The tender period for the Hepburn Hub at the Rex project has closed and Council officers are evaluating tenders and preparing a recommendation for the Council meeting on November 23. The cost of the Rex projects is expected to rise yet again.
Council awarded a contract for $7.13M to complete the works to Hutchinson’s Builders in 2020 and gave the builder notice to proceed in January, 2021. However, the builder raised a number of queries regarding site conditions and declined to proceed with the contracted works. After protracted negotiations, Council and the builder agreed to part ways in July 2021 without any work being undertaken.
Council readvertised the tender with an amended scope of works to include rectification of site conditions which were the subject of negotiations with Hutchinson’s. A quantity surveyor’s estimate of the additional costs was $1.625M bringing the estimated cost to complete the project to $8.755M. This is in addition to the cost of works already completed.
Over the past year, commercial construction costs have risen by 2.5% in Australia because of increases in the cost of materials and because of supply chain issues caused by the pandemic. This could add an additional $200,000 to the costs. An active construction sector and labour force shortages could add further to the costs. The market will determine the real cost of the renovation through the tender process.
The Rex project will deliver 2050 square metres of council office space, library space and an auditorium for community use and for the Daylesford Cinema. The projected cost is approximately $4,300 per square metre. This is well above the average cost for new construction in Melbourne, currently $2,576 per square metre. Industry sources acknowledge that the costs of construction in heritage buildings are higher than new construction partly because legacy construction needs to be updated to meet current standards and this is certainly an issue with the Rex project. However, the projected cost of $4,300 per square metre is at the upper end of costs for similar heritage building renovations.
Local estate agents have estimated that the Rex site could be sold for about $3M. Even though this would result in a substantial loss for Council, the sale would enable the purchase of a new site. A new building of the same area could be built for about $5M, a little over half the projected cost of the Rex renovation.
Earlier this year, when negotiations with Hutchinson’s Builders were stalled, Council resolved that a Councillor workshop be conducted in June 2021 to examine all options and legal consequences and to appropriately communicate with the community about the way forward. Other than an announcement of a decision to proceed, there has been little communication with the community.
The decision to proceed with a new tender must have been based on financial, non-financial and operational implications of various options. We trust that Council and Council officers are making decisions in the best interests of the community but they have failed to explain their decisions to the community
The Wombat Post requested a meeting with Council officers in an attempt to better understand the rational for the decision to proceed. Council has declined to meet, citing commercial-in-confidence considerations, until contract negotiations have been completed and a contract signed. However, these are not commercial-in-confidence considerations and do not relate to ongoing negotiations about contracts with a new builder. The scope of works has been outlined in the tender documents and the estimated costs are already on the public record.
Council has made a commitment to engage with the community and has done so on many other issues. In June, Council proposed a Community Reference Group for the Rex project but this group has not yet been formed. Council has declined our request to meet to discuss the background to their decisions on the Rex. The decision to proceed is an important one which will consume over 20% of Council’s annual budget.
Regardless of their decision at the November meeting, there is likely to be community anger. A decision to proceed will be met with anger at the costs. A decision not to proceed (and it remains a possibility) will be met with anger by those who have already waited four years for the completion of the project.
Incremental creep in costs has been a feature of the Hepburn Hub at the Rex project for the past four years. The community has come to expect and even to accept these increases in order to see the long awaited completion. But at what point do the costs become too much?
Council needs to work harder to bring the community with them on this journey.
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