### ODT Online Mon, 18/05/2009 – 6:34pm.
Comment by gplusa on Stadium price blowout
Don’t forget to add the following items to the $217 million: design fees, building consent fees, resource consent fees, the contractor’s profit, contingency sums, overheads and general site costs (such as the new fence currently being erected). Don’t put down the calculator just yet.
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### ODT Online Tue, 19/05/2009 – 9:53am.
Comment by MikeStk on and …
and if you read the contract apparently we’re also on the hook for a whole bunch of insurance – sadly someone carefully removed all the numbers from the ‘public’ version of the contract – apparently we’re not trusted to know how much the thing is really going to cost (now that it’s signed there is no ‘commercial sensitivity’)
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In reply to Roller…
### ODT Online Mon, 18/05/2009 – 12:20pm.
Comment by MikeStk on I agree
I agree – but would like to point out that that $217M figure doesn’t include the cost of purchasing Carisbrook (likely to be $10M or more if it includes the forgiving of the ORFU’s $2M debt to the city). Nor does it include the cost of realigning SH88 and building their flying roundabout – another $10M.
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Despite pending court action it is asserted that construction of the stadium is due to start in mid-June…
### stuff.co.nz Last updated 05:00 14/05/2009
2-week delay ‘risk to stadium’
By Mark Hotton – The Press
Delays in building Dunedin’s $198 million stadium could cost $4.5m, the city council says.
Read more
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Posted by Elizabeth Kerr
What if? Dunedin... 
Is it really necessary to reproduce every reader comment from the ODT without any critical analysis or testing of accuracy? It doesn’t seem to add any value to the stadium debate to me.
Further to the continual allegations of massive blowouts in costs already, the Stakeholder Report to the DCC/ORC of 2 February 2009 contained the following information on the GMP:
GMP $129,759,285
Professional Costs: $25,603,540
Adjustable Sums: $7,794,ooo
TOTAL $163,156,825
Contingency $2,243,175
TOTAL S165,000,000
Professional costs were noted as relating to design, research and development, planning, legal fees, building consent fees etc, i.e. these aspects which come out of the $15m advanced to CST are included within the original stadium costings and are not new add ons as these ODT posters continually insinuate.
Why don’t we just go to the StS. They have all the facts and figures and have been 100% correct on these right from the get go.
It’s all in the cartoon, we are looking at $750m baby, better break a few pensions while you still can.
How’s the advert go – YEAH RIGHT.
Peter,
You say the total package to construct comes to $165 million. In essence you are right, but it is the all up cost which will have to be paid. You can’t deny that it started at an absolute maximum of $188 million, escalated to $198 million and now we see in Jim Harland’s sworn affidavit a total of $217.4 million. As his counsel said at the injunction hearing, it is “a moving feast,” indicating perhaps that there is not a finite figure on the table. Nor can there be, as projects like these notoriously run hugely over preliminary costings. We only have to look at recent stadia construction around the world to realise how disaster prone they are. The much vaunted HOK – morphed into Populous – has had a hand in many of these, but noticeably say nothing of the financials. Check out Wembley and Twickenham to name just two.
Actually, it wouldn’t take a great deal to blow out to $750m. The prison blew out from just over $100m to $350m.
Even if the stadium blows out from $200 to $250. By law we have to fund the depreciation, so that will be an additional $250m over it’s life, whether that is over 50 years, 40 years, or like the new Carisbrook stands – 10 -15 years.
So we’re up to $500m (or $400m with no blowout).
Of course we also have interest which over 20 years is roughly the same as the capital. So currently thats around $100m for the ratepayers as it stands now, or $150m with the small blowout.
So that gives a total of $500m AS IT STANDS NOW, or $650 with a small blowout (not counting any running losses).
For every additional $10m blowout, we have to multiply that by three (capital, interest and depreciation).
So the prison had a 300% blowout, but if the stadium has just a 50% blowout, that will bring the total to $750m (keeping in mind that the AVERAGE construction cost over- run for a study into about 20 US stadia, was 63%).
