Councils
The Invercargill City Council is to discuss issues around the business house development at 20 Don Street at a full Council meeting tomorrow.
The anchor development, which was undertaken to aid in city centre revitalisation, houses a number of high-profile Invercargill businesses and is a popular CBD destination.
ICC Chief Executive Clare Hadley said that Councillors would today receive a report (the Chief Executive’s full report is attached to this email), to be considered at the Council meeting, detailing cost-overruns and lack of appropriate management reporting to Council during construction of the flagship development.
ICC Chief Executive Clare Hadley said that Councillors would today receive a report (the Chief Executive’s full report is attached to this email), to be considered at the Council meeting, detailing cost-overruns and lack of appropriate management reporting to Council during construction of the flagship development.
The building was officially opened a year ago and is not yet complete. Investigations have highlighted the building was larger and more costly than what was approved by Council. Work still has to be undertaken to fit out and tenant vacant spaces which, if approved by Council, would take the total cost of the project to $18.2 million. Of this, land purchase accounted for about $1.8 million, and total construction costs are estimated to be $16.4 million. This would mean a cost overrun of $4.5 million against the original Council-approved construction budget of $11.9 million.
Mrs Hadley said that escalations in both the size and cost of the building had been noted but not explained to Council in three reports in 2015, 2016 and 2017. There was no apparent record of Council approving either the increase in the size of the building, or the increase in budget to construct it.
“Furthermore, the lower-than-projected occupancy has meant that the building has not only over-delivered on cost but under-delivered on revenue.”
A detailed report on the situation was considered by the Finance and Policy Committee in Public Excluded Session last week. The Committee recommended to Council to approve funding for the required completion, including the fit out expenditure required to make unlet space tenantable and installing electricity monitoring software.
The Finance and Policy Committee also recommended to Council that an external review be conducted on the project.
In her report to Council Mrs Hadley noted that:
Over the course of the five years of its development, this project has increased in scale and cost, with a less-than-clear pathway of the approvals for the escalation. The project has raised several learnings for Council projects in future, including the need for:
- More reliable, consistent reporting that references original scope and cost;
- More robust monitoring and a clearer pathway of approval
- Clearer identification of, and reasons for, scope changes. Additionally, scope changes should reflect the strategic rationale of the project
- Better identification of post-completion operational requirements;
- Project control to sit within the Council division with the appropriate skill set.
Mrs Hadley said it was important that Council had the opportunity to reflect on what had gone well with any project, and to take the opportunity for project learnings; and to put measures in place to stop it from happening again.
Despite lapses in management and process, the business house itself was still a well-constructed development in a desirable location. Should Council tomorrow approve the building’s completion, the business house would be a valuable asset for the city, she said.
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