This chart shows the Consumer Price Index in red and shows Yardsticks for Costing in blue. You can see what's happened over the period 1973 to 1992. By and large construction costs largely fall on the general curve of the CPI.
Now, I should explain a little bit about how the construction costs are derived. Those are average unit costs that are developed by that firm on a yearly basis. They also do a quarterly analysis of unit costs as well for a particular building model. This is an average of the unit cost increases for all construction materials used in non- residential construction in Canada and adjusted for each Province, in this case Calgary. Now although the construction curve generally falls on the CPI, this is not to suggest that they're related but simply indicate that the factors that create one curve tend to impact on the other as well. But what you'll also notice is that the CPI increases at varying rates, not always the same rate, but always increasing. In fact, going back to our records we found only one instance where the CPI had decreased since those figures were kept back in the 1920s. The one year was during the depression. Otherwise, even during recessionary times the CPI increased, even at a modest rate. What happens with the construction industry is it's very responsive to market conditions. So you see in here during the 70s and up until 1982, the construction index is climbing at a slope that approximated the CPI but started pulling away during the boom years. In the recession of 1982 construction costs dropped substantially from January 1982 to '83 and continued its downward trend until 1985 at which time there was a substantial adjustment in one year which got back on the CPI curve. That adjustment was nearly 20% in a one year period. It deviated slightly from the CPI curve dropping and levelling off a little bit, climbing back on the curve, starting to go above the curve which might have suggested this kind of thing happening again, but of course we went ahead with the current recession and costs have dropped once again until you see, as of January 1992, the Yardsticks for Costing curve was slightly below the CPI. If one were to extend this graph to figures based on tendering experience now, we'd find that this is going down even further. Virtually every major project that our firm has tendered since January has been 15-20% below budget. What this does mean though, based on historical references, is that at some point this is going to correct itself. We can reasonably expect, based on history, that it will at least reach the CPI curve again if not exceed it. The curve beyond this in the future, as I mentioned, is based on the last federal budget with increases in the CPI of somewhere in the neighborhood of 2% a year or slightly less. I think in fact this year the actual increase is falling below projections, which suggests probably a stable construction climate for some time particularly due to the fact that the market is currently very depressed.
Just for your interest, these are the figures from Yardsticks for Costing published for 6 major Canadian cities -- Montreal, Winnipeg, Ottawa, Calgary, Toronto, Vancouver -- and you can see how Calgary has performed compared to the rest of them, generally speaking peaking and inclining more during the boom years and taking a greater fall during the recession. Currently what you can see is that while Alberta has dropped slightly, Toronto has taken a deep plunge and Ottawa, interestingly enough, doesn't seem to suffer the same problems from year to year as the rest of the province, exhibiting no major increases nor major drops.
We included a further chart simply to indicate that the deviation in Alberta isn't entirely due to something like the impact of the CPI. As you can see, generally speaking during this period from 1978 to 1992 the CPI for Canada as a whole, for Calgary, Regina and Vancouver, it generally follows the same curve, although Calgary's was slightly higher during those boom years.
You may be wondering why this issue was addressed in this kind of detail. It relates to the nature of the proposals of both parties we're dealing with, and expectations that both parties might have as to what construction costs might actually be over the five year period following settlement. In the instance that one might have considered estimates to be perhaps on the generous side, one has to consider that the current deviation in construction costs that I mentioned, with projects coming in 15% and 20% below budget, is a temporary anomaly that is going to correct itself in the same way as it did in 1985 when I mentioned a 20% increase in one year. So the significance of these charts is that although current construction markets are depressed, one can't expect that these are going to remain so for certainly not the duration of five years that's planned, and in fact, whether or not the construction market improves in terms of a volumn of work, there will undoubtedly be a correction in pricing in any event because while contractors are bidding for cash flow, ultimately they face a point in time at which some contractors will become insolvent or bankrupt. They will start raising their prices. And so whether the volumn of work increases or not, construction costs are bound to rise. So our expectation for the purposes of this study and in terms of planning for escalation of construction costs was that the construction curve would again intercept this CPI curve and that we could reasonably expect that at least over a five year period, construction escalation would equal the projection of the CPI.