Hopefully ours will come in on current targets, meaning we’re only up for $500m.
Calvin
But my point is that the affidavit information does not total $217.4m. That is the interpretation placed on it by an ODT reader.
The ODT article states $35.6m for land purchases; $15.3m to CST; $1.1m for administration; and $385,000 for the District Plan change; all these items currently expensed fall within the $198m stadium cost. The inflated land purchases and lack of revenue from the sale of Carisbrook are responsible for increasing the cost from $188m to $198m. The other costs incurred by Council according to Mr Harland’s affidavit fall within the $25m professional costs that are part of the $165m.
This is not to say there may or may not be budget blowouts or there may or may not be valid concerns about the servicing the DCC loan to pay for stadium. However, the actual costs of the stadium to date would appear to be within the $198m.
Peter,
If you read Harland’s affidavit you will see that he claims costs to date of $52.425 million. This consists of land costs $35.6 ml, CST costs to date $15.3 ml., admin. costs $1.14 ml. and plan change costs $.385 ml.
Hawkins contract including a contingency of $1.388 ml., totals $165.4 ml.
Grand total $217. 8 ml.
It might be argued by some that the land cost is part of Hawkins contract. However, as the DCC has bought and paid for it I doubt very much that argument holds any water. Ditto for CST costs which have been ongoing since day one, and are arguably vastly understated. I believe that the $25 ml. professional costs you mention are forward projections to come to charge from commencement onwards. If you think of it, for Hawkins to buy back off the DCC their already paid costs in order to add on to the contract, makes no sense. The DCC already concede that the cost has moved to $198 ml. so why would that have happened if they were to transfer $25 ml. back out to another party?
I admit that the whole thing is confusing, but has it not occurred to you that this might be by design?
Calvin
Does Mr Harland actually state in his affidavit that the total cost is now $217.8m? Yes or no?
If no, what evidence do you have (if any) to support your contention that professional costs are ‘forward projections to charge from commencement’?
I agree with Peter that the costs for consent fees and consultants appear to be shown in the 26 million allocated to CST for that work. Projects of this size are charged out by all concerned at an hourly rate, rather than a flat fee. So it’s an estimate. But hopefully a good one. No worries there. However, unless there has been a variation to the contract since the signing date, P&G costs, adjustable sums and profit margins are all specifically excluded from the GMP. I see that an estimate of the adjustable sums is allowed for in the 214 mill. Fair enough, it’s good to see it mentioned somewhere. Adjustable sums are for specific items of work that the client’s QS was not comfortable in having a fixed price for. Because they are not confident today about the quantity, design or quality of those items of work. And so don’t want to risk having a fixed price for them. At the moment they have guessed that those items are worth 7 million dollars. Maybe we’ll get lucky and will only have to pay 2 million. Maybe we’ll be unlucky and have to pay 20 million. Nobody knows today. If they did, it would be included within the fixed price GMP. P&G are the costs that cannot be linked to any specific items of work. P&G is generally made up of direct overheads, indirect overheads, and the contractor’s contingency sum. Direct overheads are for the general running of that specific contract. All the things that you need, but aren’t specific items of work. Things like electricity, water, toilets, site lighting, security fences, rubbish removal, repairs to the main roads, plane tickets to and from head office, that sort of thing. Here’s an example of a direct overhead. Take the price for a piece of roof steel. You have a fixed price for the purchase and fitting of the steel. That’s in the GMP and isn’t going to change. But the price doesn’t include for the use of one of the 10 site cranes to lift it into place. Those cranes are on site the whole time, so their cost is spread over the whole contract as an overhead. Ditto for the costs of site foremen and site managers. They can’t be charged against specific items of work in the GMP.Their wages etc are an overhead. Hawkins are also required to design a number of items of work themselves. Again, another overhead in the P&G. Indirect overheads are the costs for running Hawkins as a company during the duration of the contract. Cost for their offices, mortgage payments, office staff, vehicle leases. This contract will use most of the local Hawkins resources, so the company running costs will have to be recovered directly from the project. Sometimes indirect overheads are included in the profit margin, rather than as a separate item. All that achieves is to raise the profit margin percentage. Hawkins will also have their own contingency sum. Council has a contingency sum of around 2 million dollars. That’s to hopefully cover variations and any increases on the adjustable sums. Extra stuff they might have to pay to Hawkins. But that’s not Hawkins contingency sum. They will have their own sum in the P&G to allow for things that invariably will go wrong from their end. A bit of steel that gets cut too short, overruns on hours, underestimating of costs by their QS, allowance for extra labour should there be an unexpected week of crap weather or should it get tight for time at the end. Basically it’s their risk fund for things they can’t charge more money for. After all, they are not a charity. But I guess the big item missing from all this is the contractor’s profit for the contract. Over and above the overheads. In the absence of any released information, I’m going to take a fairly educated stab at the combined total of P&G and profit, and say that there is no change out of 30 million. And I’m working on the premise that Hawkins are feeling generous towards their client. Which I’m certain they are.
