Following a two staged procurement process, five submissions were received and evaluated, with two tenders progressing to a shortlisting stage, with Kane Constructions being recommended as the preferred contractor.
Kane Constructions are a multi award winning, privately owned commercial construction company that has extensive experience in building quality contemporary buildings, including in regional areas such as Ararat, Numurkah, Horsham, Geelong and Ballarat.
“The field of applicants to undertake the construction of the new SAM was outstanding. We are excited to be able to award this significant opportunity to Kane Constructions who have been responsible for such iconic buildings as the $45 million Geelong Library and Heritage Centre, Geelong Performing Arts Centre Redevelopment (Stage 2) and $100 million Ballarat GovHub”, explains Greater Shepparton Mayor, Cr Kim O’Keeffe. “This is the most significant and bold building that Council has invested in, and we have every confidence that Kane Constructions will do the design justice.”
“Kane are very excited to be appointed to construct this unique and special project with Greater Shepparton City Council’, explains Kane Construction Director, Geoff Purcell. “At Kane, we have a long and successful history of delivering tailor-made, complex and demanding building projects throughout Victoria and are very much looking forward to making the new SAM vision a reality.”
During the tender evaluation process it was identified that bids received were above the adopted build budget, with bids ranging from $47.3M to $51.7M (including GST). The difference between the estimated cost versus market value of the build of the new SAM is attributed to an acute increase in the price of construction materials, in particularly concrete and steel, due to significant generational construction works currently being undertaken across the state.
“With more than $100 billion worth of new roads, rail lines, hospitals, multi-storey buildings, wind and solar farms and other infrastructure being built in Victoria, a consequence of the boom is large scale demand for materials, especially concrete and steel”, suggests Mayor O’Keefe. “And unfortunately this leads to unanticipated cost escalation for large scale projects such as the new SAM. The reality therefore is that the high demand from major infrastructure projects has pushed up prices of these materials which was not expected.”
With the discrepancy between the estimated cost versus market value cost of the build, a rigorous process was undertaken to determine how to best manage the adopted budget versus the tendered prices.
In the first instance, a value management (VM) process was instigated that identified opportunities to reduce construction costs, by selecting alternate materials and/or removing components of work. This was required to enhance the tender bids and bring the bids closer to the adopted build budget amount.
A VM list of a possible 140 items was forwarded to the two short-listed tenderers to price potential savings against. The VM process identified a possible $1.3M in savings without compromising deliverables or functionality.
As a secondary measure an independent review of the proposed process and cost of the build was undertaken by the Office of Victoria Government Architects (OVGA). The OVGA assessment concluded that the procurement and value management process undertaken by Council was extensive and commendable. The OVGA further identified the significance of completing the new SAM project in a regional setting and suggested a multi-pronged and flexible approach to securing the additional funding to bridge the budget gap was required.
“The VM process was definitely worthwhile undertaking, as it clearly identified that with the cost of materials escalating, there were savings to be made by reducing some components of the project”, contends Mayor O’Keefe. “This was further supported by the independent review undertaken by the OVGA.”
With the bids being greater than the pre-tendered budgeted amount Council has successfully negotiated with the Federal Government and the SAM Foundation to increase their grant agreements to offset the increase in the capital required.
Mayor O’Keeffe extends Council’s gratitude to the Federal Government and SAM Foundation for having the understanding of the economic and social value of the new SAM project. “We commend and thank the Hon Damian Drum MP, the Federal Government and the hard working SAM Foundation for their additional financial commitment to the new SAM project. Their unwavering support will enable Greater Shepparton to experience the full economic and social benefits that this iconic project will deliver, and continue our aspirations to be a progressive regional city.”
As an additional measure to manage the unanticipated cost escalation of materials and subsequent increased budget, a staged approached will be undertaken to constructing the new SAM, as recommended by the OVGA.
Stage 1 will see the new contemporary SAM being built, while Stage 2 will include landscaping, car parking, and specialist equipment, and will require an additional $2.5M (ex GST). Council will continue to negotiate with funding bodies and explore funding programs to offset this capital requirement.
“This rigorous tendering process has resulted in the appointment of an award winning, experienced builder and has provided further clarification of construction costs. In doing so we are now poised for the project to kick off, with works to commence in March 2019. The build is going to be world class and a must-see destination, attracting tourism and visitation to Greater Shepparton. I can’t wait to see the transformation of the location take place”, said Mayor O’Keeffe.
For more information about what changes have been made to the project, see this Frequently Asked Questions page.