend $316,826.53

The spend is split into financial years as follows:




Original contract amounts $41,660.62 $170,358.47 $102,414.55

Variations to contract amounts $0 $2,392.89 $0

Total Spend $41,660.62 $172,751.36 $102,414.55

Total $316,826.53

Variations to AV and Technical Equipment contracts have been minimal, and it is not expected that any further variations will be claimed by contractors prior to completion of the project.

Forecast spend for 2019-20 consist of:

• Payment for the cinema projector, which was delivered to the Shire in early July 2019, $52,002.85; and

• Installation of equipment in SP2, $50,411.70.

Whilst the cinema projector originates from the United States and was subject to fluctuations in exchange rate, the Shire has confirmed with the contractor that no adjustment for exchange rate fluctuations will be on-charged to the Shire.


5. Professional Fees Contract Progress 5.1 Progress on Services Throughout construction, Bollig have acted as Superintendents Representative, being the first point of contact for BGC during the construction phase with regards to technical aspects of the works.

Due to the creation of SP3 and the extension of the contract construction period, Bollig’s contract shall also run for longer than originally anticipated. As such, the Shire can expect to receive a cost variation to their contract, and this is allowed for in the below figures. Consultant costs for site visit are also anticipated.

5.2 Contract Budget v Actual


Bollig Design Group Architectural Services for the HEART Project $598,198.68

Variations Approved:

VO-1 Revised section to Multipurpose Room $15,000.00

VO-2 Value management $26,705.00

VO-3 Hard copies of plans and trade specifications $493.83

VO-4 Structural, electrical changes – Court 3 (doors and exits) $2,220.00

Variations Yet to be Approved:

Additional contract administration during SP3 construction1 $15,000.00

Total revised contract spend $657,617.51

The contract spend is split into financial years as follows:





Original contract amounts

$35,891.92 $416,944.49 $140,098.13 $5,264.14

Variations to contract amounts

$0 $41,705.00 $2,713.83 $15,000.001

Total Spend $35,891.92 $458,649.49 $142,811.96 $20,264.14

Total $657,617.51

1 Forecast spend for 2019-20 consist of:

• Phase 7 Post-construction and defects liability period services $5,264.14; and • A $15,000.00 estimated variation expected on the Bollig contract with regards to SP3 contract

administration and the cost of consultant site visits undertaken but not yet invoiced. Bollig have not yet issued this variation, and as such it is only possible to include an estimate of likely costs.


6. Overall HEART Project Budget v Actual Costs Over and above the HEART project funding specifically approved by Council and outlined in Section 2.2, there were further amounts included and approved in the Annual Budget for 2018-19 (and draft approved Budget for 2019-20) associated with the HEART’s construction as follows:

Budget item Budget code

HEART budgeted amounts

HEART Project funding reported to Council $9,558,233

Shire – approved 2018-19 municipal funds for power upgrade works

CBS131 $75,000

Shire – approved 2018-19 municipal funds for fly tower recladding works

CBS154 $110,000

Shire – approved 2018-19 municipal funds for HEART landscaping RES146 $65,000

Shire – approved 2018-19 municipal funds for Wallcliffe Rd Stormwater Drainage (CAC Precinct)

DEN18 $50,000

Shire – draft approved 2019-20 municipal funds for upgrades required to Gloucester Park substation

CBS170 $50,000

Total HEART Project funding including 2018-19 and 2019-20 approved budgeted capital upgrade works

$9,908,233

It is anticipated that the total HEART Project spend will remain in line with the budgeted funds of $9,908,233 as outlined above, with the split of spend estimated to be as follows:

Project Costs Approved Budget (27 February 2019

OM2019/35)

Expected Total HEART Project Spend (revised estimate 19 Jul

2019)

Variance

Construction costs $8,608,233 $8,813,511 $205,278

AV and Technical Equipment $295,000 $316,827 $21,827

Professional Fees $655,000 $657,618 $2,618

Other costs1 $0 $120,277 $120,277

Total Project Costs $9,558,233 $9,908,233 $350,000

1Other Costs of $120,277 includes $73,882 costs incurred to date, plus a provision of $46,395 for additional costs which could be expected to be incurred on the project.

[email protected] www.amrshire.wa.gov.au

Margaret River

41 Wallcliffe Road (PO Box 61) Margaret River 6285

T (08) 9780 5255 | F (08) 9757 2512

Office Hours Mon to Fri, 9am – 4pm

Phone enquiries 8am – 4.30pm

Augusta

66 Allnutt Terrace Augusta 6290

T 08 9780 5660 | F (08) 9758 0033

Office Hours Mon to Fri, 9am – 4pm (closes for lunch 12pm – 1pm)

Phone enquiries 8am – 4.30pm

If you are deaf, or have a hearing impairment or speech impairment, contact us through the National Relay Service:

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