I’ll also stick my neck out here and say that the project will be reported as coming in on budget. That is to say that the GMP will be no more than the agreed 130 million dollars. Of course it won’t, that’s a fixed cost. But that’s not an indication of the actual cost. Let’s say you have a budget of 30,000 to buy a new car. You see the perfect car for you, in Auckland. Costs 29,000 dollars. That’s a fixed price, it’s not going to change. Let’s call it a GMP. You buy the car and your project of a car purchase comes in 1000 under budget. Pat yourself on the back. But, it costs you 4000 dollars to get the car to Dunedin. It’s heavy. So the cost to sit in your new car is 33,000 dollars. Did the car cost 29,000 or 33,000? Was it 1,000 under budget, or 3,000 over? I guess it depends on which pocket you are showing people.
Peter,
I have read the affidavit, have you? The numbers add up to $217.8 ml. relate this to the following and it seems self explanatory.
Athol Stephens’ financial model presented 9/2/09 stated that when completed the stadium would be transferred to a new council controlled trading company (CCTO) called Dunedin City Venues Ltd (DCVL) as from July 1st 2011. DCVL will carry debt of $108.8 ml. This covers construction costs plus capitalised interest on funding to completion.
So, if we add the following: DCVL $108.8 ml., ORC $37.5 ml., OCT $7 ml., Govt. $15 ml., Private funding $45.5 ml. plus DCC’s admin.costs $1.14 ml. and plan change costs $.385 ml. the total is $215.325 ml. Close enough I think. Certainly $17.325 ml. past the $198 ml. target.
As it has been stated by others, it is “a moving feast”.
Perhaps the difference is the capitalised interest on the DCC loan.
Defering payments for two years is going to add roughly $13m – $14m onto the loan.
Then of course there may be more $m in capitalised interest on bridging finance to cover the large shortfall in private funding until memberships are paid in years to come (and possibly more for private funding coming in short of target).
So the promise of ratepayers being burdened with “not a dollar over $91m” is now not a dollar over $108m.
Except the additional $100m in interest. OK – lets call it not a dollar over $208m.
Except we’ll have to fund the depreciation on the total cost – another $200m. Lets say ratepayers won’t be burdened with a dollar more than $408m.
Except in the case of funding shortfalls, cost over runs, running losses, and trouble getting the pitch to grow.
Except in the case that the record low interest rates don’t carry on this low for the next two decades.
Excellent. Thanks all for posts on this thread, attracting one of the highest visitor counts (in 24 hrs, to Tues midnight) of any subject for quite some time.
### ODT Online Mon, 25/05/2009 – 9:52am.
Comment by Fungus Pudding on Here’s your answer MkeStk.
When will spending on the stadium stop? Here’s the answer. Obviously it will stop immediately, because you may remember the ORC $37.5 million is conditional upon the maximum cost being $198 million.
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