Thinking outside the municipal box
Manager of Capital Projects, City of St. Albert
The challenge: Build the first Leadership in Energy and Environmental Design (LEED®) Gold fire station in Alberta within a construction environment facing massive numbers of projects, labor shortages, materials shortages, and a municipal environment that requires and endorses rigidity in its policies and procedures. The solution: Create a dynamic project management plan that addressed stakeholder identification and buy-in early in the project, introduced innovative procurement strategies, and revamped the criteria for awarding contracts and selecting a construction manager. The results to date: competing demands of stakeholders have been more than satisfied, municipal regulations have been met, top quality consultants and contractors were retained for the project, and the project is currently under budget and ahead of schedule.
Need for a New Station
The city of St. Albert (the city) is a bustling community located just outside of Edmonton, Alberta, Canada (Exhibit 1). Much like the rest of Alberta, the city has experienced high levels of growth and an increasing demand on the infrastructure due to the booming oil sands activity. Since the last fire station was built 25 years ago, the city has experienced a 70% increase in population and a 35% increase in city area. The city recognized that its current inventory of two fire stations was coming close to its maximum operating capacity and commissioned a comprehensive needs study to identify the best location for a new facility. The study involved detailed computer analysis of response times and existing operational duties. This data was then combined with projected growth levels and used to identify the best location for a new facility and its future operational requirements. The growth, coupled with a city council mandated emergency response time of nine minutes 90% of the time, created the need for a new fire station.
Exhibit 1 – Location of the city of St. Albert
Exhibit 2 illustrates the city limits in 1982 and 2007 as well as the locations of the existing fire halls 1 and 2 and the future location of fire hall 3.
Exhibit 2 – City area (1982 and 2007) and fire hall locations
Surrounding Construction Environment
Over the last few years, the construction market in Alberta has grown exponentially with current inflation rates averaging 3% to 5% per month. Material and labor shortages are common to every project with serious schedule and budget consequences. It is common to see calls for tender going unanswered or receiving only one response well over the approved budget. For example, from 2001 to 2007, Alberta saw an increase in the dollar value of major projects from just over $82.4 billion dollars to $244.8 billion dollars (Figure 3). It is important to note that these figures only include projects of $2,000,000 or greater that were reported to Alberta Economic Development. Not included are projects with $2,000,000 or less value and other private industry projects not reported. It is estimated another 12,000 workers will be required due to the increase in volume of projects alone. The increase in the number of projects is further compounded by recent waves of retirement. It is estimated that 17,000 additional workers will be lost to retirement for a combined total of 29,000 workers required over the next six years (Construction Sector Council, 2008). This is a conservative estimate since the replacement of one worker with 30 years experience often takes two to three individuals just to match the productivity and knowledge levels.
Figure 3 – Alberta major projects inventory (source: Inventory of Major AB Projects, 2008)
Creation and Implementation of a Dynamic Project Management Plan
To address the challenges faced in constructing the new fire station, the Capital Projects Office (CPO) for the city first updated the Project Charter and Project Scope Statement to reflect current operational and budget requirements. The CPO then created an overall dynamic project management plan for the project with special emphasis placed on scope, cost, risk, communication, and procurement plans. Due to space constraints, the majority of this paper will focus on the procurement plans, but will also provide a brief overview of the others.
From the scope management plan, a detailed work breakdown structure was created that directly related back to the overall project budget (Appendix A). An initial estimate of $3,500,000 was allocated for fire hall 3 back in 2001. The original estimate was an analogous cost estimate based on similar projects completed in the mid-90s but had not been updated to reflect current market conditions or needs. Since 2001, the scope of work had been expanded from another satellite fire station to a primary administration/emergency operations center hall for the city.
