'Gain share/pain share': New bidding process for KED build

The bidding process for the building of Sudbury's Kingsway Entertainment District is going to be a little different this time around as the city looks to move ahead with the project.

City councillors were given an update on the new 'progressive design build' process that was used in the tender for the project in a meeting Thursday night.

David Shelsted, the city's project director, said it will create more of a shared risk/reward with the contractors bidding on the development.

"It's called gain share/pain share," Shelsted said.

"The design is only partially complete. We sign an agreement, we move in that direction and we sit down with the constructor and we go through those changes. The design cost is done on an hourly basis."

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According to the report submitted to city council, there are both some positives and negatives to moving to this new model.

In terms of advantages, the price is agreed upon later in the process and closer to the start of construction, once the design has been further developed.

With that, the risk of disputes during construction is reduced, the owner (the city) has more opportunity to provide input and is left with more transparency into the design builder's costs.

There would also be several 'off-ramps' for city council to take, however, there are also some risks.

In their document, city staff outlined the fact that the construction cost is not agreed to at the time of the contract signing, it's determined through negotiated and competitive processes and the owner would need a quantity surveyor to make sure it's getting the value for its dollar.

The model is relatively new to Canada, with one of the first contracts being a water treatment plant in Saskatchewan in 2020. Infrastructure Ontario and Metrolinx are also using it and it is being used throughout the United States.

"Can you assure us there's no extra costs the citizens of Greater Sudbury will have to pay because of this? My greatest fear is they try and come in at a lower number and then there are add-ons," Councillor Mark Signoretti asked in Thursday night's council meeting.

"There are concerns in the community that the progressive design build process would commit the city to spending much more than intended on this project, so more information on this process has been very much appreciated," said City Councillor Deb McIntosh.

City Councillor Geoff McCausland, who has been an opponent of the project, said the move to a progressive design build is a good one.

"I think it's a great process and increases the assurance the city will receive the best value for the competitive value process," he said.

"There is experience out there in pulling this together to ensure that the prices don't go far out of line as some people might be suggesting," said Mayor Brian Bigger to reporters after the meeting.

Earlier this year, the city revealed that the $92-million cost limit had been removed from the design-build request for proposals because of what the city had described at the time as "current market risks and inflation effects."

It added proponents were unwilling to assume the risk of a fixed-price contract.

The deadline for tenders was on Thursday and only two pre-qualified tenders are still in the running: PCL Construction and Ball/TESC Construction. Ellis Don did not submit a proposal by the deadline.

CTV News has reached out to Ellis Don for comment on why it no longer plans to proceed in the process.

The next step in the tendering process is for staff to assess the bids and grade them on their costing proposals before asking city council to vote on a budget at the July meeting.

If the target price exceeds the approved budget, staff will then have to return to council for further direction.

Staff said if everything proceeds as planned, they should be able to break ground on the events centre in early 2023 with an opening scheduled for 2025.