Are there any questions so far? Did any of that make any sense to you?
This isn't part of the report but I've included it anyway because it's illustrative of what I'm going to talk about now. Someone is buying a doll house for their child and the caption is "That for pure realism, the price includes cost overruns and schedule slippages".
Which brings us to the topic of contingency and risk. Typically at the outset of a design project, consultants carry a contingency, what we refer to as a design and pricing contingency, that allows for the simple fact that in the early stages of a project you don't have a specific set of drawings from which you can derive an estimate. In this case, we have no drawings whatsoever. We're simply looking at the size of a particular building, the type of building, and we're comparing that to other buildings of a similar type -- what we referred to earlier as a class "D" estimate. What's standard procedure for the Department of Indian and Northern Affairs is to carry a contingency. Their use of the contingency is somewhat different. They carry a construction contingency to allow for unforeseen things occurring during the construction period.
The Department also carries an element called risk. The potential accuracy of an estimate at any stage varies depending on the amount of information you have. At a class "D" estimate, as I said earlier, it is considered to be plus or minus 20%. That's a reflection of what we in the industry would consider the tolerance of the estimate. The government uses the terminology risk, and under Treasury Board regulations, they are required to carry an element for risk in their budgets -- a kind of a "What is the worst sort of thing that could happen?" And that's to be carried in the budget for that project.
As I mentioned, class "D" estimates are based on an order of magnitude estimate. They're based simply on other types of buildings, without reference to the details of particular buildings that might be constructed at Lubicon Lake. The other levels of estimates -- class "C", "B" and "A" -- are the kinds of estimates that one would prepare as drawings are being prepared leading up to a class "A" estimate just prior to tender. The Department's cost reference manual deals with the various levels of estimates and defines class "D" as a preliminary estimate which, due to little or no site information, indicates the approximate magnitude of the cost of the proposed project based on the clients' broad requirements. This overall cost estimate may be derived from one summary unit cost for a similar project. It may be used to developing long-term capital plans and for preliminary discussion as opposed to capital projects. The Department's manual carries a chart which suggests what the magnitude of the risk element might at various levels of the estimate. You can see at class "D" it's fairly high, ranging from 10% to as high as 75% of the estimate. It declines as you approach class "A" which is typically prepared just prior to tender when you have a fairly good idea of what the construction market conditions are because you're in that time frame and the drawings and specifications are complete. Naturally if you look at an estimate and you say that it has a risk of 75%, all credibility in the estimate is destroyed. So it would be rare that one would consider carrying a risk of that magnitude.
The Department document defines what kinds of risk that they consider. Some of these are, for example, the quantity and quality of pre-engineering information; for example, the lack of some detailed soils investigation. One might discover the conditions when you're actually building are different from the soils tests that were previously taken, and so this might lead to higher than expected construction costs. Things related to tender and construction schedules, and probably the most difficult to pin down is the construction market. I can give an example here of other major construction projects starting at the same time and at the same area which might reduce competition in the bidding, the oil boom in Alberta being an example.
As I mentioned earlier, even within the market, the problems as a whole -- which is a macro-market -- you need to look at micro situations. And contractors will find that they're not terribly busy, but they're busy enough with work in major centers that you tend to find construction costs for work in more remote locations tends to go up at a greater rate than one would normally expect just by looking at escalation alone. In other words, the desirability of the project is going, to some extent, to affect the kinds of bidding you get on the project and the number of contractors bidding due to the desirability of that project to those contractors and therefore the cost.
Did you have a question?
John MacMillan: Like your yardage prices on your risk factor, were they based on what you could get for a yard of dirt moved to Calgary for say $1 a meter? We'll talk meters, not yards. I guess we'll talk meters. Is that the same factor you'd use in Cadotte Lake?