To address the significant scope changes and current market conditions, the CPO identified all primary and secondary stakeholders to provide input into the project. The CPO then updated the schedule and project estimate for final approval from the council. Once the revised schedule and project estimate were approved, they were updated on a monthly basis using a variety of resources and materials due to the volatility of the surrounding construction environment. The CPO worked closely with the primary and secondary stakeholders to identify agreed upon areas of scope that could be increased or decreased based on costs. As many of the processes utilized in the project management plan were a new and completely different way of managing projects, extra emphasis was placed on the communications plan to be implemented throughout the entire project. This included identifying the different needs of each of the primary stakeholders and creating a centralized “one-stop” database to disseminate the information expediently. A comprehensive qualitative risk analysis that was completed identified the key project risks as procurement of land, procurement of the consultant and contractor, inflation, material and labor shortages, internal resource availability, and the occurrence of a municipal election halfway through the project. Mitigation strategies were applied where possible and an overall risk response plan implemented for the remaining risks.
The city of St. Albert, like most municipal and governmental organizations has stringent purchasing policies and procedures that all employees are expected to follow when spending public dollars. At the time of project initiation, the city followed a “traditional” tender format by which a request for consultant would be issued with an award based on fees followed by a straight lump sum tender. The city, like most municipalities, does not have the ability to sole source or negotiate directly for goods and services on large-scale projects unless it is an emergency situation. For example, the city’s purchasing polices are based on the premise of open and effective competition and include obtaining written, formal bids on any goods or services whose value is equal to or greater than $10,000.00. Aside from the city council, the city manager is the only individual with sole sourcing ability, which is limited at $100,000 and only to be used under specific conditions. A countrywide advertising system must be used to purchase goods/services greater than $100,000. However, based on the current construction environment, revised project scope, schedule and budget, and experience of the city’s project team, the CPO determined the traditional procurement methods would not be conducive in this situation and proposed a change.
For procurement on this project, procurement strategies were identified, approved, and implemented based on such items as quality of design and construction, schedules, material availability, and market capacity. Instead of the traditional municipal procedure of awarding the prime consultant contract based solely on fees, the contract was awarded based on a combination of individual and firm experience, innovation, current workload capacity, references, and fee. Further, the city set a minimum fee that would be used for the project based on values set by the Alberta Association of Architects and rejected any proposals with fees lower than the set value. This allowed the city to match the best-qualified consultant to its particular needs of the project.
As this revised procurement strategy differed from the existing approved strategy, there was initial opposition to its use. The CPO overcame this opposition through constant communication with the purchasing department and senior leadership team and initiating the requested changes in purchasing policies early on in the project. The CPO still had to ensure that the revised procurement strategy still met all requirements under the Municipal Government Act and all provincial regulations.
Midway through the design process of the new fire hall, the city council chose to make this the first Leadership in Energy and Environmental Design (LEED®) gold certified fire hall in Alberta. LEED was adapted from the U.S. Green Building Council’s (USGBC) Leadership in Energy and Environmental Design Green Building Rating System and modified to better suit Canadian climates, construction practices, and regulations (CGBC, 2008). To achieve gold certification, a minimum of 39 points must be obtained from five principal LEED categories including sustainable sites, water efficiency, energy and atmosphere, material and resources, indoor environmental quality and innovation, and design (CGBC, 2008).
Based on the previously mentioned change to incorporate LEED requirements into the design, the overall project schedule had to be revised and the anticipated tender date was changed from February 2007 to June 2007. Past experience in the St. Albert area has shown that contracts tendered by February or March typically attract the most interest and best pricing. However, in this super-heated construction environment even tendering by these dates would not guarantee any interest in the project. The CPO recognized that the opportunity to attract a LEED qualified contractor at this late of date was minimal at best. As such, the CPO commenced discussions with the procurement office and senior leadership team on the different tendering strategies. The traditional municipal procurement strategies were examined including lump sum tender, unit price, and design build. All of these strategies were rejected as being unfavorable based on current market conditions, status of the project, and the experience of city staff. With respect to the city staff experience, there was no one on the city staff who had managed a LEED project before and as such it was critical to retain a top quality and well-experienced contracting firm.
