The state will likely pick up a $3 million cost overrun for the Montpelier District Heat Plant.
The biomass facility and piping system located behind 120 State St. is designed to heat state and downtown buildings in the capital city.
Last week, the Department of Buildings and General Services reported that the project will cost $20 million, up from a $17 million estimate provided to the Legislature earlier this year.
State officials gave the House Institutions and Corrections Committee a heads-up Friday that unanticipated construction costs will result in a $3 million adjustment in the fiscal year 2014 capital budget.
It’s the second time in a year BGS has asked the Legislature for more money to complete the district heat project. In February, Commissioner Michael Obuchowski asked House Institutions and Corrections to boost its contribution to the project from $7 million to $10 million. If the Legislature covers the construction overrun, the state will pay a total of $13 million toward the Montpelier project. Montpelier’s contribution includes $1 million in grants from the state’s Clean Energy Development Fund and about $500,000 from the city.
State officials say the cost overrun was caused by a variety of issues. The original estimate provided to lawmakers in February was based on “very preliminary design documents” that didn’t prove to be an accurate gauge of the costs, according to a budget history provided by BGS. Timing was a problem. The state couldn’t wait for complete drawings because of the short construction season and pressure to use federal grant money in a timely way. (The U.S. Department of Energy is paying for about $6 million of the project.) And finally, unforeseen complications, including electrical and mechanical design issues and problems related to meeting FEMA flood plain requirements, have plagued the project.
“The rush to meet deadlines before all of the construction documents were fully completed has led to multiple design changes and associated subcontractor pricing, each contributing to the project cost increases,” according to the project budget history provided by BGS.
It also took the state longer than expected to obtain local and Act 250 permits for the project. Because construction didn’t begin until late June and the new biomass boilers wouldn’t be ready in time for the heating season, the state had to spend $250,000 on a temporary boiler (on lease) and related mechanical and electrical costs.
The department did not obtain a “guaranteed minimum price” for the new boiler system, building and piping systems until mid-September — long after the project was well underway, according to Joe Aja, the project manager for BGS.
The state is using guaranteed minimum pricing for other projects, including the Vermont Psychiatric Care Hospital in Berlin and the Waterbury State Office Complex, to curb overruns, but in this instance the GMP came too late to circumvent cost increases, officials said.
“It was basically a situation in which better communications would have solved some of the problems and a situation where more teamwork would have helped,” Obuchowski said. “I’ve done a lot of thinking about this. We’re asked to do more and more complicated things. We’re building a hospital, a level 3 certified lab building and two heat plants. What we need is a mechanism to evaluate things in beginning, during the conceptual stage.”
The Montpelier Heat District Plant is the first biomass project that the state has attempted in conjunction with a municipality. Obuchowski characterized it as an unprecedented public-public partnership.
Editor’s note: This story was updated with more complete numbers including the city of Montpelier’s contribution at 9:07 a.m.