Bruce Koliger: No. As I indicated earlier, when we look at factors for the location at Lubicon Lake, we were considering 30% over and above Calgary based prices. The location factor is different from the risk factor. When I talk location factor, that's an estimate of the additional cost to go out involved in -- soil moving might not be a good example, but the cost of shipping materials and assembling components on site. When I'm talking about risk, what I'm talking about is the tolerance of the estimate. In other words, if I give you an estimate you have to accept that there's some risk in that estimate. What is the tolerance of the estimate? What is the likelihood that the actual cost will come within a certain percentage of the estimate? And that's what we're talking about when we talk about risk. So we're saying at the class "D" level, the estimate has a plus or minus 20% risk. History will show that by and large, a properly done class "D" estimate will yield an actual project that is within 20% of that estimate plus or minus.
John MacMillan: That's on your building and your materials. I'm talking about yardage -- on ground dirt preparation, for example.
Bruce Koliger: Well, when we're looking at 20% risk we're looking at the overall project.
John MacMillan: Even on ground preparation?
Bruce Koliger: We're looking at the total. It's an average. Obviously certain parts of the project are not as risky as others. If you're looking at soil conditions, naturally soil conditions may amount to more than 20% of the cost of the foundation themselves, for example, but if you look at the percentage the foundations represent of the whole -- let's say the risk was 50%, for example, or even 100%, you're talking about a large percentage of a smaller number. On the average, what we're saying is that it's wise to carry a 20% risk element at this stage of the estimate.
John MacMillan: That would be based on your water table level in the different areas?
Bruce Koliger: That would be based on the fact that at the moment we only have preliminary soil investigation, with a few holes drilled in several locations but none of them specifically drilled at the site where any one building might actually be constructed. Based on your question, you obviously realize that soil conditions can vary widely even within a couple 100 feet. So that can have a significant impact on the cost. We also believe that as the project proceeds to further design and other soil tests can be taken, as you approach class "A" estimates just prior to tendering, you should know what those soil conditions are at your specific location.
John MacMillan: What I was concerned about was the drying factor -- like in the Prairies where there's no trees and the drying factor, dirt and clay in the bush -- there's quite a difference. Going back to your water table level, if you're going to dry your soil, 20% isn't very much money.
Bruce Koliger: No, it isn't on the foundations themselves. But it's a fairly substantial amount of the overall project. And I should note further that we addressed this particular issue. All of the major buildings that could utilize that kind of a system were designed on piles with structural floors as opposed to slab on (inaudible), for example. So the cost estimates for the school were predicated on a structural floor with pilings so you're not depending on the bare capacity of the soils or the fact that they might swell and retreat to affect the design of the slab.
The government notes that local contractors may not be available so utilization of outside contractors could result in higher costs. In the Peace River area there aren't a substantial number of local contractors that could necessarily handle all the aspects of construction at this site. So this is an issue.
They talk about non-quantifiable items. Examples of such risk include two items that probably wouldn't affect the project but a third which does. The contractors may charge a premium to accept a local labour contractor clause, which means stipulating a certain percentage of local people being employed on the project.
As I noted it's standard industry practice to carry design and pricing contingencies. At the class "D" estimate stage we carry a 10% contingency. That contingency typically declines as we approach tendering at which time it's replaced by a 2% or 3% construction contingency. So we start with 10% and it declines. The government suggests in their manual that contingency should be in the order of 10% for Departmental projects. They're talking construction contingency only. But however you define it, we're both looking at a 10% contingency.
In the case of risk, because risk is a government term -- when we talk to clients about the variabilities in estimates we don't talk in terms of risk, we talk in terms of tolerance -- but they're essentially describing the same thing. Except in the case of Treasury Board requirements, they're required to carry a number in the budget for risk.
I mentioned that order of magnitude estimates are class "D" estimates which are considered 20% plus or minus. This is based on industry standards and confirmed by the R.S. Means Company which is an international group of cost consultants and publishers.
Now I've noted also that there are numerous additional factors which serve to complicate this particular exercise, including the location of the site, the time frame that we're talking about in constructing this community over five years, the fact that we think that we're emerging from a recession, and the methodology to be employed in seeking contract bids which in all likelihood will include some kind of local labour clause. These aren't factors that you'd normally have to consider in an environment such as Edmonton. And we note as well that the impact of any of these factors -- they are factors which are beyond our control, or beyond the government's control, or the Band's control -- these are things that are going to happen due to events that we can't always foresee and can often not predict.
