Sierra Planning and Management Velodrome - Town of Milton

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Velodrome Business Plan – Town of Milton 55 8 RISK ANALYSIS 8.1 DEVELOPMENT, DESIGN AND CONSTRUCTION RISKS A range of risks exist some of which are listed below. All construction projects involve risk in their design, development and construction. These risks relate to a range of factors including the following principle elements: � Insufficient detail in design leading to scope creep to meet anticipated functional requirements - there is significant risk in a project failing to meet its functional program requirements through insufficient definition of these functional requirements and their translation into program design and performance specifications. This translates into longer timeframes for completion and often increases in capital costs as well as insufficiencies in design and layout of buildings; � Design errors and omissions – this is the risk associated with building features and requirements being either underrepresented or absent and necessitating attached design and construction solutions and potential cost additions in addition to usual project delays associated with such changes in scope. Additionally, there is an ultimate risk in any development project that the intended design is not fulfilled due the failure of the constructor to build the facility to design; � Procurement risks – these risks pertain to problems which arise between prospective contractors and the procurement agencies (e.g. the Municipality); � Construction delays – from a variety of potential sources related to overall management, individual trades, materials or unforeseen site-related matters; and � Cost overruns – for a variety of reasons, there is a risk associated with the capital cost as estimated in the design stage. 8.1.1 DESIGN, COST AND CONSTRUCTION RISKS MITIGATED 1. The above risks are to be mitigated through the chosen delivery method for the facilities which are to be constructed for the Pan Am Games. Infrastructure Ontario is utilizing a process of Alternative Financing and Procurement (AFP) to engage the private sector in the design, development and financing of games venues and to do so on the basis of a competitive bid process. Source: The Canadian Council for Public-Private Partnerships Business Plan | January 2012 Sierra Planning & Management 55
Sierra Planning & Management 56 56 Velodrome Business Plan – Town of Milton Exhibit 27: Scale of Public Private Partnerships The extent of the private sector involvement and therefore the degree of project risk transferred to the private sector varies depending on the type of private sector partnership. In this first limited form, the involvement of the private sector is in the provision of the design-build services whereby the design and construction (not necessarily the financing) is undertaken by the private sector. Ownership and operation of the facility when complete remains with the public sector. At the other end of the spectrum is full out privatization whereby the private sector fully substitutes the public sector in the provision of the facility, service or other activity under consideration. Between these two limits, lie a range of risk transfer mechanisms which have proven valuable to a number of municipalities in the delivery of large scale, long term capital facilities. The reduction of risk to the public sector, including the Town of Milton as partner to the funding of the development, results in capital cost increases over the base costs of construction and associated soft costs (design, contingency, project management and other) to account for the adoption of project design and construction risk by the private partner. The form of AFP in place for the Velodrome is the following: � Design-build-finance (DBF) –a form of public private partnership or AFP whereby a municipal capital facility is designed, constructed and financed to completion by the private sector on behalf of the municipality or other public sector organization which has the use of the facility. Financing by the proponent is limited to construction financing and all obligations for funding the capital cost of the Business Plan | January 2012
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