The CPO selected to use a hybrid version of construction management with conversion into a lump sum contract as the tendering strategy. Similar to the request for proposal issued for the consultant, a request for proposals for a construction manager was issued with final selection of the construction manager based on a combination of experience of the firm and team, innovation, current workload capacity, safety record, references, and fee. Particular emphasis was placed on safety and experience with fees only worth 20% of the overall evaluation. Furthermore, the successful construction manager would come onto the project team as soon as possible (February 2007) in order to provide value engineering throughout the remainder of design.
Successes to Date
As of July 2008, the project is under budget and ahead of schedule. Stakeholder satisfaction remains high on all levels. The dynamic project management plan has allowed the city to quickly respond to a superheated construction economy and changes in key personnel. The importance of a well-defined work breakdown structure and project budget was shown when there was a change in fire chiefs and council midway through the project. New project members were quickly brought up to speed not only on the project history but current events as well. Previous decisions with respect to scope and budget were well-explained and -documented. The qualitative risk analysis that was done allowed for proper planning and mitigation of risks to manageable levels. With respect to the procurement strategies, the city had 16 consultants respond to the original request for proposal. Eight were selected to submit more detailed responses with the top three then chosen for interviews. Anyone of the top three consultants could have completed the project due to the high quality of submissions. Five well-experienced and qualified construction managers/general contractors responded to the request for proposal for a construction manager. Of the five that responded, three were selected for interviews and again, final selection was extremely difficult due to the quality of the respondents.
Retaining the services of the construction manager in February 2007 guaranteed the city the resources of a LEED experienced contractor for the project. When the major subcontracts were tendered in June 2007, all major sub-trades including mechanical, electrical, drywall, steel, and windows each received a minimum of five responses. The spread on the tender responses was minimal. This is significant considering that similar projects tendered at the same time received minimal to no response and any responses received were often well over the approved budget. Perhaps the one of key reasons for such a strong sub trade response was that by retaining the services of the construction manager early on, the city had direct access to the sub trade pool in terms of creating interest in the project. Sub-trades were also more confident the project was proceeding with the retention of a construction manager and kept room in their workload schedule for the project.
One other significant success to note is that city council formally adopted the project management policies and procedures that were created for this project for all capital projects throughout the city. The project management policies and procedures adopted provide a corporate wide, professionally accepted framework for managing the scope, quality, time, cost, risk, and human resources of corporate projects. In doing so, the probability is increased that optimal solutions will be implemented. The project management framework model is to be flexible and adaptable to the nature of each operating unit within the corporation and to the work being done.
Lessons Learned to Date
Some of the lessons learned to date include recognition that it is not possible to always satisfy the competing demands of different stakeholders while maintaining the project budget, schedule, and scope. For every project it is extremely important to identify the individual or group that will make the ultimate decision on competing demands. Roles and responsibilities need to be not only clearly defined at the onset of a project but also clearly explained to all stakeholders involved. It is important to maintain clear, constant communication between all impacted parties. In situations where new strategies are being proposed, it is not uncommon to expect increased levels of communication throughout the project. Additional time should be budgeted for education purposes.
It is also to important recognize that it is often not possible in a municipal organization to implement such a comprehensive project management plan on all ongoing capital projects due to resource availability. Project managers will need to assess which components of the overall project management plan are pertinent to the project at hand and in some cases, even which projects. It is imperative that all project managers clearly identify which components of the project management plan they will be implementing and the risks of not completing the others. Finally, it is critical for project managers in a municipal organization to recognize that changing the current status quo can be a lengthy process and one that may not happen for the current project. Not all changes will be implemented for the current project in hand and the project manager needs to have an alternative project management plan in place.
CGBC. (n.d.) What is LEED and why certify? Retrieved on July 3, 2008 from http://www.cagbc.org/leed/what/index.php .
Construction Sector Council. (2008) .Construction looking forward. Retrieved on May 2008 from http://www.csc-ca.org/pdf/CSC-LookingForward08-AB-EN.pdf
Inventory of Major AB Projects (2001, 2003, 2005, & 2007). Retrieved April 21, 2008 from [email protected]
Appendix A – Sample of Project Information Form and Work Breakdown Structure