What we've concluded in the final analysis was that we would carry a 10% contingency on the estimates and at a minimum, a 20% risk. But we note that there are other considerations involved. One is the local labour clause. The extent of local labour that will be available or imposed on this project hasn't been defined, but a reasonable allowance, we believe in this case, based on our past experience and talking with general contractors who've worked in these conditions, would be an allowance of about 2% of the cost. Now obviously that can vary depending upon the number of people that are involved locally and the experience of the contractors involved in these types of systems. But that's a fairly modest percentage and fairly consistent with the government's estimate which is about 1.5%.
We carry a 30% factor, as I mentioned earlier, for escalating costs from Edmonton to the Lubicon Lake site. And as noted in the report, this is a very soft number and it's highly dependent on the construction market at the time. For example, when work is in short supply, construction workers are more willing to relocate where the work is and make less demands in terms of accommodation, subsistence, travel expenses, and so on. But if, for example, as I indicated earlier, most of the construction workers are sourced from Edmonton or other locations like Calgary or other major centers, if they're busy on other locations they may put a higher premium on their time, which means they may ask for travel expenses in and out every couple of weeks and this sort of thing, which could impact on that factor. We're not maintaining it must be increased for those purposes, but this is a risk factor that needs to be considered.
Jennifer Klimek: Mr. Koliger, if I may interrupt at this point, we are on a bit of a tight time line here and I was wondering if -- I think we've got the gist of how you've done this -- if you've got much left maybe you could give us the summary portion of it.
Bruce Koliger: No, I won't make you sit through all of it. As a matter of fact I was just about at the conclusion of this particular section.
What we have concluded in the final analysis was that we would carry a 10% contingency and a 22% risk.
I'm leading into a discussion of the cost summaries, which I'm sure is what you're interested in but which won't mean much without the background that I've just given you. As I indicated, there were a number of proposals that we had to consider. There was the one list from the Lubicon Lake Indian, and essentially six different proposals from the government for the three different population scenarios and Options A & B relating to the size of the school and other facilities. Again our dollars are January 1992 constant dollars. The corresponding Lubicon Lake Indian Nation estimates were in 1988 constant dollars. The most recent government of Canada estimates were in 1992 constant dollars, which is shown on the summaries.
I mentioned earlier that we did not deviate generally from the proposals of either party except in one particular area, and this is in regards to the housing. It was predicated in both proposals that 30 units would be relocated from the present site to the new location. They would be relocated and renovated. We expressed some concern about that approach during the conduct of our study, and by agreement of both parties, we were retained to conduct a preliminary investigation of existing housing at Lubicon Lake and to look at the potential costs involved in renovating them and relocating them. It was our conclusion that it would not be a cost-effective approach given the condition of their current housing. This is not because their housing has been abused by any means. It's simply due to the fact that the budgets that were available when these units were constructed -- which I understand ranged to as little as $20,000 for some units -- was not sufficient to construct dwelling units that meet the national building code, and that they're deficient to such an extent that relocating them and renovating them and adding on to them to bring them up to an expected average size and to construct basements for them and so on would not be cost effective.
