FARGO - News that the cost of the new City Hall building has increased by $2.1 million is shedding light on a little publicized practice of not including some costs with the usually well publicized cost of construction.
When construction bids came in in 2016, the lowest was $22.5 million. But the "all-in" cost, as city leaders found out Monday, July 16, is around $29.8 million.
This figure includes several other costs that city leaders had previously agreed to, such as the demolition of Centennial Hall and furnishings, and the new costs that seemed to surprise them Monday.
The all-in costs for several other city buildings in recent years have also been higher than the construction bid, ranging from less than 1 percent to more than 3 percent, according to documents staff submitted to the City Commission. Based on the way the city divided up City Hall costs, the all-in is 26 percent higher.
Mayor Tim Mahoney said every building has these extra costs and, going forward, city staff will provide an estimate of what those added costs might be. He stressed that city leaders were told that there would be extra costs for the City Hall building as well, there just wasn't much discussion how much it would be.
Everyone, he said, was fixated on construction costs because of the shock of a bid the city received for a more ambitious building.
Asked if West Fargo budgeted building projects this way, spokeswoman Melissa Richard said she had no comment because it's been a while since the city did that and staff knowledgeable about those projects are gone.
Moorhead Mayor Del Rae Williams said her city also hasn't built anything in a while, though she expected that the City Council would want to know all the costs.
City staff have divvied up the total cost of each building project between the cost of construction and the cost of what it calls "owner-supplied items." Owner costs are simply any cost contractors aren't responsible for.
There appears to be no pattern to these costs, based on data supplied by the city:
- Water treatment plant expansion: Construction costs were $108 million, owner costs were $2.3 million. All-in costs were 2 percent higher than construction.
- Renovation of the downtown firehouse: Construction costs were $2.7 million, owner costs were $41,000. All-in costs were 1 percent higher.
- Renovation of an old supermarket into offices for Fargo Cass Public Health: Construction costs were $7.9 million, owner costs were $205,000. All-in costs were 3 percent higher.
- The new Roberts Commons parking ramp: Construction costs were $13 million, owner costs were $26,000. All-in costs were less than a percent higher.
Altogether, these other projects add up to $132 million in construction costs and $2.6 million in owner costs for an average all-in cost that was 2 percent higher.
City spokesman Gregg Schildberger said in an email that the projects are each unique and not directly comparable.
City Hall costs
The City Hall project was unusual in that it included multiple bid processes, several of which were started at different times.
The $22.5 million package of bids that came in 2016 was made up of three bids, one each for a general, mechanical and electrical contractor. That later increased to $23.7 million because of changes needed either because workers encountered some unexpected difficulty or because the city wanted it, such as larger windows.
All was well within the $1.4 million contingency set aside for cost overruns.
Mahoney said there wasn't much talk of all-in costs in 2016 because the entire city was fixated on the construction cost. "I don't think anybody concentrated on anything else," he said.
After the bid for a more ambitious City Hall building came in at $31.1 million - much higher than anyone expected - city leaders were under pressure to make that number smaller.
But the $31.1 million was only the construction cost, and it was that way because all the previous cost estimates were for construction costs only. So to compare the less ambitious building, what the city ultimately got, in an apples-to-apples way, city officials only looked at construction costs.
The owner-supplied items, according to the city, includes the cost of architect and other professional services, the demolition of Centennial Hall to make room for the new building, furnishings, broadcast technology for the new City Commission chambers, computer equipment and security systems.
Altogether, those items added up to $6.1 million.
Of these, the professional services, demolition and furnishings were budgeted at $3.8 million and went over budget by 6 percent. That is, city leaders were aware of them ahead of time. The rest are estimated at $2.1 million - the amount staff asked city leaders to approve Monday - and bids are expected later.
Most of the $2.1 million paid for technology that city staff didn't want to put out for bid in 2016 because technology changed so fast, according to Ron Gronneberg, the director of information services. He thought the total cost would be about $1 million, but didn't research it extensively.
City Administrator Bruce Grubb said city staff made a mistake in not offering any estimate to city leaders. For future projects, he said staff will supply city leaders with an estimate of the all-in cost.