Construction costs have come in higher than expected on several recent county projects, resulting in project downsizing, budget shifts and possibly the need to float more bonds.
The most striking recent example was a $5.1 million low bid on a project the county estimated would cost $3 million. Isemoto Contracting Co. Ltd. was the low bidder of seven competing for the Honaunau Rodeo Arena improvement project when the bids were opened Dec. 3.
County officials attribute the optimistic estimates to increased contractor prices caused by plenty of work and higher labor costs as the economy improves.
“The general trend is the cost of the projects are going up,” said James Komata, planner for the Department of Parks and Recreation. “There still seems to be a lot of interest in bidding on county projects.”
Komata said the county looks at the range of the bids, and if they’re close together, it’s probably a good estimate of the true cost of the project. In the case of the rodeo improvements, five of the seven bidders clustered closely between $5.1 million and $5.7 million.
“If there is a really tight grouping, then we know the bid is a reasonable bid,” Komata said.
The project adds a 2,260-square-foot community pavilion with a concession stand for public and rodeo use; replaces the spectator seating with a new eight-tier aluminum bleacher system seating 500, including eight ADA wheelchair spaces; and replaces an existing comfort station with an 800-square-foot facility. It also reroutes and improves vehicular access; expands parking to 41 regular and nine ADA-compliant paved stalls; and improves the water system by adding a tank for fire protection.
Finance Director Deanna Sako said the county may shift project schedules within the capital budget to pay for the higher-than-expected project cost, but it’s possible it won’t be necessary because of the departments’ ability to trim costs elsewhere. It could, however, result in the county having to go out for its next bond issue sooner than planned, she added.
“We’ll be able to shift,” Sako said Wednesday. “Our departments are really good with their ability to search for areas to reduce.”
Sometimes, overly optimistic estimates result in the project being downsized to fit the budget.
That’s what happened with the Waimea district park, which had to do away with a comfort station, a multi-use field, a detached maintenance facility, utilities infrastructure, some of the parking spaces and some of the landscaping in order to fit within the estimate.
“It’s a science and an art,” is how Public Works Director Warren Lee describes the estimating process. “It’s not all science.”
Factors such as how remote the job site is, how many subcontractors will be involved and how busy the contractors are all figure into how the bids come in, Lee said. “Right now, they’re busy,” Lee said.
Once a contract is awarded, that’s not necessarily the end of the expenses. These are among change orders in the latest reports on the County Council Finance Committee’s Tuesday agenda:
• Adding a sidewalk to a gateball storage facility and new pavilion for Kamehameha Park is increasing General Construction Inc.’s $168,100 contract price by $9,664 or 5.8 percent, according to a Nov. 25 change order.
• A Nov. 4 change order to Isemoto’s $260,500 contract to re-roof the Honomu gymnasium brings the total change orders to $78,107, or 29.9 percent of the original Jan. 5, 2015 contract price. The costs have escalated because of hidden structural damage found after the old roof was removed, county staff says.
• A $117,970 contract to replace light poles at the Carvalho Park ball field, executed April 2 with Edward Hirayama Electric Inc. has increased by $9,264, or 7.9 percent of the contract price. The contractor is adding electric grounding rods and termite treatment to the project.
• A $416,990 contract for a new comfort station at Mauna Kea Recreation Area has expanded by $37,270 or 8.9 percent of the contract price. Contractor White Sands Construction Inc. had to install additional sidewalks and other work required in the final inspection.
• The $22.3 million Pahoa Park master plan has increased by $828,368, or 3.7 percent. The latest of four change orders is for contractor Nan Inc. to remove material for a new leach field.
• Re-roofing and repairs for the University Heights Park, a $253,800 project, has increased by $12,247, or 7.9 percent of the contract. Contractor Stan’s Contracting Inc. said additional repairs were needed on electrical work, drainage and ceiling beams.
In the first 11 months of 2015, the latest data available, the county executed 107 change orders or contract extensions valued at $12.7 million, or 9.5 percent of the $133.8 million in contracts, according to a West Hawaii Today analysis of twice-monthly change order reports.
The industry standard for change orders increasing project costs is about 6 to 10 percent.
Sako said the data is somewhat misleading because the reports include supplemental agreements to original service contracts that extend the contract by another year.
Changes to original contracts became more transparent to the County Council and the public because of a 2011 ordinance sponsored by former Council Chairman Dominic Yagong that requires regular reports to the council.
Yagong sponsored the bill after an audit of county contracting procedures showed the county paid 116 percent more for professional services in the 2006-07 fiscal year than those services were originally contracted to cost. Construction contracts that year ended up costing about 33 percent more than the original contracted amount.