Briefly I'll just tell you what the condition of the units is. Thirty units were to be drawn from a group of 38 that were built in the last 12 years. One quarter of those units are only 576 sq. feet in size while the remainder are 864 sq. feet. To give you an idea of what those sizes mean, 576 sq. feet is smaller than the typical one-bedroom apartment that you'd find in Edmonton. None of the houses have indoor plumbing. The smallest units consist of a kind of a living-dining-kitchen area plus 2 bedrooms and a utility room. The largest units have 3 bedrooms. There's a small electrical service. Light fixtures generally consist of bare lightbulbs. Heating is provided by means of wood stoves or space heaters, none of which consists of a modern hot air residential system. There's no mechanical ventilation provided and humidity levels are very high. All the units are built on crawl spaces. None of them have basements. The siding is pre-finished wood siding, not very attractive. Destructive investigation was not conducted on the units to determine how the interiors of the walls were actually constructed nor how they were bearing up under the high humidity levels. There is a possibility there's been some deterioration of the structural elements but that's not obvious from a visual inspection. Shingles are of low quality. They are already curling on the houses that were first constructed. The living room windows are fixed in wood frames, others are low-quality plastic sliders, they leak, and the houses are reportedly cold and drafty -- which interestingly enough is a fortunate occurrence because of the lack of combustion air in the heating devices. The only combustion air that is available is leakage into the houses through the windows and doors. Had it not been the case that the combustion air is provided in that manner, we might have had instances already of people being asphyxiated as a result of downdrafting or backdrafting down the chimneys. The interior finishes are of poor quality, poor quality flooring, poor quality carpet. The mill work is very low quality throughout. As we've noted, all of the units fall short of even the most minimal standards that are generally accepted for housing in Canada, including Alberta's Building Code of 1990. In addition, obviously, relocating them, upgrading them, increasing them to size and constructing basements would be fairly expensive. We've determined in the final analysis that to bring the smallest units up to 1,000 sq. feet would represent a cost of about 83% of the cost of new construction. The larger units would take about 76%. And if you're looking at conversion to larger units of 1,200 sq. feet the numbers are even higher -- 90% and 84%. On that basis we concluded that the investment in relocation and renovation would not be a wise investment. We have recommended that all houses be constructed new, which is a deviation, as I indicated, from both the Lubicon and government proposals and, as a result, we have developed costs for new housing only as opposed to the renovation option.
This cost summary is based on the Lubicon Lake Indian Nation proposal. This column shows our figures of January 1992 costs. These show the Lubicon Lake Indian Nation figures which are 1988 costs. This column shows the difference in those costs and this shows the percentage difference in those costs. So you can see if you look at the sub-total of community construction, for example -- which is the school, housing, basic facilities, band office, community hall and so on -- our estimate is something in excess of $38 million versus the Lubicon estimate which is just over $24 million. Our estimate for commercial construction is approaching $3 million. The Lubicon estimate was just under $2 million. Agricultural construction, our estimate is $1.2 million. The Lubicon estimate was $850,000. The bottom line total constant dollars -- our estimate is roughly $42 million versus $27 million for the Lubicon estimate. Now of course you have to consider that we are comparing estimates that are 4 years apart. Ours are 1992 and the Lubicons' are 1988. To the Lubicon estimates -- if you want convert those numbers to 1992 costs -- Hanscomb's Yardsticks for Costing would indicate that you would use approximately 17.25%, which represents the increase in costs on an overall unit basis from January of 1988 to January of 1992. What in fact happened was that costs rose to about 1990 and declined slightly since then. So if you look at the difference between these two numbers you're seeing a difference of about $15 million or almost 57% between our estimates and the Lubicon estimates. And the 57% would be reduced as the result of applying the 17.25% to the Lubicon estimates. There will still be a substantial difference.
In addition the Lubicon estimates did not contain anything for risk or contingencies, which is a substantial portion of our estimate. As you can see here, for these two items we carry in the neighborhood of $13.5 million, which were not included in the Lubicon estimates at all. We've also carried an escalation factor of about $3.6 million which is based on our average estimate overall based on that schedule I showed you earlier.
The net result is that our estimate of the Lubicon list of facilities is approaching $60 million versus the $27 million the Lubicons carried in their estimate of 1988. The difference is over $32 million or 120%. In other words, our numbers are more than double what the Lubicon numbers carried for the same list of facilities four years ago.
I won't go through all the government's scenarios...
Michael Asch: Excuse me. I'm wondering if you can turn back to that other one for a second. I think maybe I misunderstood something. There may be some kind of a technical problem here. I'm just comparing L10, the fire station, and it looks to me -- well, with any of the others in the community construction column -- and then the same thing with L21. It looks to me that in both of those cases, we have the Lubicon Lake proposal being larger than your estimates. And in the other cases where that's the case, you show a parenthesis and then a minus. In that particular case you don't. I'm wondering if that's just a technical glitch.
Bruce Koliger: No. The Lubicon proposal was for a combined fire station, police station and courtroom.
Michael Asch: I see. So L11 is a different item?
Bruce Koliger: L11 in the Lubicon estimate, these were combined, which isn't obvious until you look further. So our estimate is still higher. In the case of L21 -- that's true. Our estimate was less than the Lubicon estimate in that one particular instance.
This is a comparison of our estimate on the government's list for the 450 residents, Option A. Again, the first column are our numbers, the 2nd column is the government of Canada's numbers, the 3rd column is the difference, and the last column is the percentage difference.
You can see our estimate for community facilities was $19.6 million. The government's estimate was about $14.2 million. The difference is $5.4 million or 38%. A large portion of that difference is in the housing. If you look at some of these other numbers, our school estimate is about 12% higher than theirs. We were substantially higher on the teacherages; within almost 18% on the Band office; within 21% in the community health unit; much higher on temporary staff accommodations, which I'll get to in a moment. We were actually a little bit less on the vocational training center and on the fire station. Overall a 38% difference. But as I indicated, of the $5.4 million difference between our estimate and the government's, almost $4.2 million of that, or about 80% of it, is in the housing alone.
On housing the government figure, as I indicated, was based on the relocation of 30 units, so their estimate was less for that reason. In addition, the government number doesn't represent an actual estimate of construction costs. Rather what it reflects is the government program offering. In other words, this is how much their program indicates that they will offer for the houses, rather than as an estimate of what the actual cost of construction is.
Jennifer Klimek: Mr. Koliger, I have one question for you. I'm not quite understanding the constant dollars versus the current dollars. When you have 1988 constant dollars, does that mean that's dollars as they're worth today or what they were worth back in 1988?
Bruce Koliger: Constant dollars refers to what they were worth in 1988. In this case, both of these were done in 1992 constant dollars. Current dollars are the dollars at the time when you expect the project will be constructed.
Jennifer Klimek: So in the Lubicon case, when you brought them up to current dollars, that would have been using their requirements in today's dollars?
Bruce Koliger: That's right. Similarly what we're looking at here is 1992 constant dollars. The government's are also in 1992 constant dollars.
So as I indicated the basic differences is in the housing and teacher accommodations. This is a significant difference in temporary staff accommodation, although the overall dollars aren't a lot. The temporary staff accommodation is for administrative people to reside on the site during the construction period.
The overall difference as I mentioned is 38%. However, we've applied contingency and risk to all of these items. The government has not. The government has looked at contingency and risk on certain items and not on others. The net result is that what appears to be 10% and 20% is actually about 8% and a little less than 15% if you consider the overall sub-total.
Escalation in the government's is a little higher than what we had predicated as a percentage. They were proposing 9.55%. In reality again they did not apply that to all of these items, and therefore the actual percentage escalation is about 7.48%.
The bottom line is that we're suggesting an estimate approaching $28 million versus an estimate approaching $19 million for the government, with a difference of $9 million. Again, the bulk of the difference is in the housing.
Now there are several other scenarios, and I'm sure you'd really like me to go through all of them, but I'll just show you one more because I think it's relevant, and that's the 270 scenario.
In the 270 scenario, our estimate bottom-line is roughly $19 million versus $13 million for the government, a difference of about $6 million. Again, the bulk of the difference is in the housing.
Jacques Johnson: I've understood you very well when you said the government was not really considering, in terms of the housing, the real costs. They were just saying we're offering say $5 million to build what is really market value around $10 million roughly. Did you question them about the rationale of this and how they expect anybody to build $10 million worth of houses with only $5 million?
Bruce Koliger: This was a subject of discussion but as I've indicated to you when we talked prior to today's presentation, we're not representatives of either the Lubicon Lake Indian Nation or the federal government nor are we members of the negotiating team. I would have to decline to answer that and refer that question to the Lubicon negotiators who may wish to address that.
Michael Asch: Just to be clear again. What question were you asked to answer with this?
Bruce Koliger: We were asked to cost the government list and the Lubicon list of facilities and we deviated from that with respect to the housing, with general agreement, I should say, of both parties. The government funded, through a contribution arrangement, a further study of the existing housing at Lubicon Lake, and as a result, while both parties have costed housing on the basis of a certain number of renovated and relocated units, we costed them on the basis of new housing alone.
Michael Asch: Then basically, you concluded that each side costed too low by some significant factors?
Bruce Koliger: That's right.
Jacques Johnson: Perhaps it's the same sort of question that I just asked and you don't have to answer, but at the same time, I would like to know how was your report received by the Lubicons and the government?
Bruce Koliger: Again, I think you'd have to refer that question to the Lubicon negotiators.
Jacques Johnson: That's what I thought you'd say.
Michael Asch: Was there any discussion about use of local labour, meaning the Lubicon themselves, as an issue regarding costing?
Bruce Koliger: Not prior to the completion of the report. Obviously, I think both parties, including the government and the Lubicon Lake Indian Nation, would like to see as much local labour content as possible. That's only reflected in the estimates through the additional 2% we carried for local labour costs. So our assumption is that to the extent that that labour is available, it would be utilized.
John MacMillan: You've got 25 items here for the Lubicon and you've got 10 for the government. Is that the way both parties set it up?
Bruce Koliger: Yes.
John MacMillan: In other words, the government is saying that 10 items is all they want an appraisal on?
Bruce Koliger: That's all that is in their proposal.
John MacMillan: So in the actual figures then, the Lubicons are really low on a lot of their estimates then, aren't they?
Bruce Koliger: Yes.
John MacMillan: I think you've done a real good job. I clearly understand it. The only thing I was concerned about is the drying factor of the ground works which we didn't go through, or the road building or water and sewage systems.
Bruce Koliger: John will be addressing those in his presentation.
John MacMillan: All right.
Jennifer Klimek: Thank you Mr. Koliger. We may have some more questions after Mr. Krebes gets through with his presentation. I think we'd like to take about a 5 minute break just to stretch and then we can carry on.
Jennifer Klimek: I would like to reconvene the meeting and I'd like to turn it over to you, Mr. Krebes, for your presentation and then we can ask any questions if we have any. Thank you.
John Krebes: I won't be quite as detailed in my description of our work as Bruce was, so if you have any questions at any time, please don't hesitate to interrupt.
First of all, I'd just like to touch on our approach to the assignment and the standards that we used.
The terms of reference for our assignment was to prepare a land use plan including a site inventory and assessment of land suitability through the use of aerial photographs, on-site reconnaissance and geo-technical information provided through a detailed geo-technical investigation. A hydro-geological study was also conducted initially to establish the viability of ground water as a water source for the reserve. However this was subsequently ruled out because of the results which we obtained. It was also necessary to identify Band goals and needs, consider soil types, vegetation, drainage, climate, circulation, environmental sensitivity and capability. In order to develop the community infrastructure plan, Butler Krebes did consult extensively with the Lubicons and outside agencies to define a community that would meet the long-term needs and aspirations of the residents. The population base which we used for our study was 450 people. Local input was also sought through numerous meetings with Band Elders as well as on-site reconnaissance.
Based on the input provided and the use of available mapping and aerial photography, a plan was developed which could be economically implemented. In general the standards selected conform to the same level we would recommend to any community initiating development in northern Alberta. The plan included the determination of a feasible water supply, sewage collection and disposal, definition of road corridors and length, power and gas concepts and fire- fighting requirements. Alternate concepts for each system were developed and analyzed after which an overall servicing plan was prepared in order to allow us to develop project level "C" cost estimates. In comparison to the costs that Bruce developed, which are class "D", our costs were based on more detailed site investigation and research, so they're considered more accurate than the class "D" estimates.
Where options for servicing included non-standard options, preliminary benefit cost analyses were done to establish the most feasible long-term option. As an example, based on this type of analysis, the option of a small diameter water main to deliver water to the rural area was recommended over the option of hauling water by truck. On the other hand, the option of a low-pressure sewage system for the rural areas was not recommended based on the same type of analysis.
In regards to the costing parameters, infrastructure costs for municipal and franchise services were developed on the basis of specific elements dedicated to serving the community as planned. Cost estimates were prepared on a unit cost basis using mainly Butler Krebes cost files for the area, Alberta Transportation and Utilities, contractors and supplier sources, as well as power and natural gas companies providing those services in the area. The unit prices included an allowance for unique considerations of the site, such as transportation for gravel and so on, as well as verifying amounts to provide for development of a local labour pool which can be utilized in the future development of the community. All of the estimates included a contingency allowance, provision for feasibility studies, design, supervision and project management. Band administration and quality control, as well as specific training where required -- for example, the water treatment plant -- were also included.
The summary of our costs based on the 450 population and the standards developed are as follows, and these are broken down into major groups:
First of all, roads: the estimate for roads includes 27.3 kms. of a 9-meter wide access to the provincial highway system, which would be graded and gravelled to a standard that would allow the placement of a paved surface in the future. Also included are 29 kms. of an 8-meter wide collector road graded and gravelled to a standard which would permit all-weather school bus access. As well we included 13.9 kms. of 7-meter wide residential access road. The configuration provides for access to highway SR686 in two directions from the community core area, thus giving alternative access in case of emergencies. The total cost for roads is $11,400,000.
Secondly, the water supply system: water supply estimates provide for a water treatment plant at Fish Lake and a pipeline from the source to the core area. Distribution in the core area would be to normal rural community standards including fire protection. Distribution in the rural area would be through small diameter mains to cisterns with re-pressurization being required in each house. The treated water reservoir and distribution pumping would be located in the core area. The total cost for the water system is $6,400,000.
Thirdly, sewage disposal: sewage disposal would be through a lagoon located south and east of the core area. The location avoids discharge to the Lubicon Lake and discharges downstream of the community development into a tributary of the Lubicon River. Sewage collection in the core area would be through a conventional gravity system with transmission to the lagoon by lift station and force mains. Rural sewage collection would be by means of trucks from pump-out tanks. The sewage would be hauled to the lagoon for treatment. Soil and water table conditions preclude the use of septic tanks in the area. The total cost for the sewage system is $2,300,000.
Fourth, solid waste disposal: solid waste disposal has been estimated on the basis of incineration since the initial soil survey indicates that soil conditions are not favorable for the development of a landfill. The total cost for the incineration system is $161,000.
Fifth, franchise utilities: power, gas, telephone have been estimated on the basis of information supplied by the operators in question and the total franchise utility costs are estimated to be $3,400,000.
Sixth, public works equipment and firetruck: estimates for the public works equipment are based on the anticipated requirements for the continued operation of a road, water and sewer network as planned in this described area. The total cost for public works equipment is $1,500,000.
Seven, planning studies and management: this estimate is included to cover a detailed community plan, analysis of energy options for community buildings, studies and surveys, survey control and miscellaneous studies. The total cost is $600,000.
Eight, the airstrip: it is proposed that an existing, abandoned airstrip at the northeast corner of Lubicon Lake be upgraded to allow light aircraft access for emergency use. The total cost for up-grading of the airstrip is $160,000.
Nine, TV dish and transmitter: the isolation of the community means that satellite receivers will be required to provide good TV programming. It is anticipated that this can best be achieved through development of a local cable system. The total cost for this is $250,000.
The overall total cost for infrastructure, therefore, to accommodate a community with a population of 450 people is just over $26,000,000.
That basically concludes the estimates for infrastructure. We have a further break-down in our report, as you can see. For further information in that regard, it's a matter of just checking that chart for that purpose.
Jennifer Klimek: Are there any questions from any of the Commissioners?
Michael Asch: On what basis did you decide that you would use gravel roads as a form of road surface rather than anything else? I mean, I'm just curious as to why you decided -- on what basis did you make the determination -- or did someone give you those specifications out of which you derive?
John Krebes: No, not other than this is a common method that's used, as I said, for a community of that size. Again there is an allowance for the ability to allow for paved surfaces in the future. But the gravel is something that is commonly used.
Jennifer Klimek: Any other questions from the Commissioners? Thank you Mr. Krebes. I think your estimates here are very useful. And to you, Mr. Koliger. They'll come in handy for our evaluation. I'd like to thank you both for your time today in bringing this information and submitting your reports to us as well.
I'd like to thank the people who showed up today. We're not sure when our next hearings are. We will be advising you through the media and if anybody wants to call either Jacques or myself, we'll advise you of the next step. So I'd like to adjourn the meeting for the day. Thank you.